Dairy price-fixing scandal will cost companies £50m in fines

Sainsbury’s, Tesco and Leeds-based Asda face the biggest penalties.

Yesterday Tesco threatened legal action against the OFT saying it had reacted with “surprise and dismay” over the decision to include it in the fines.

The three supermarkets were among nine firms that the watchdog judged to have colluded to rig the price of cheese and milk in 2002 and 2003.

The scandal is thought to have cost consumers around £270m. The OFT initially intended to fine the guilty parties more that £116m, but scaled back the penalties after a period of consultation.

Asda, Sainsbury’s and Safeway – later bought by Bradford-based Morrisons – along with dairy processors Dairy Crest, McLelland, the Cheese Company and Robert Wiseman all received reduced fines after admitting liability.

A spokesman for Asda said: “Our intention was to provide more money for dairy farmers, who were under severe financial pressure at the time and we have recognised there were lessons to be learned and we have learned them.

“We have co-operated fully with the OFT throughout its investigation and our aim has been to ensure that we comply with competition law across our business.

“As expected, the fine has been reduced because of the ‘early resolution’ agreement we made with the OFT, based on the evidence available at the time.”

The OFT began investigating price-fixing after being alerted to the practice by Leeds-based Arla, which was subsequently given complete immunity from any fines.

OFT chief executive John Fingleton said: “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.”

He added: : “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.”

In 2008, Morrisons announced it was to lodge a libel suit against the OFT, alleging that the body had damaged its reputation by including it in a list of guilty firms.

The watchdog later dropped its allegation against the supermarket giant.

Sainsbury’s fine of just over £11m following a 35 per cent discount for its co-operation is the biggest, followed by Tesco, which is facing a £10.4m penalty, and Asda which must pay £9.4m.

The dairy processors were given penalties ranging from £1.26m to £7.14m.

Tesco stands alone in denying that it colluded with the others to inflate the price of milk and cheese.

Lucy Neville-Rolfe, Tesco’s director of corporate and legal affairs, said: “We are disheartened and disturbed that the OFT continues to pursue this costly and time-consuming case at the expense of both the taxpayer and UK business.

“We have always said we did not collude on prices on cheese and we stand firm in our rebuttal of these ongoing allegations.”

The OFT found that between 2002 and 2003, supermarkets and dairy companies exchanged information regarding pricing intentions to co-ordinate increases which were passed on to consumers.

As a result, shoppers were made to pay more for cheese and milk products than they should have been, the watchdog found.

The OFT has come under attack for the length and cost of the investigation.

Tesco criticised the “absurdity” of the Office of Fair Trading operating as “investigator, prosecutor and judge”.

“The Government’s plans for the new competition regime must address this anomaly,” said Ms Neville-Rolfe.