U.K.'s Office of Fair Trading imposes fines totaling £49.5M on reatilers Asda, Safeway, Sainsbury's and Tesco, as well as five dairy processors for coordinating prices hikes on some dairy products in 2002-2003

Graziela Medina Shepnick

LONDON , August 10, 2011 (press release) – The OFT today issued a decision following its dairy products retail pricing investigation, imposing fines totalling £49.51 million on four supermarkets and five dairy processors.

The OFT found that Arla, Asda, Dairy Crest, McLelland, Safeway, Sainsbury's, Tesco, The Cheese Company and Wiseman infringed the Competition Act 1998 by co-ordinating increases in the prices consumers paid for certain dairy products in 2002 and/or 2003.

This co-ordination was achieved by supermarkets indirectly exchanging retail pricing intentions with each other via the dairy processors - so called A-B-C information exchanges.

The OFT found that three infringements were committed. Not all companies were involved in all three infringements and details of the scope of the OFT's findings are set out below:

* Cheese in 2002 - involving Asda, Dairy Crest, Lactalis McLelland (prior to its acquisition by Groupe Lactalis), Safeway (prior to its acquisition by Morrisons), Sainsbury's, Tesco and The Cheese Company
* Cheese in 2003 - involving Asda, Lactalis McLelland (prior to its acquisition by Groupe Lactalis), Sainsbury's and Tesco and
* Fresh Liquid Milk in 2003 - involving Arla, Asda, Dairy Crest, Safeway (prior to its acquisition by Morrisons), Sainsbury's and Wiseman.

Arla benefitted from complete immunity from fines as it applied for and was granted immunity under the OFT's leniency programme. Arla was the first company to alert the OFT to the existence of possible infringements and the first to apply for leniency.

Asda, Dairy Crest, McLelland, Safeway, Sainsbury's, The Cheese Company and Wiseman received reductions in their fines because they agreed to early resolution. Each of these parties admitted liability for the infringements and agreed to a streamlined procedure enabling parts of the case to be resolved more quickly, thus reducing the costs of the investigation.

John Fingleton, OFT Chief Executive, said:

'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.

'Competition in the supermarket sector is generally intense and has delivered significant benefits to shoppers across the UK in terms of innovation, choice and improved value for money. Our investigation and this final decision will help ensure that this competition is maintained.

'We welcome the co-operation provided by those companies which admitted to the infringements and have given them lower fines to reflect the reduced resources required to complete our investigation.'

NOTES

1. For further information on this investigation, including earlier press releases, see the Dairy products case page.

2. Penalties for each party for each infringement are:

Total penalties for each party are (please note that some information in this table was amended following release of this press notice):

3. The Competition Act 1998 (the Act) prohibits, among other matters, agreements and practices that have the object or effect of preventing, restricting or distorting competition in the UK or a part of it and which may affect trade in the UK or a part of it (the Chapter I prohibition). Since the OFT is not required to demonstrate any effect on prices in order to establish an infringement of the Chapter I prohibition in this case, the OFT makes no finding as to whether there was any such effect.

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