Supermarkets admit to fixing dairy prices

In September, the Office of Fair Trading (OFT), discovered evidence of collusion by several firms relating to price fixing in 2002 and 2003.

Following an investigation by the OFT, Sainsbury’s and Asda have confessed to fixing the price of milk and cheese products.

Together with a number of dairy firms, the supermarket giants have agreed to pay fines totalling at least £116 million.

Sainsbury’s has agreed to pay £26 million while Asda has not disclosed the details of its fine, however, it is understood to be less than that faced by Sainsbury’s.

No deal was agreed with Tesco and Morrisons so the cases are to continue. The two supermarkets, along with dairy firm Lactalis McLelland are challenging the OFT discoveries.

Safeway has also admitted to fixing the prices of milk, cheese and butter (prior to its takeover by Morrisons).

Evidence found that while dairy product prices increased after the conspiracy, the amount received by farmers did not go up.

Dairy processors Dairy Crest, the Cheese Company and Wiseman Dairies have also come to an agreement with the watchdog but face smaller fines said the OFT.

Dairy firm, Arla, has been given immunity from fines if it continues to co-operate with the investigation.

The Competition Act of 1998 prohibits agreements, practices and conduct that may have a harmful effect on competition in the UK.

The provisional OFT report from September said the collusion saw customers being charged 3p extra for a pint of milk and 15p extra per quarter-pound of butter. The overcharging also led to customers being allegedly overcharged 15p per half-pound of cheese, said the OFT.

In a statement, Sainsbury’s said its price initiatives in 2002 and 2003 ‘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’.

Sainsbury’s 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.

Mr King added we shared what we intended to do in a very public way as far as retail prices were concerned with our suppliers. They shared that with some of our competitors, and it’s that that broke the rules.

A spokesperson for Asda said there were ‘regrets’ at the firm, but that its intention ‘was to provide more money for dairy farmers, who were under severe financial pressure at the time’.

A spokesperson for Dairy Crest, said that the pricing policy occurred in the aftermath of the foot-and-mouth epidemic. The group will pay £9.4 million.

A spokesperson for Wiseman Dairies said that ‘every penny of additional revenues paid to Wiseman was passed directly to our suppliers’. The group faces a £6.1 million fine.

The National Farmers’ Union (NFU) did not want to comment on the OFT announcement but a spokesperson said this was a period of time that was extremely difficult for dairy farmers when prices were very low for a sustained period and there was great pressure on dairy companies and retailers for a farm gate price increase.

The spokesperson concluded we are pleased to say that the price for milk is now significantly higher, largely due to changes in the global market.

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