Allegations dropped and fines cut in dairy price fixing probe

By Guy Montague-Jones

- Last updated on GMT

Related tags: Oft, Milk

A long-running investigation into price fixing in the UK dairy market appears to have run its course as allegations are dropped and fines levied at leading processors and supermarkets are reduced.

The case dates back to 2007 when the Office of Fair Trading (OFT) alleged that leading supermarkets and dairy processors including Tesco, Asda, Dairy Crest and Robert Wiseman colluded to fix the prices of certain milk, butter and cheese products in 2002 and 2003.

Seven of the accused parties quickly reached an agreement with the OFT that saw them accept liability in principle for a breach of competition law and pay fines totaling £160m.

Tesco refused to accept liability and it is in light of evidence that the supermarket brought to the OFT that the watchdog decided to drop its allegations against all parties related to milk and butter.

Lower fines

Because of this development, the OFT has agreed to reduce the fines originally agreed with the seven other companies from a total of £160m to £70m. This offer is conditional on their continued cooperation with the regulator.

Tesco decided not to contest the allegations related to the price fixing of certain cheese products with two suppliers in 2002 and one in 2003. Nevertheless, the supermarket maintains its innocense.

Disagreement on cheese

In a statement, the supermarket said: “We disagree with the OFT’s views on cheese. We firmly maintain that we are innocent of all allegations against us and at no point sought to collude with other retailers or dairy processors on prices. But given the passage of time and the cost of litigation, we are keen to bring this lengthy and costly process to a close.”

Tesco added that the allegations from the OFT relate to a difficult time for the dairy industry, when the retailer independently increased the price of a number of dairy products in an effort to support farmers and in response to feedback from customers and others.

The OFT expects to conclude and issue its final decision by early summer 2010.

Related topics: Markets, Pricing Pressures

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