Tesco threatens to sue OFT after £10m price-fixing fine

Published on Tuesday 9 August 2011 22:19

TESCO has threatened to take legal action against the Office of Fair Trading (OFT) after it was slapped with a £10 million fine for allegedly taking part in a dairy price-fixing scandal.

The OFT has imposed penalties totalling almost 50m on nine companies, including East Kilbride-based Robert Wiseman Dairies, but Tesco is the only company among that number to deny colluding to inflate the price of milk and cheese between 2002 and 2003.

The supermarket giant yesterday responded with "surprise and dismay" and vowed to defend its position "vigorously" and "through the courts if necessary".

Lucy Neville-Rolfe, director of corporate and legal affairs at Tesco, said: "We are disheartened and disturbed that the OFT continues to pursue this costly and time-consuming case at the expense of both the taxpayer and UK business.

"We have always said we did not collude on prices on cheese and we stand firm in our rebuttal of these ongoing allegations."

It is the second time a supermarket has challenged the OFT's ruling, which was first delivered in 2007 after a number of the firms involved held their hands up over the affair. The scandal is estimated to have cost shoppers 270 million.

In 2008, Morrisons said it intended to lodge a libel suit against the competition watchdog, claiming the allegations had damaged its reputation. The OFT later dropped its case against the chain. Originally, the OFT threatened to dole out fines totalling more than 116m, but that sum was reduced after consultation with the companies involved.

Robert Wiseman, which was originally looking at a penalty of 6.1m, yesterday had its forfeit reduced for a second time to 3.2m. Last year it was cut to 4.2m. "The impact of this 1m reduction will be recognised in the financial statements for the year to 31 March 2012," the dairy firm said in a statement.

Sainsbury's and Asda, which both admitted their role in the group in 2007, also received a 10m fine, while the producers were docked between 1.26m and 7.14m each. The other processors included Arla, Dairy Crest, McLelland and The Cheese Company.

However, Arla was granted complete immunity from the fines after it was the first company to alert the OFT to the problems.John Fingleton, the chief executive of the OFT, 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."

He added: "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."