Watchdog attacked over tobacco ruling

The Office of Fair Trading (OFT) said Imperial Tobacco, Gallaher and ten retailers engaged in "unlawful practices" under which the cigarette and tobacco prices of rival manufacturers were linked.

But four of the 12 firms named – Lambert & Butler maker Imperial Tobacco, supermarket chains Morrisons and the Co-operative Group and petrol station owner Shell – are either appealing or actively considering a challenge.

Morrisons – fined 8.6m – said the OFT's stance was "disappointing", as well as "illogical and without foundation".

It said: "The practices to which the OFT refers were intended to reduce the retail prices charged to consumers."

Imperial Tobacco – given the biggest fine of 112.3m – added: "Far from being anti-competitive, these arrangements were pro-competitive and to the benefit of consumers."

The OFT said the breaches took place between 2001 and 2003. Sainsbury's revealed the infringements and has escaped any fine.

The other firms caught up in the case were Asda, First Quench, One Stop Stores (formerly T&S Stores), Safeway, Somerfield and TM Retail, the owner of the McColls and Martins chains, as well as Silk Cut firm Gallaher. These co-operated and received lower fines after admitting liability.

Safeway has since been bought by Morrisons, the Co-operative has acquired Somerfield and First Quench – which owned Threshers – went into administration last year. The watchdog has dropped allegations against Tesco due to lack of evidence.

But the OFT insisted the agreements over prices "restricted the ability of these retailers to determine their selling prices independently".

Simon Williams, the OFT's senior director of goods, said: "Practices such as these, which restrict the ability of retailers to set their resale prices for competing brands independently, are unlawful."