OFT's Largest Fine for Price Fixing - 16/04/2010

A whole raft of retailers colluded with tobacco manufacturers Imperial Tobacco and Gallaher to link the prices of cigarettes, tobacco and cigars to those of their competitors in an attempt to avoid being undercut on price by cheaper brands. As a result the tobacco manufacturers could raise their prices knowing that the retailers would sell their competitors' brands at a similarly higher price.

The Office of Fair Trading (OFT) handed out fines amounting to £225 million to Asda, the Co-operative Group, Morrison's, One-Stop Stores, Safeway, Shell, Somerfield and TM Retail. Apparently the OFT felt there was insufficient evidence to pursue Tesco.

A senior OFT director stated "this enforcement action will send out a strong message that such practices, which could, in principle, be applied to the sale of many different products, can result in substantial penalties for those who engage in them".

The investigation has been going on since 2003 when Sainsbury's blew the whistle in exchange for leniency. A tactic that worked as Sainsbury's has not been fined. Asda, One Stop Stores, Gallaher, First Quench, Somerfield and TM Retail all received reduced fines for volunteering information early on in the investigation.

The lesson here seems to be that those involved in anti-competition activity, even something as blatant as price fixing, when caught out should own up immediately to reduce the eye-watering fines.

[Back to news]