The ITV station was also ordered to contribute pounds 650,000 towards the retail giant's legal costs over a World in Action documentary which alleged that M&S knew of child exploitation in a Moroccan factory used by a supplier and misled customers by selling foreign-made garments labelled "Made in the UK".
Granada accepted the verdict and made an unreserved apology. But it claimed later that the central thrust of the documentary, transmitted in January 1996 and entitled "St Michael: Has the halo slipped?", had not been discredited by the ruling.
Charles Tremayne, controller of factual programmes, said the programme had proven that some 13 and 14-year-olds were employed in the factory and that a consignment of pyjamas made there had been mislabelled "Made in the UK" by its Northern Ireland-based supplier, Desmonds.
"We never intended to give the impression that M&S knew of these practices and we don't accept that the programme gave such an impression," he said.
Sir Richard Greenbury, chairman of M&S, said: "We will always take firm action to protect our reputation."