Supermarkets Admit Dairy Price Fixing

Supermarkets Asda and Sainsbury's have agreed to pay multi-million pound fines after admitting fixing the price of milk, butter and cheese, following an inquiry by the Office of Fair Trading.

Asda, Sainsbury's admitted to price-fixing, as did Safeway, prior to its takeover by Morrisons.

Dairy firms, Robert Wiseman, Dairy Crest and The Cheese Company also agreed to pay fines.

The total amount of fines paid will come to more than £116 million. Sainsbury's alone will pay a fine of £26 million.

Another dairy farm, Arla, had applied to the OFT for leniency and they said that it will receive immunity from fines if it continues to co-operate with the investigation.

However, Tesco, Morrisons and dairy firm Lactalis McLelland, have challenged the OFT's findings and the case against them will continue.

The case relates to prices of certain dairy products during 2002 and 2003. The OFT report said that the price-fixing resulted in customers being charged 3p extra for a pint of milk, 15p extra per quarter-pound of butter and 15p per half-pound of cheese. Overall, the cost to consumers is estimated at around £270 million.

Sainsbury's said that the prices were: "designed to help British dairy farmers at a time of considerable economic pressure and public debate about whether farmers were getting a fair price for their products."

Meanwhile, Asda said they regretted what had happened but stressed that their intention was to provide more money for dairy farmers who were under "severe financial pressure at the time".

However, Tesco said that it was vigourously defending its position. Executive Director Lucy Neville-Rolfe told reporters that the company had always said that they had acted independently and had not colluded with anyone.

The National Farmer's Union issued a statement which said: "This was a period of time that was extremely difficult for dairy farmers when prices were very low for a sustained period and there was great pressure on dairy companies and retailers for a farm gate price increase.

"We find it difficult to comment on the precise OFT announcement as we don't have full details and it is likely that the investigation is on going, but clearly these fines could take money out of the supply chain.

"We are pleased to say that the price for milk is now significantly higher, largely due to changes in the global market. There is also much progress being made in developing dedicated and integrated supply chains between dairy farmers, processing companies and retailers."

(KMcA)