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December 7, 2007

UPDATE – UK: We wanted to help farmers, say retailers

Two UK retailers and two dairy firms facing fines for fixing prices in the dairy sector have claimed the move was designed to help cash-strapped farmers.

Two UK retailers and two dairy firms facing fines for fixing prices in the dairy sector have claimed the move was designed to help cash-strapped farmers.

Sainsbury’s has expressed “disappointment” at the company’s GBP26m (US$52.9m) fine for its role in fixing the price of milk, butter and cheese.

The UK’s third-largest grocer was among three retailers and three dairy processors that admitted price-fixing in 2002 and 2003.

Retailers Sainsbury’s, Asda and Safeway, alongside dairy firms Dairy Crest, The Cheese Company and Robert Wiseman Dairies, have agreed to pay fines that could reach a combined GBP116m (US$235.2m), following a deal with the Office of Fair Trading, the UK’s competition watchdog.

The OFT said this morning (7 December) that the five companies had “admitted involvement in anti-competitive practices”.

Sainsbury’s chief executive Justin King said the company was “disappointed” to have been “penalised for actions that were intended to help British farmers”.

King said: “The price initiatives in 2002 and 2003, which were widely and publicly reported at the time, were designed to help British dairy farmers at a time of considerable economic pressure and public debate about whether farmers were getting a fair price for their products.”

Asda said it had “regrets” but added: “Our intention was to provide more money for dairy farmers, who were under severe financial pressure at the time.”

When the OFT announced it had evidence of collusion in September, the British Retail Consortium  said individual retailers had independently raised the price of milk, butter and cheese in a bid to keep farmers in business and ensure a supply of dairy products.

BRC director general Kevin Hawkins then claimed that not all of the extra cash reached the farmers. “A proportion of the increases reached farmers; some appears to have stuck to the sides on the way down the supply chain,” he said.

One dairy processor, Robert Wiseman Dairies, had then insisted it did not profit from moves to increase farm-gate prices – an assertion it repeated today.

The company, which is being fined GBP6.1m for its role in the affair, said it had backed moves to raise prices to boost returns for farmers.

Chairman Alan Wiseman said the plan was “to provide support for farmers at a time of crisis”. He added: “Every penny of additional revenues paid to Wiseman was passed directly to our suppliers.”

The OFT’s investigation will continue against Morrisons, Tesco and dairy firm Lactalis McLelland after no deals were struck.

The OFT said dairy giant Arla Foods will receive “complete immunity from financial penalty” if it continues to co-operate with the watchdog.

Dairy Crest, which faces a fine of GBP9.4m, said the “milk-price initiatives” were designed to help farmers in the aftermath of the foot-and-mouth outbreak in 2001.

“The implementation of these initiatives was very well publicised at the time and received widespread support including strong political backing.”

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