Tesco says it will take legal action to defend itself against a £10.4m fine imposed by the Office of Fair Trade for fixing cheese prices.

The retailer said it was “surprised and dismayed” by the OFT’s ruling that it had colluded with suppliers and retailers to fix prices in 2002 and 2003.

It said the ruling was “without substance” and claimed it would defend its position through the courts if it had to.

Tesco was one of four retailers and five dairy processors to be handed fines totalling £50m by the OFT for price-fixing milk and cheese.

In a ruling announced on Wednesday (10 August), Sainsbury’s was handed an £11.04m fine, Safeway was ordered to pay £5.69m and Asda was fined £9.39m.

The three retailers were all given a reduction in the amounts they agreed to an early resolution.

But Tesco has denied it colluded to set prices and said it had provided evidence to show pricing decisions were unilateral.

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

“We have always said we did not collude on prices on cheese and we stand firm in our rebuttal of these ongoing allegations. We will continue to defend our position vigorously, through the courts if necessary.”

She said the OFT had dropped earlier butter and milk allegations against the retailer last year, showing a significant climb-down in its price-fixing investigations.

“We surely have now reached the stage where the absurdity of the OFT operating as investigator, prosecutor and judge cannot be allowed to continue,” she added.

“The Government’s plans for the new competition regime must address this anomaly, in the interests of the consumer and the business community.”

A Sainsbury’s spokesman said its £11.04m fine had been settled with the OFT in 2007, despite the retailer’s disappointment at being penalised for actions that were intended to help British farmers.

“We will continue to work hard to balance value for customers with fair prices for our suppliers,” he added.

Arthur Reeves of Dairy Crest – which was handed a £7.14m fine after an early resolution with the OFT – said the amount had been expected and already accounted for in the processor’s accounts.

“Hopefully this draws a line under the whole thing,” he added.

“This wasn’t an underhand thing – everyone knew what we were doing, including government. We have now put in place measure to ensure we comply with competition law.

table