25 Apr 2008


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Supermarkets under fire over tobacco price arrangements

Tobacco

Supermarkets and some tobacco manufacturers may have acted unlawfully to set retail prices for tobacco products, the Office of Fair Trading alleged this morning.

A “statement of objections” issued by the OFT names tobacco manufacturers Imperial Tobacco and Gallaher, and 11 retailers: Asda, the Co-operative Group, First Quench, Morrisons, Safeway, Sainsbury's, Shell, Somerfield, T&S Stores, Tesco and TM Retail.

The OFT alleges that these tobacco manufacturers and retailers “variously engaged in one or more unlawful practices in relation to retail prices for some or all of a number of tobacco products in breach of the Competition Act 1998."

The alleged practices comprised:

1. Arrangements between each manufacturer and each retailer that restricted the ability of each of these retailers to determine its selling prices independently, by linking the retail price of a manufacturer's brand to the retail price of a competing brand of another manufacturer. The alleged infringements span different periods for different parties between 2000 and 2003.

2. In the case of Gallaher, Imperial Tobacco, Asda, Sainsbury, Shell, Somerfield and Tesco, the indirect exchange of proposed future retail prices between competitors. The alleged infringements span different periods for different parties between 2001 and 2003

John Fingleton, OFT chief executive, said: “For markets to work well for consumers, it is a fundamental principle that pricing decisions should be made independently. If we find evidence of anti-competitive activity, we are prepared to use the appropriate powers to punish the companies involved and to deter other businesses from taking part in such behaviour.

“If proven, the alleged practices would amount to a serious breach of the law.”

The OFT added: “At this stage it should not be assumed that the parties involved have broken the law, and the OFT will decide if the law has been breached after it has reviewed any responses to the statement of objections.”

Cigarettes

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