Supermarkets must pay a multimillion pound fine for ripping off smokers in collusion with Gallaher, the tobacco company, it was announced yesterday.

Asda and Somerfield have admitted fixing the price of cigarettes and overcharging customers under a secret deal with the manufacturer of brands including Benson & Hedges and Silk Cut. The Office of Fair Trading said that a total of £173.3 million in fines and costs had been agreed in one of the biggest settlements of its kind.

Other firms that admitted colluding in the pricing scam include the owner of Threshers, the off-licence chain, and One Stop convenience stores, which must contribute towards the settlement. But the lion’s share of the fine — £93 million — will be paid by Gallaher, owned by Japan Tobacco.

The OFT has been investigating an alleged price-fixing cartel in Britain’s £15 billion-a-year market for cigarettes and rolling tobacco for five years. In April it announced that 11 companies were suspected of swapping price information and linking prices with rival brands between 2000 and 2003.

Other accused firms are fighting the allegations. These are Imperial Tobacco, which owns the Embassy, John Player and Golden Virginia brands, Tesco, Morrisons, Safeway (now taken over by Morrisons), the Co-op and Shell, for its petrol station stores. If they are found guilty of collusion they face serious penalties under the Competition Act.

If they are found guilty of collusion they face serious penalties under the Competition Act and stand to be fined as much as 10 per cent of turnover of each product involved in the cartel.

Sainsbury’s was also part of the original investigation but turned whistleblower and handed over all its papers identifying unlawful practices. It is to be spared a fine provided it continues to assist the investigation.

The six companies fined yesterday made prompt admissions of illicit competition practices in return for lenient fines.

A spokesman for Japan Tobacco said: “We acquired Gallaher’s last year and after applying due diligence in all of this we decided to apply for leniency and have agreed to pay £93 million in fines.”

An Asda spokesman said that it had also agreed to a multimillion-pound fine. “We put our hands up quickly and admitted we have done some wrong but we are not the villains of this piece,” he said.

However, Imperial Tobacco insisted that it had not admitted any infringement of the law. A spokesman said that it took compliance with competition law “very seriously” and said that it rejected any suggestion that it had acted in any way contrary to the interests of consumers. “Imperial Tobacco has co-operated fully with the OFT throughout and continues to do so,” he said.

John Fingleton, chief executive at the OFT, said: “The OFT’s objective is to make markets work well for consumers and the economy alike. A cornerstone of this is the principle that companies should set their prices independently.

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