Office of Fair Trading hands retailers £100m fine for milk price fixing

The Office of Fair Trading has agreed fines of over £100m with a number of retailers and supermarkets accused of price fixing during efforts to raise the farm-gate milk price in 2002 and 2003.

Companies were presented with the OFT’s evidence in September and could have faced a maximum fine of 10% of turnover if found guilty.

The accused, however, were offered the chance to pay reduced fines in return for early cooperation with the investigation.

Processor Arla Foods UK was the first to apply for leniency by agreeing to cooperate and has avoided any fines at all.

Today, processors Dairy Crest and Robert Wiseman Dairies and The Cheese Company and retailers Asda and Sainsbury’s said they had also struck a deal with the OFT.

Dairy Crest said it expected to pay a significantly reduced fine of £9.4m provided that it continues to cooperate fully with the OFT’s investigation.

The firm said it was pleased to have reached an agreement with the OFT that removed uncertainty and allowed the company to move forward.

Robert Wiseman Dairies said it had also signed an early resolution agreement with the OFT that will see it pay £6.1m on condition it continues to provide full co-operation to the OFT.

Chairman Alan Wiseman said: “The intention of the Retail Price Initiatives was to provide support for farmers at a time of crisis, and every penny of additional revenues paid to Wiseman was passed directly to our suppliers.  

“Whilst we are disappointed with the outcome of the investigation, this Agreement removes a long shadow hanging over the company, and we now look forward to the group’s continued growth and success.”

It is not yet known how much The Cheese Company, which is part of co-op Milk Link, is going to be fined.

The allegations against it refer to Glanbia’s cheese business, which it purchased after the period under investigation by the OFT.

Sainsbury’s confirmed that is has agreed to pay a settlement of £26m.

Chief executive Justin King said: “We are disappointed that we have been penalised for actions that were intended to help British farmers, but recognise the benefit of a speedy settlement with the OFT.

“The price initiatives in 2002 and 2003, which were widely and publicly reported at the time, were designed to help British dairy farmers at a time of considerable economic pressure and public debate about whether farmers were getting a fair price for their products.”

Because Asda is not a privately owned company it does not have to disclose the amount of its fine.

Tesco and Morrisons have raised eyebrows by not yet agreeing to co-operate with the OFT, leaving themselves open to much larger fines.

Dairy UK, the trade association that represents the dairy industry, said today that dairy products in the UK were extremely good value for consumers.

Responding to today’s OFT announcement, Jim Begg, Director General of Dairy UK, said: “The OFT investigation refers to events five years ago and any price rises then reflected the major cost and income difficulties being encountered by dairy farmers.

“It was an exceptionally difficult time for farmers and there were protests about the prices that were being paid to them. There was widespread acceptance at that time that the UK’s farmers should get a better deal.

“Dairy prices for consumers in the UK over the last 10 years have been extremely competitive and remain so. Price rises have generally been below the rate of inflation and dairy products continue to be very good value.”

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