At the end of April the OFT issued a statement alleging that several tobacco manufacturers and retailers were involved in unlawful pricing practices at the beginning of the century. The parties involved now have the chance to respond and then the OFT will decide if the law has been broken. If so, then the parties are likely to receive a hefty fine.

The tobacco manufacturers involved are Imperial Tobacco (home to brands such as Lambert & Butler, Embassy, Regal and Golden Virginia) and Gallaher (whose range contains Benson & Hedges, Berkeley, Hamlet and Silk Cut), whilst there are 11 retailers named including the supermarket heavyweights Asda, Morrisons, Sainsbury’s and Tesco.

It is alleged that the parties entered arrangements linking the retail price of certain brands to that of another manufacturer’s competing brand, thereby restricting the ability of the retailers to determine their selling prices for themselves. Also, some of the parties are said to have indirectly exchanged proposed future retail prices. These activities go to the very heart of competition law; as John Fingleton of the OFT recognised, “it is a fundamental principle that pricing decisions should be made independently”.

The major supermarkets will be very familiar with the competition law authorities at the moment. This announcement follows the OFT’s investigation into retail price arrangements between five supermarkets and five dairy producers and the Competition Commission’s recent announcement containing recommended changes to the planning system for supermarket premises to make it harder for one chain to dominate a local area. There have also been reports in the press, unconfirmed as yet by the OFT, of the OFT inspecting certain supermarket premises in separate, new investigations.

Whilst supermarkets seem to be spending more time with the OFT than they would perhaps like, at least one has managed to hit back. Morrisons has just won an apology, £100,000 and its costs in settlement of a defamation action relating to an earlier OFT press release about the dairy investigation. With this in mind, we would like to make it clear that Morrisons are not alleged to have been involved in the second activity of indirect retail price exchange.

Posted: May 1st, 2008 under Competition Law & Regulatory.
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