Milked: Supermarkets fined £16m for subjecting customers to two years of dairy price-fixing


Last updated at 23:16 07 December 2007

A supermarket cheese counter

Supermarkets have been fined £116million for their part in a "Great Milk Robbery" that inflated prices imposed on shoppers for two years.

Sainsbury's and Asda together with a group of dairies face substantial penalties after they held up their hands yesterday to cheating the public.

However, they are not the only ones in the dock, for government watchdogs are now turning their attention to Tesco, Morrisons and others.

Consumer groups condemned the price-fixing and questioned whether other products could be involved at a time when food prices are soaring.

The fines follow an investigation by the Office of Fair Trading which found that dairy prices were artificially inflated by £270million in 2002 and 2003.

The scam added 3p to the price of a pint of milk, 15p to a half pound of cheese and 15p to a 250g pack of butter.

The supermarkets and their dairy partners claim they colluded to raise prices in a benign attempt to pay more to struggling dairy farmers.

However, the OFT discovered that precious little of the price rise actually reached these hard-pressed producers, thousands of whom have been driven out of the industry in recent years in the face of the low prices they have been receiving.

As a result, the country faces shortages that have caused big increases in the price of milk, butter and cheese in the last few months.

Consumer groups said the OFT's revelations will shatter any claims that supermarkets are acting in the best interests of their customers.

Pula Houghton, campaigns policy chief at Which?, 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?"

The money raised by the fines will go into government coffers, rather than compensating consumers.

Carl Belgrove, competition expert at the National Consumer Council, described the activity of the supermarkets and dairies as "shameful".

He said: "It will do enormous damage to the reputation of supermarkets. Consumers have always trusted supermarkets to provide value for money but they will be more sceptical about their claims in the future."

Neil Parish MEP, Conservative chairman of the European Parliament's agriculture committee, said farmers had long suspected underhand tactics.

Mr Parish, a farmer himself, said: "Dairy farmers have been calling for action against supermarket price fixing for years."

He rejected industry claims that they were trying to ensure farmers got a higher price for their milk as an excuse.

"The Government needs to stand up for farmers as well as consumers and launch a full investigation on how price-fixing has impacted on the dairy industry," he said.

Sainsbury's, which was fined £26million, denied it intended to rip off consumers. Chief executive Justin King said: "We are disappointed that we have been penalised for actions that were intended to help British farmers."

Asda, which has not revealed the amount of its fine, said the price rises were to "provide more money for dairy farmers who were under severe financial pressure at the time".

Safeway, which has since been taken over by Morrisons, plus the dairies Robert Wiseman, Dairy Crest and The Cheese Company have also admitted colluding over dairy prices.

All of these companies have been given reduced fines because they have admitted their part in rigging prices.

The dairy company Arla was excused any punishment for its part in the price collusion after volunteering to co-operate with the OFT's investigation at an early stage.

The OFT has made clear it considers Tesco was also guilty following a provisional investigation. However, the supermarket insists it was not involved in pricefixing and said it is "defending its case vigorously".

Morrisons and the dairy group Lactalis McLelland also deny any wrongdoing.

John Fingleton, the OFT's chief executive, said supermarket claims that extra money raised from the price-fixing had gone to farmers were not borne out by the figures. He suggested the supermarket claims were part of a damage limitation exercise.

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