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The UK's top five supermarkets were today accused of colluding to fix the price of dairy products despite a previous warning, resulting in a £270 million cost to Britain's shoppers.
The Office of Fair Trading (OFT) has set out findings indicating that Tesco, J Sainsbury, Wm Morrison, Safeway (now part of Wm Morrison) and Asda conspired with the dairy processors Arla, Dairy Crest, Lactalis McLelland, the Cheese Company and Wiseman to fix the prices of milk, butter and cheese.
The OFT's provisional findings are that the companies engaged in price-fixing over a two-year period, in 2002 and 2003, and that the practice was harmful to consumers by restricting the competitive process, leading to higher prices.
It emerged today that supermarkets have previously been warned by the OFT that their actions might be anti-competitive.
The maximum penalty the OFT could impose is a fine of 10 per cent of "relevant" turnover on the supermarkets and the dairy producers.
For example, Tesco reported full-year global sales of £46.6 billion and of that, £32.6 billion was generated by its 1,988 UK stores. The OFT could fine the group 10 per cent of total UK turnover that was generated by sales of milk, butter and cheese.
Sean Williams, the executive director of the OFT, said: "This is a very serious case. We believe supermarkets have been colluding to put up the price of dairy products. Consumers have lost out to the tune of hundreds of millions of pounds.
"This kind of collusion on price is a very serious breach of the law. Businesses should understand that where we find evidence of this kind of anti-competitive activity we will use the powers at our disposal to punish the companies involved and to deter other businesses from taking such actions."
The OFT must now wait to receive the parties' responses, which will then have to be reviewed to decide if the law has been breached. A non-confidential version of the OFT's provisional findings will be published in October.
A spokesman for Tesco said this morning: "We will vigorously defend any allegations that we have not acted in the best interests of consumers." Shares in the supermarket rose from 436p to 438p.
Asda said: "Naturally we are disappointed with the allegations and are considering our position."
Sainsbury's said: "Sainsbury's is reviewing the statement of objections and will be vigorously defending its position."
Wm Morrison issued a robust response today, stating: "Morrisons firmly believes that it was not directly involved in the Dairy Products Retail Price Initiatives that are the subject of the OFT's inquiry."
The group said it was aware that the OFT had been investigating Safeway's conduct prior to its acquisition by Morrisons but said it had not seen any evidence of its own involvement in price fixing nor had it been asked for documents.
It said: "Morrisons continues to seek to ensure the best value for our customers, whilst also paying fair market prices."
Dairy Crest noted today's statement by the OFT and said it has cooperated fully with the three year investigation and will continue to do so.
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i don't believe they managed to get away with the fixing of the prices for so long, it should have been stopped a long time ago.
matthew cook, horncastle, UK
The big markets are not free markets.
Lars Christiansen, viña del mar, Chile, southamerica
Having just come back from the UK, I can state that everything is double what it is here. This is taking into account the Dollar/Pound ratio. The Governments collusion in this is of course disgusting. They get more taxes at higher prices. Peasants revolt!
Desmond Taylor, Houston, USA Tx
Now there's a surprise.
Mark Lyndon, London, UK
Why was it then, that I had to pay more when I had my milk delivered in glass bottles at the door, than I do now that, in the last few months, I get my milk from Asda , 45p rather than 36p ? It is the independent dairy's prices that need looking at. It would appear to me that the supermarkets have done a good job in keeping prices low for the consumer, sadly to the detriment of dairy farmers. Another own-goal from the OFT ?
John B., Runcorn, UK
This is about 1/2 p per person per day isn't it.
Pete, Edinburgh,
You watch teflon coated Tesco et al wriggle their way out of this one...
Rod Munch, Northampton, UK
Whilst I accept that there needs to be an element of market forces to prices, I do feel that the farmers also need to be heavily protected against the exploitation that supermarkets can and do exert, hence the old Milk Board to protect the interest of the farmers. How much would milk and cheese cost if all the UK diary farmers went out of business and all products had to be imported, both financially and environmentally. It seems to me that we desperately need to address the "need" of consumers for cheep food against the need of the producers to earn enough to have a decent standard of living. Nobody can convince me that we are currently paying over the odds for milk or any other food. Relative to wages, it is still cheeper than it has ever been.
David Chrimes, PhD Cambridge.
David Chrimes, Cambridge,
The OFT are only half right.
It is not consumers who have borne the cost of the supermarkets' actions,but British farmers.
They are the real losers over the past 10 years,producing food at prices below the cost of production as the supermarkets' profits have soared.
sandy , north ayrshire,
If true, the OFT should impose the maximum fine
of 10% of turnover on each company to ensure
they never contemplate another price fixing adventure and send a clear message to all big businesses. Competition is not about price fixing. Break the law and pay the fine.
Roch, London, UK
The law should be strengthened to allow jail terms for the directors of companies who engage in price fixing. A fine is not enough, as the culprits can afford to pay for that out of the profits extorted from the consumer. Put them in jail and let them collude from neigbouring cells. As for the shareholders, whose greed drives this process, a way should be found to force the shares to change hands, in this way punishing those who profit by breaking the law.
Tsai Chi, Cambridge,
I Live in bridgwater somerset. Our local MPIan Liddell Grainger (Ttory, Right, non aligned to Dave) has been boasting about what great lengths he went to, to encourage Wiseman's to set up a new state of the art facillity in this town.
Bridgwater is renowned for creating low paid de-skilled employment, our own council's Core strategy documnent admits it.
Only this week Wiseman's started advertising for staff..no mention of pay but already close to minimum wage i believe. So with their price fixing exposed and a large fine looming can we please receive some government guarantee that working at Wisemans will lead to a happy life and presperity..a bit like the new risk free investments at Northern Rock? No of course we cant..well dont think Bridgwater needs Wisemans' then or Liddell Grainger for that matter
John Beale, Bridgwater, Uk
Let them put up the prices BUT FORCE THEM TO PAY THE FARMERS MORE. British dairy farmers put iin loads of work for not enough money.
An extra 30p on milk wouldn't bust the bank now would it?
Antonio, Essex,
Dairy products in UK have been greatly overpriced for a very long time. I frequently travel around Europe and am therefore able to compare prices between the different countries. UK customers are being taken for a ride!
It will be interesting to see whether or not the Office of Fair Trading will be able to to introduce fairer pricing!
Anna, London,
What rubbish! It has not been a competitive process for years. The farmers have been screwed down for so long that they just go out of business and we then inport dairy products to compensate. The OFT must be living on a different planet!
Nigel, Crediton,
Oh wow what a suprise. . .not. I believe this 100%. They may say its not true and that competition is as lively as ever but when you look around the prices are very very similiar.
Its all rigged.
I hope the OFT clobber the lot of them.
Warren, Southport, Merseyside
Am I be cynical or has this nest egg been allowed to grow for years ready for government to harvest the political capital of being seen to act on behalf of the consumer close to an election, while the treasury harvests the financial capital of the inevitable fines that in truth came from the blood sweat and tears of the many dairy farmers who were the ones really being ripped off.The figures are there for everybody to see.
Trevor, Antrim, N.Ireland
Lets hope the fines do rightly match the crime, these greedy traders deserve to be hung out to dry as they have not only robbed consumers but the poor farmers as well. They should be ashamed of themselves and made to pay in full for blatantly breaking the law in this way.
They are just too big and should be broken up as they are beginning to think the are above the law. Any one who uses these stores regularly, as I do, soon gets to see all the scams that are pulled like increasing prices and them putting them back down and claiming to have cut the price when in fact the shopper has been robbed, yet again, by the unnecessary price rise.
d case, newquay,
Robinson-Patman Act is what we need - then jail the executives for forming a cartel
TomTom, Leeds, England
The real competition problem here is not in any price fixing for the consumer but price fixing for the farmer. Thousands of dairy farmers have gone out of business because they have been paid less for their products than it costs them to produce. It is there that the OFT ought to have been looking.
Paying the farmer 19 pence for a litre of milk and selling it to us for 60 pence is profiteering. It does not cost much more than 5 pence a litre to treat and bottle (or package) the stuff, transport might be another 5 pence so the rest (over 100%) is profit!
Peter Ryder, Middlewich, Cheshire
I doubt whether we are now in a former 'Communist Rule'!! There,the prices were decided by the goverment and in this case it was done by a consortioum of manufacturers and the retailers, i guess..
Who knows, this way of 'fixing' is still going on under everybod's nose. Can't it be?
Saju Mathew, Guildford, United Kingdom
Are the supermarkets guilty? Just look at the data attached to this; farmgate price for pint of milk never rose above 18.5p from 2001 to now (was lower for several years).
Supermarket price? Rose by 30% to56p in the same period. And they have the gall to say they were helping farmers!
Yacht Pamela - exactly how do you make fining the supermarkets a govt tax? They may well try to recoup it - that's business, but what are you recommending, just look the other way?
Adam, Bristol,
It's taken you how long to figure this out?
Farrukh, Woking, UK
Consumer's know that they are being conned, but the question is, "Who is going to do anything about it?" The Government has positively discriminated in favour of the large supermarket chains because of the never ending badly paid jobs that they create. The supermarkets themselves, sell their souls for profit. So who is it that protects the producer and the consumer? - No one .
Judy , Liverpool, england
That extra money should go to the dairy farmers, its costs more to produce the milk than what they're getting.
Mike, London,
Yeah, Yacht, just let them get away with conning people, eh. After all, loads of other businesses do it.
starling, Lancaster,
Yes great, fine them, they will just add it to the consumer to keep their profits up. Just another hidden goverment tax.
yacht pamela, swindon,