Supermarkets fined millions for price fix

TESCO and Morrisons face renewed action over alleged milk price fixing after two of their competitors agreed to pay multi-million pound fines.

TESCO and Morrisons face renewed action over alleged milk price fixing after two of their competitors agreed to pay multi-million pound fines.

Asda and Sainsbury’s agreed to pay millions of pounds in fines after they admitted fixing the price of milk, cheese and butter.

The retailers are among a group of major supermarkets and dairies to admit colluding over prices and have agreed to pay combined fines of more than £116m.

Sainsbury’s alone will pay watchdogs a settlement of £26m.

Other firms that have held up their hands in the investigation by the Office of Fair Trading include fellow supermarket Safeway, prior to its takeover by Morrisons, and dairies Robert Wiseman, Dairy Crest and The Cheese Company.

The matter relates to pricing during 2002 and 2003, at a cost of about £270m to consumers.

The OFT will continue with its case against supermarkets Tesco and Morrisons and dairy company Lactalis McLelland, which have not admitted to price fixing.

Tesco last night said it was vigorously defending its position, which it said was different from its rivals.

Executive director Lucy Neville-Rolfe said: “As we have always said, we acted independently and we did not collude with anyone.”

Sainsbury’s said yesterday its action to collude over prices was designed to help dairy farmers at a time when they were under financial strain, following the devastating foot-and-mouth outbreak in 2001.

Chief executive Justin King said: “We are disappointed that we have been penalised for actions that were intended to help British farmers, but recognise the benefit of a speedy settlement.

“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 in a statement its intention was also to “provide more money for dairy farmers, who were under severe financial pressure at the time”.

“These issues concern all the major supermarkets but we’ve chosen to settle this matter quickly because we believe it’s the right thing to do for our customers,” it added.

Both supermarkets have since formed segregated supply chain schemes to help ensure dairy farmers are paid a premium and to provide greater efficiencies by working more closely with dairies.

Dairy Crest is expected to pay a fine of £9.4m after its price-fixing admission, while fellow dairy Robert Wiseman had agreed to pay £6.1m.

The settlements are yet to be finalised, but the OFT said those that have made admissions will receive “a significant reduction in the financial penalty that would otherwise have been imposed”.

Dairy Crest said it was pleased to have reached agreement with the OFT, but added the price fixing was not aimed at giving consumers a bad deal.

“The OFT investigation relates to a period five years ago when the farming community was facing extreme difficulties following the foot-and-mouth outbreak in 2001.

“The milk price initiatives in 2002 and 2003 were aimed at supporting farmers through this difficult period by returning higher prices to them for their milk.

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

Journalists

David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
Sports Writer