After a lengthy investigation, the office found that Arla, Asda, Dairy Crest, Safeway, McLelland, Sainsbury’s and Tesco infringed the Competition Act 1998.
The infringement related to co-ordinated price increases on specific dairy products between 2002 and 2003.
Easy as ABC…
This objective was achieved, the OFT said, by supermarkets indirectly exchanging retail pricing intentions via the major dairy processors, in a so-called ‘ABC’ information exchange.
One infringement involved cheese in 2002. Asda, Dairy Crest, Lactalis McLelland before the Groupe Lactalis takeover, Safeway prior to its acquisition by Morrisons, Sainsbury’s, Tesco and The Cheese Company were all involved.
A further cheese infringement in 2003 saw Asda, Lactalis McLelland, Sainsbury’s and Tesco implicated. A liquid milk infringement also saw Arla, Asda, Dairy Crest, Safeway and Robert Wiseman Dairies involved.
However, one dairy industry source suggested to FoodManufacture.co.uk that the fines were unfair: “The irony here is that the retailers and processors were trying to pass on [the proceeds of] higher milk prices to farmers. But the OFT judged that this was a breach of competition law.”
Arla blows the whistle
John Fingleton, OFT ceo, said that the decision would send out a “strong signal to supermarkets, suppliers and other businesses”.
He added that the OFT would act and impose significant fines “where it uncovers anti-competitive behaviour aimed at increasing the price paid by consumers”.
However, Fingleton welcomed the co-operation of the firms that admitted to the infringements (all bar Tesco, which was fined £10.43m) and that lower fines had been imposed as a result.
Of the dairy processors involved, whistleblower Arla received 100% leniency for alerting the OFT to possible infringements and was not fined, despite its involvement.
Dairy Crest must pay £7.14m, Lactalis McLelland £1.66m and The Cheese Company £1.26m.
Robert Wiseman paid a £6.1m fine in December 2007 to reach settlement with the OFT, a figure reduced to £4.2m in March last year.
The sum has now been reduced to £3.2m, and a Robert Wiseman spokesman told FoodManufacture.co.uk: “We’re disappointed that we were ever involved in this. But the £1m fine reduction is welcome, and we will feed that into our numbers for 2010/11.”