Asda plans legal test on drugs ruling

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The Independent Online
Asda, which is trying to break the resale price maintenance agreement on non-prescription drugs, is considering a legal challenge to the ruling next week. The supermarket group will try to remove certain products from the agreement which will enable it to cut prices without falling foul of the law.

The company, which yesterday announced a 27 per cent surge in interim profits to pounds 138m, said it was also keen to cut the prices of other products which were not subject to price fixing but which it considered too expensive. Compact discs are one possibility.

Asda mounted its original challenge to non-prescription drug prices in October when it cut the prices of some vitamins and health food supplements. But it was forced to retreat after some manufacturers obtained an injunction. The matter is the subject of an Office of Fair Trading review.

Asda's fresh challenge is to drug classifications. Asda says some products are unnecessarily classed as medicines and so subject to price fixing. Vitamins and dietary supplements are included and it is thought these are the products that Asda would like removed.

Asda's chief executive Archie Norman, who led the challenge to the Net Book Agreement earlier this year, said yesterday: "We will continue to oppose outdated regulations that artificially maintain high prices."

Mr Norman also turned up the heat in the battle for Christmas shoppers yesterday when it extended its offer on loyalty card vouchers. Tomorrow and all this weekend it will accept any vouchers including those from rival retailers. The company started the offer in some stores last week but will now extend it to all of its 207 stores. The offer is seen as a direct challenge to Tesco which has just mailed out pounds 40m of vouchers to its loyalty card members offering free frozen turkeys. Tesco customers will now qualify for a free turkey at Asda instead.

Tesco dismissed Asda's offer as "an empty gesture". It added that Mr Norman was also too late as the majority of Tesco card holders had already cashed in their vouchers.

Asda is continuing its experiment with longer Christmas opening hours this year. Three branches will open 24 hours a day over weekends. Sixty more will open until midnight.

Commenting on Chistmas trading Mr Norman said: "I think it's going to be a good Christmas for retailers that hold their nerve."

Asda said its new Market Hall style of supermarket which has a fresher, lighter design, had been successful. Since August, six new superstores have been opened of which five are in the new format. Asda plans to open six new stores a year which will all be in the new design.

Asda's pounds 138m of pre-tax profits for the six months to November were compared to pounds 108m last year. Like-for-like sales are running at 12.6 per cent higher than last year. This is much stronger growth than rivals Tesco and Safeway and significantly better than recent figures by Sainsbury.

Asda's sales for the six months to November increased from pounds 2.6bn to pounds 3.04bn. The interim dividend was increased by 18 per cent to 0.72p. The shares closed 1p higher at 106.5p.

Investment Column, page 22.

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