The Office of Fair Trading has confirmed it is investigating retail milk pricing initiatives implemented between 2000 and 2003.

An OFT spokeswoman told Farmers Weekly: “We have reasonable grounds to investigate certain retail price initiatives that may have been in breach of the Competition Act.”

Although the OFT would not confirm details of its investigation, it is thought that the 2p/litre retail price rise in July 2003 may be among initiatives under scrutiny.

The spokeswoman said that the investigation was a serious matter and could eventually culminate in company representatives being called to London to give evidence in person.

If they are found to have breached laws, the companies will face substantial fines, the spokeswoman said, and she confirmed that information gathering was already under way.

So far milk processors Robert Wiseman and Dairy Crest have announced that they are subject to the investigation, but the OFT said there were several other companies involved.

The big retailers were asked whether they had been approached but, after much deliberation on whether or not to comment, they all declined to do so.

The farming industry was much more forthcoming.

Farmers For Action chairman David Handley said as far as he was concerned everything had been above board and the OFT would find audit trails which proved this.

“I don’t think the OFT has any justification to waste taxpayers’ money on this.

[The process] was totally transparent, so I can’t see how the OFT can look at it from the perspective that something was wrong.”

Mr Handley added that the OFT’s goal was to make markets work well for consumers.

“We are trying to protect the consumer – to make sure that they can continue to buy British milk,” he said.

NFU milk board chairman Gwyn Jones described the investigation as “unbelievable”.

“The OFT has steadfastly refused to do anything about retail power and yet it seems determined to get in the way of the milk industry making any progress.

“It highlights the need for a review of the OFT.

If it does not broaden its view, and encompass the whole milk supply chain, the UK industry will be devastated and ultimately it will be the consumer that loses out.”

A spokesman for Dairy UK said: “The intensely competitive nature of the dairy industry is readily apparent to any independent observer.

Dairy companies are fully aware of their obligations under competition law.

“The implementation of competition policy in the UK is a significant issue for the dairy industry.

The sector needs to be able to restructure and consolidate in order to be able to compete with its European counterparts.”

jonathan.riley@rbi.co.uk