The Office of Fair Trading (OFT) today issued a decision following its dairy products retail pricing investigation, imposing fines totalling £49.51 million on four supermarkets and five dairy processors.

The OFT found that Arla, Asda, Dairy Crest, McLelland, Safeway, Sainsbury's, Tesco, The Cheese Company and Wiseman infringed the Competition Act 1998 by co-ordinating increases in the prices consumers paid for certain dairy products in 2002 and/or 2003.

This co-ordination was achieved by supermarkets indirectly exchanging retail pricing intentions with each other via the dairy processors; a process called A-B-C information exchanges. The OFT estimate that the collusion resulted in shoppers paying 2 pence extra for every litre of milk and 100 grams of cheese; a total cost of £270 million to UK consumers.

The OFT found that three infringements were committed. Not all companies were involved in all three infringements and details of the scope of the OFT's findings are set out below:

•    Cheese in 2002 - involving Asda, Dairy Crest, Lactalis McLelland (prior to its acquisition by Groupe Lactalis), Safeway (prior to its acquisition by Morrisons), Sainsbury's, Tesco and The Cheese Company
•    Cheese in 2003 - involving Asda, Lactalis McLelland (prior to its acquisition by Groupe Lactalis), Sainsbury's and Tesco and
•    Fresh Liquid Milk in 2003 - involving Arla, Asda, Dairy Crest, Safeway (prior to its acquisition by Morrisons), Sainsbury's and Wiseman.

Arla escaped without receiving any fines, as it applied for and was granted immunity under the OFT's leniency programme. Arla was the first company to alert the OFT to the existence of possible infringements and the first to apply for leniency.

Asda, Dairy Crest, McLelland, Safeway, Sainsbury's, The Cheese Company and Wiseman received reductions in their fines because they agreed to early resolution. Each of these parties admitted liability for the infringements and agreed to a streamlined procedure enabling parts of the case to be resolved more quickly, thus reducing the costs of the investigation.

John Fingleton, OFT Chief Executive, said, “This decision sends a strong signal to supermarkets, suppliers and other businesses that the OFT will take action and impose significant fines where it uncovers anti-competitive behaviour aimed at increasing the prices paid by consumers.

"Competition in the supermarket sector is generally intense and has delivered significant benefits to shoppers across the UK in terms of innovation, choice and improved value for money. Our investigation and this final decision will help ensure that this competition is maintained.

"We welcome the co-operation provided by those companies which admitted to the infringements and have given them lower fines to reflect the reduced resources required to complete our investigation."

The fine announced today, the culmination of a nine year investigation into price fixing in the dairy industry, represents less than half the original estimate of £116million announced in 2007.

However, Tesco has threatened legal action over the fines. The company denied that it colluded with others to fix prices and said the OFT’s ruling was "entirely without substance." Tesco’s Director of Corporate and Legal Affairs, Lucy Neville-Rolfe, stated, "We surely have now reached the stage where the absurdity of the OFT operating as investigator, prosecutor and judge cannot be allowed to continue."

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