Tesco found guilty of unlawful exchange of pricing information

In its decision of 26 July 2011, the Office of Fair Trading found that Asda, Safeway, Sainsbury and Tesco, together with the major dairy processors Dairy Crest, Glanbia and McLelland, took part in an unlawful concerted practice relating to the pricing of British cheese in 2002 which infringed the Competition Act 1998. The OFT also found that Asda, Sainsbury and Tesco, together with McLelland, took part in an unlawful concerted practice in relation to the pricing of British cheese in 2003.

Tesco was fined £10.4m and substantial fines were also given to the other participants. Tesco alone appealed, on both liability and penalty.

After a four week trial between April and July this year, the CAT has now handed down judgment on the main liability issues. The CAT upheld the OFT's finding of liability in relation to events in 2002, the principal infringement found by the OFT, although the case was held to be insufficiently proven in relation to some of the individual factual strands of the infringement in 2002, and in relation to the events in 2003.

The infringement alleged involved the indirect exchange between supermarkets of future pricing intentions, in a "hub-and-spoke" (or "A-B-C") arrangement through dairy suppliers. This was the first time the CAT has had to consider such arrangements, since the leading judgment of the Court of Appeal in Replica Kit and Toys. Despite objection by Tesco as to the quality of the evidence relied upon, the CAT was satisfied that the documentary evidence was sufficient to establish that Tesco was involved in a number of unlawful indirect exchanges of future pricing information.

The decision represents an important application of the principles of UK competition law to indirect information exchange. The CAT accepted that Early Resolution Agreements ("ERAs") reached with the other parties, while not probative against Tesco itself in respect of its own involvement, could be probative in respect of a finding that other parties to the concerted practice had participated with the relevant mental state (although on the facts of the case, relatively little weight was given to them). The CAT also gave consideration to the necessary mental state of a party participating in such an indirect concerted practice, and applied, for the first time in an indirect exchange case, the Anic presumption that a party receiving illicit information is presumed to have used it unless he rebuts that presumption.