OFT fines Gallaher, Asda and four other firms £132m

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The Independent Online

Six companies including the supermarket group Asda and the tobacco giant Gallaher, are set to be fined up to £132.3m after admitting to the Office of Fair Trading (OFT) that they colluded on the pricing of cigarettes.

The OFT allegations of "price co-ordination" were first made public in April, and by the time the deadline for response expired yesterday afternoon, Asda, First Quench, Gallaher, One Stop Stores (which is owned by Tesco), Somerfield and TM Retail had owned up to engaging in unlawful practices. By admitting liability, the companies reduced their combined fine by some £50m from £173.3m. As the first company to come forward and co-operate with the investigation, Sainsbury's has guaranteed its immunity from financial penalties, providing it continues to co-operate.

The Co-operative Group, Imperial Tobacco, Morrisons, Safeway, Shell and Tesco are still fighting the allegations, and the inquiry will not conclude until next year. The investigation, which has already been running for some five years, focuses on activities between 2000 and early 2003. Unlike price fixing, which sets a specific price for a specific product, price co-ordination agrees the price of one product in relation to another, however that may fluctuate.

John Fingleton, the chief executive of the OFT, said: "Our objective is to make markets work well for consumers and the economy alike. A cornerstone of this is the principle that companies should set their prices independently. The OFT is very pleased that the early co-operation of these parties has enabled the swift resolution of some of this case, which will significantly reduce the costs of pursuing the investigation for the OFT and the businesses concerned."

Notwithstanding their admissions of guilt, a number of the companies involved were keen to distance themselves from the activity. Japan Tobacco, which took over Gallaher Group in April 2007, pointed out the events under consideration took place before the acquisition. Similarly, Tesco emphasised that its acknowledgement of wrong-doing with regards to its One Stop Stores chain was because of the timing of the subsidiary's takeover. The group is continuing to fight the allegation against its main business and maintains that the operating practices of the two companies were very different.

But others of the accused had simply to own up. A spokeswoman for Asda said: "Everyone at Asda is very sorry about what happened. These events date back over five years and though we can't turn back the clock there are lessons to be learned and we will learn them.

"As you'd expect we've been co-operating fully with the OFT throughout its investigation and we'll continue to do so. Our aim is to ensure that something like this doesn't happen again in the future."

The OFT's largest ever price-fixing investigation found evidence of collusion between five supermarkets and five dairy processors in 2007, and levied a combined fine of more than £116m. Last year, British Airways had to stump up £121m all by itself, after Virgin applied for leniency, and therefore immunity from a financial penalty.

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