Firms fined £225m over price fixing

THE competition watchdog has hit ten retailers and two tobacco manufacturers with fines totalling £225 million for "unlawful practices" in pricing of cigarettes, cigars and rolling tobacco.

The Office of Fair Trading (OFT) yesterday said Imperial Tobacco, Gallaher and ten retailers engaged in "unlawful practices" under which the cigarette and tobacco prices of rival manufacturers were linked.

But four of the 12 firms named – Lambert & Butler maker Imperial Tobacco, supermarkets Morrisons and the Co-operative Group and petrol station owner Shell – are either appealing or considering a challenge.

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Morrisons – fined 8.6 million – said the OFT's stance was "disappointing", as well as "illogical and without foundation".

It said: "The practices to which the OFT refers were intended to reduce the retail prices charged to consumers."

The appeal is likely to be the supermarket's second clash with the watchdog in two years after the OFT wrongly accused it of anti-competitive behaviour in dairy markets in 2008. It apologised and paid 100,000.

Imperial Tobacco – which has been landed with the biggest fine of 112.3 million – added: "Far from being anti-competitive, these arrangements were pro-competitive and to the benefit of consumers.

"Retailers remained free to set their own prices."

The OFT said that the breaches all took place between 2001 and 2003. Sainsbury's revealed the infringements and has escaped any fine.

The other firms caught up in the case were Asda, First Quench, One Stop Stores (formerly T&S Stores), Safeway, Somerfield and TM Retail, the owner of the McColls and Martins chains, as well as Silk Cut firm Gallaher. These co-operated with the investigation and received lower fines after admitting liability.

Safeway has since been bought by Morrisons, the Co-operative has acquired Somerfield and First Quench – which owned off-licence Threshers – went into administration last year.

The watchdog has dropped allegations against the market leader, Tesco, due to lack of evidence.

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But the OFT insisted the agreements over price links between rival brands "restricted the ability of these retailers to determine their selling prices independently".

Simon Williams, the OFT's senior director of goods, explained: "Practices such as these, which restrict the ability of retailers to set their resale prices for competing brands independently, are unlawful.

"They can lead to reduced competition and ultimately disadvantage consumers."

He added: "This enforcement action will send out a strong message that such practices, which could in principle be applied to the sale of many different products, can result in substantial penalties for those who engage in them."

But Shell said it "strongly disagreed" with the OFT.

The Co-operative added: "Throughout the investigation to date, our judgment has been that our behaviour during the years in question did not infringe competition law. Nor did it result in consumers paying more for tobacco products than they otherwise would have done."