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Tesco is preparing a legal battle to clear its name of involvement in the dairy price-fixing scandal that has cost consumers ￡270 million. Failure to prove that it had no part in collusion with other supermarkets and dairy processors may land it with a fine of at least ￡80 million. The Office of Fair Trading (OFT) said yesterday that Asda, Sainsbury’s and the former Safeway, plus the dairy companies Wiseman, Dairy Crest and Cheese Company, had admitted being in a cartel to fix prices for milk, butter and cheese. They were fined a total of just over ￡116 million as part of a leniency deal offered by the watchdog to companies that owned up quickly to anti-competitive behaviour.
Officials at the OFT admitted privately that they did not think they would ever discover which company or individual had initiated the pricing formula. But the watchdog recognises that at the time supermarkets were under pressure from politicians and farmers to raise the cost of milk to save dairy farming, though it is not certain that money found its way to farmers. The OFT claimed in September that it had found evidence that the retail chains had passed future milk prices to dairy companies, which then reached a fixed price among themselves.
The average cost to each household is thought to be ￡11.25 over 2002 and 2003. Prices went up an extra 3p on a pint of milk, 15p on a quarter of a pound of butter and 15p on a half pound of cheese. There is no direct recompense for consumers, however, and the money will go to the Treasury. The National Consumer Council gave warning that the admissions would dent consumer confidence in leading high street names and that people would become sceptical of their claims. Farmers For Action, the group of farmers that has led protests over low milk prices since 2000, is seeking legal advice on whether it can now bring a claim for compensation.
The OFT investigation is continuing, however, in relation to Tesco, Morrisons and the dairy group Lactalis McLelland, and any legal action is expected to be delayed until that is completed.
Tesco was defiant and said that it was preparing a robust defence of its actions. Lucy Neville-Rolfe, its executive director, said: “As we have always said, we acted independently and we did not collude with anyone. Our position is different from our competitors and we are defending our own case vigorously. Our philosophy is to give a good deal to customers.”
Morrisons has supported the OFT in inquiries into the former Safeway business that it took over, but in a statement said that it was still making “strong representations” in its defence. A spokeswoman for Lactalis McLelland said that the company was “co-operating” with the OFT. Industry insiders suggested that the three companies were deliberately stalling the OFT investigation.
Sainsbury’s admitted yesterday that it had agreed to pay ￡26 million in fines, but denied that it had sought to profiteer. Justin King, the chief executive, said he was disappointed that the company had been penalised for actions meant to help farmers but recognised the benefit of a speedy settlement. Asda declined to say how much it would pay in fines and also said that its intention had been to help farmers under severe financial pressure.
