The Office of Fair Trading (OFT) has issued fines totalling £49.51 million to four of the leading supermarkets in the UK, and five dairy processors following a seven year investigation into the price-fixing of dairy products.
The inquiry began when Arla (suppliers of dairy products such as Lurpak butter and Cravendale milk) notified the OFT that price increase discussions had taken place. Under the OFT's leniency programme, Arla received 100% immunity from fines for being the first to come forward.
The OFT found in their investigation that three competition law breaches had taken place during 2002/2003 in relation to the pricing of cheese and milk, however, not all nine of the companies were involved in each of the infringements.
In 2002, Asda, Dairy Crest, Lactalis McLelland (now Groupe Lactalis), Safeway (now Morrisons), The Cheese Company, Sainsbury's and Tesco were all involved in price coordination discussions about an increase in cheese prices. Similar price coordination took place again in 2003 between Asda, Sainsbury's, Tesco and Lactalis McLelland. And in 2003, collusion over the price of milk took place between Arla, Asda, Dairy Crest, Safeway, Sainsbury's and Wiseman.
Other than Tesco, who have threatened legal action after receiving a £10.43 million fine, all of the other companies involved in the investigation admitted liability and received a discount on their penalty as a result. Tesco, however, have denied any collusion and have said that the OFT's finding is "entirely without substance".
Whilst the OFT is not obliged to demonstrate that there has been an effect on prices in order to establish the existence of an infringement, the regulator did originally estimate that a massive £270 million was spent by UK consumers as a result of the price increases. However, no such figure was included in the final report.
John Fingleton, Chief Executive of the OFT, said in the press release that:"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."