OFT launches dairy price-fixing probe in UK

By Chris Mercer

- Last updated on GMT

Related tags: Dairy crest, Arla foods, Milk, Oft

Britain's Office of Fair Trading is investigating allegations of
price-fixing by top dairy processors as the government agency draws
increasing criticism from the industry.

Dairy Crest and Robert Wiseman, two of the UK's top three dairy processors, confirmed they were under investigation by the OFT in relation to certain "retail price initiatives"​.

Arla Foods UK, subsidiary of Scandinavian dairy group Arla Foods, is also believed to be involved.

Wiseman said retailers had devised the initiatives to help increase revenues for farmers, long an explosive issue in the British dairy sector.

Up to 4,000 dairy farmers recently held a three-day strike, withholding milk from dairies, to protest at low farmgate prices. Britain has the lowest average farmgate milk price, 18p per litre, among the pre-enlargement EU-15 countries.

Campaign group Farmers For Action (FFA) called the strikes. Earlier this year, the group claimed it had negotiated a deal with Tesco, Britain's leading supermarket, to ensure farmers got more money for their milk.

The group said that an earlier agreement involving processors to raise retail milk prices by two pence per litre had failed to benefit farmers.

An OFT spokesperson confirmed it was investigating retail price initiatives but was unable to add comments to what Dairy Crest and Wiseman had said themselves.

She said inquiries were a lengthy process, often taking up to two years to complete and sometimes longer if several companies were involved.

This November is the OFT's 'Come Clean on Cartels' month, aimed at persuading more companies to blow the whistle on price-fixing in their industry. The agency gives special leniency to anyone involved in a cartel that informs authorities of its existence.

The OFT has received increasing criticism from the dairy industry in recent months, and officials have accused it of blocking developments that could lead to badly needed higher earnings in the sector.

The Rt. Hon. David Curry MP, chairman of industry body Dairy UK, recently told 250 industry representatives that competition authorities would jeopardise the dairy sector's future if they prevented the development of a more powerful supply chain.

"We must make the competition authorities understand that the market is more open and competitive than they tend to believe."

Gwyn Jones, chairman of the National Farmers' Union Dairy Board, also criticised the OFT last week for referring Wiseman's proposed takeover of Scottish Milk Dairies to the Competition Commission.

"We find this decision incredibly frustrating because it is precisely the kind of move we believe should be encouraged if we are to achieve the economies of scale required to compete with the rest of Europe,"​ he told government representatives.

Related topics: Manufacturers, Pricing Pressures

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