Tesco defiant over dairy price-fixing fine

Supermarket giant Tesco has threatened legal action against the competition watchdog after it was slapped with a £10 million fine for its role in a dairy price-fixing scandal.

The company said it reacted with "surprise and dismay" over the decision by the Office of Fair Trading (OFT) to include it in penalties totalling nearly £50 million.

In a statement, Tesco promised to defend its position "vigorously" and "through the courts if necessary".

The supermarket was among nine firms that the watchdog judged to have colluded to rig the price of cheese and milk in 2002 and 2003.

The scandal is thought to have cost consumers around £270 million. The OFT had initially intended to fine the guilty parties more that £116 million, but scaled back the penalties after a period of consultation.

Supermarket chains Asda, Sainsbury's and Safeway and dairy processors Arla, Dairy Crest, McLelland, The Cheese Company and Wiseman all received lenient fines after admitting liability.

Tesco stands alone in denying that it colluded with the others to inflate the price of milk and cheese.

Reacting to today's decision, Lucy Neville-Rolfe, Tesco's director of corporate and legal affairs, said: "We are disheartened and disturbed that the OFT continues to pursue this costly and time-consuming case at the expense of both the taxpayer and UK business.

"We have always said we did not collude on prices on cheese and we stand firm in our rebuttal of these ongoing allegations."

Tesco is the second supermarket to threaten legal action over the case.

In 2008, Morrisons announced it was to lodge a libel suit against the OFT, alleging that the body had damaged its reputation by including it in a list of guilty firms.

The watchdog later dropped its allegation against the supermarket.

The OFT began investigating price-fixing after being alerted to the practice by Arla, which was subsequently given complete immunity from any fines.

It found that between 2002 and 2003, supermarkets and dairies exchanged information regarding pricing intentions to co-ordinate increases felt by the consumer.

As a result, shoppers were made to pay more for cheese and milk products than they should have been, the watchdog found.

Today's final decision by the OFT sees Tesco, Sainsbury's and Asda all fined around £10 million each for their role in the scandal.

Dairy processors involved were given penalties ranging from £1.26 million to £7.14 million.

But the watchdog has come under attack for the length and cost of the investigation.

Tesco criticised the "absurdity" of the OFT operating as "investigator, prosecutor and judge".

"The Government's plans for the new competition regime must address this anomaly," Ms Neville-Rolfe said.

But the OFT defended its decision to fine the firms.

John Fingleton, the watchdog's chief executive, said: "This decision sends a strong signal to supermarkets, suppliers and other businesses that the OFT will take action and impose significant fines where it uncovers anti-competitive behaviour aimed at increasing the prices paid by consumers.

"Competition in the supermarket sector is generally intense and has delivered significant benefits to shoppers across the UK in terms of innovation, choice and improved value for money.

"Our investigation and this final decision will help ensure that this competition is maintained."

PA

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