Price-fixing on dairy products cost consumers £270m, says OFT
Major supermarkets and dairy processors have been colluding to fix the price of dairy products with an estimated cost to the consumer of £270m, according to the Office of Fair Trading.
The OFT yesterday accused the supermarkets of fixing the prices for milk, butter and cheese in breach of the Competition Act by sharing "highly commercially sensitive information, including details of the levels of price increase" in 2002 and 2003.
Asda, Morrisons, Safeway, Sainsbury and Tesco are now all facing a hefty fine after being named in the findings along with the dairy processors Arla, Dairy Crest, Lactalis McLelland, The Cheese Company and Wiseman.
Sean Williams, executive director at the OFT, said this was "a very serious case". He added: "This kind of collusion on price is a very serious breach of the law. 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 and to deter other businesses from taking such actions."
But the supermarkets and dairy producers denied any wrongdoing and said they would "vigorously defend" themselves against the charges.
Kevin Hawkins, director general of the British Retail Consortium, said: "There was no collusion between supermarkets over milk prices and no sharing of confidential information."
He said in 2002 there was a surplus of raw milk which led to a fall in farm-gate milk prices. As a consequence some retailers independently raised the prices charged to customers "in an attempt to ensure farmers received more and were able to continue in business so ensuring future milk supplies".
Mr Hawkins said MPs and farming groups were telling retailers to do this. "A proportion of the increases reached farmers, but some appears to have stuck to the sides on the way down the supply chain. At no time were retailers acting against the best interests of customers. In fact this move helped customers by ensuring they did not go short of milk."
Morrisons said it firmly believes it was not involved in colluding with the others, adding that Morrisons has inherited from Safeway, which it acquired at the end of 2003, "a matter not of Morrisons' making, or doing".
The OFT said it will not be in a position to decide if the law has been breached until it has received and reviewed responses to its statement of objectives.