OFT accuses supermarkets of price fixing

The Office of Fair Trading has provisionally found that large supermarkets and dairy processors have colluded to increase the prices of dairy products, costing consumers an estimated £270 million.

A “statement of objections” has been sent to Asda, Morrisons, Safeway, Sainsbury and Tesco, as well as dairy processors Arla, Dairy Crest, Lactalis McLelland, The Cheese Company and Wiseman.

This says that these supermarkets and processors engaged in fixing retail prices for milk, butter and cheese, in breach of the Competition Act, by sharing highly commercially sensitive information over a two year period, 2002 and 2003.

This was harmful to consumers, leading to higher prices.

“This kind of collusion on price is a very serious breach of the law,” said Sean Williams, OFT executive director. “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.”

Speaking on Radio Five Live this morning, director general of the British Retail Consortium Kevin Hawkins insisted there had been no collusion among supermarkets. The price rises had been made individually and were part of an effort by retailers to help raise farmgate prices, and so secure the supply of milk for consumers, he said.

But it is understood the OFT found little evidence of prices to farmers increasing at the time.

According to Conservative MEP Neil Parish, this comes as no surprise and farmers had been campaigning against “the great milk robbery” for some time. “Our farmers have been paid the lowest price for their milk among the major producers in Europe – sometimes several pence per litre less that it costs to produce.

“It is encouraging to see the OFT has finally woken up to the level of collusion between supermarkets when negotiating dairy prices.”

But supermarket group Morrisons denied any collusion. “Morrisons takes adherence to competition law very seriously and operates a comprehensive and robust compliance programme, which was extended to cover Safeway immediately on the company’s takeover,” said a statement.