August 24, 2011


UK retailers to pay US$79.21 million for dairy price fixing



Major supermarkets in the UK were handed multi-million euro fines last week for being involved in price fixing of dairy products almost 10 years ago.


The fines were issued by the Office of Fair Trading (OFT), which is the UK's equivalent of the Competition Authority here.


The Government agency found that Arla, Asda, Dairy Crest, Safeway, McLelland, Sainsbury's and Tesco infringed Britain's Competition Act through the implementation of co-ordinated price increases on specific dairy products such as cheese and liquid milk between 2002 and 2003.


The OFT said that the supermarkets indirectly exchanged retail pricing intentions via the dairy processors, in a so-called 'ABC' information exchange.


However, before farmers celebrate a win over the multiples, a food industry source's comments should be borne in mind.


"The irony here is that the retailers and processors were trying to pass on higher milk prices to farmers. But the OFT judged that this was a breach of competition law," he said.


John Fingleton, the former head of our Competition Authority and who now heads up the OFT, said that the decision would send out a signal to supermarkets, suppliers and other businesses that his office would impose significant fines "where it uncovers anti-competitive behaviour aimed at increasing the price paid by consumers".


Tesco has described the result as "entirely without substance".


It was the only retailer that refused to co-operate with the investigation and, as a result, was fined nearly EUR12 million (US$17.28 million).


In contrast, whistleblower Arla escaped having any fine imposed after it alerted the OFT of possible infringements, despite its involvement.


Dairy Crest must pay GBP7.14 million (US$11.78 million), Lactalis McLelland GBP1.66 million (US$2.74 million) and the Cheese Company GBP1.26 million (US$2.08 million). Robert Wiseman's fine has been reduced from GBP6.1 million (US$10.06 million) in December 2007 to GBP3.2 million (US$5.28 million).


"This [fine] is surprising given that the OFT itself said that competition in the supermarket sector is generally intense and has delivered significant benefits to shoppers," said Tesco director of corporate and legal affairs, Lucy Neville-Rolfe.

Video >

Follow Us