OFT issues fines to companies that exchanged dairy price information

Asda, Sainsbury's,Tesco and Safeway, prior to being bought over by Morrisons, along with four dairy companies, were fined a total of £49.51m for sharing price information in 2002 and 2003, the Office of Fair Trading (OFT) said.

The regulator said it "makes no finding" as to whether prices were increased as a result of the behaviour.

The supermarkets, with help from five dairy companies, exchanged information about pricing of cheese and milk, activity which infringed UK competition laws, the OFT said. Arla, one of the dairy companies involved, was not fined.

The UK Competition Act prohibits the forming of "concerted practices" where the object or effect is "the prevention, restriction or distortion of competition" in the UK, or which may affect trade in the UK.

The OFT said its investigation had found three occasions where groups of the nine companies had acted unlawfully.

"The OFT found that Arla, Asda, Dairy Crest, McLelland, Safeway, Sainsbury's, Tesco, The Cheese Company and Wiseman infringed the Competition Act 1998 by co-ordinating increases in the prices consumers paid for certain dairy products in 2002 and/or 2003," the OFT said in a statement.

"This co-ordination was achieved by supermarkets indirectly exchanging retail pricing intentions with each other via the dairy processors - so called A-B-C information exchanges," the statement said.

Arla alerted the OFT to the infringing activity and was granted immunity from any fines. All the other companies, apart from Tesco, received reduced fines after admitting fault and allowing a quicker, less costly investigation to proceed, the OFT said.

Sainsbury's was fined £11.04m, Tesco £10.43m, Asda £9.39m and Safeway £5.69m for their part in the unlawful information sharing. Dairy Crest was issued the heaviest punishment of all the dairy companies. It was issued with a £7.14m fine.

"This decision sends a strong signal to supermarkets, suppliers and other businesses that the OFT will take action and impose significant fines where it uncovers anti-competitive behaviour aimed at increasing the prices paid by consumers," John Fingleton, OFT chief executive, said.

"Competition in the supermarket sector is generally intense and has delivered significant benefits to shoppers across the UK in terms of innovation, choice and improved value for money. Our investigation and this final decision will help ensure that this competition is maintained. We welcome the co-operation provided by those companies which admitted to the infringements and have given them lower fines to reflect the reduced resources required to complete our investigation," Fingleton said.

Tesco intends to challenge the OFT's fine, according to a report by the BBC.

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