Supermarkets admit dairy price-fixingThey face multi-million pound fines

07 December 2007

A man carrying a shopping basket in a supermarket

Stock up on baby essentials at your local supermarket

Supermarket giants Asda and Sainsbury's have agreed to pay multi-million-pound fines after they admitted fixing the price of milk, cheese and butter.

The retailers are among a group of major supermarkets and dairies to admit colluding over prices and have agreed to pay combined fines of more than £116 million.

Sainsbury's alone will pay watchdogs a settlement of £26 million.

Other firms that have held up their hands in the investigation by the Office of Fair Trading (OFT) include fellow supermarket Safeway, prior to its takeover by Morrisons, and dairies Robert Wiseman, Dairy Crest and The Cheese Company.

The matter relates to pricing during 2002 and 2003, at a cost of about £270 million to consumers.

Dairy farmers

The OFT will continue with its case against supermarkets Tesco and Morrisons and dairy company Lactalis McLelland, which have not admitted to price fixing.

Sainsbury's said its action to collude over prices was designed to help dairy farmers at a time when they were under financial strain, following the devastating foot-and-mouth outbreak in 2001.

Chief executive Justin King said: ‘We are disappointed that we have been penalised for actions that were intended to help British farmers, but recognise the benefit of a speedy settlement.

‘The price initiatives in 2002 and 2003, which were widely and publicly reported at the time, 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.’

Financial pressure

Asda said in a statement its intention was also to ‘provide more money for dairy farmers, who were under severe financial pressure at the time’.

‘These issues concern all the major supermarkets but we've chosen to settle this matter quickly because we believe it's the right thing to do for our customers,’ it added.

Dairy Crest is expected to pay a fine of £9.4 million after its price fixing admission, while fellow dairy Robert Wiseman had agreed to pay £6.1 million.

Consumer confidence

Which? Campaigns Policy Manager Pula Houghton said: ‘It is shocking that consumers have been ripped off by businesses they trust. Consumers will be asking - if it is milk now, what next?

‘If the supermarkets want to restore the consumer confidence that will no doubt be damaged by their admissions, they should publicly commit to never doing this again and find creative ways to proactively reimburse their customers.

‘Whilst we are pleased that the firms involved have admitted price fixing and been fined, the fines won’t repay the consumers who have paid over the odds for basic provisions. 

‘The Office of Fair Trading (OFT) must continue to press for the strongest possible punishments to stamp out these practices.’

© The Press Association, All Rights Reserved.