Supermarkets under fire over milk and alcohol pricing

by Alex Donohue, Brand Republic 07-Dec-07, 09:15

LONDON - Sainsbury's and Asda have received heavy fines from the Office of Fair Trading for price-fixing dairy products, while Tesco has been heavily criticised by MPs for encouraging binge drinking by selling alcohol below cost price.

Sainsbury's and Asda are two of several companies fined a total of £116m by the OFT for fixing the price of milk, cheese and butter products during 2002 and 2003.

Safeway, now owned by Morrissons, and dairy firms Dairy Crest, The Cheese Company and Wiseman were also punished.

In a statement, the OFT said the parties involved had admitted involvement in anti-competitive practices and had agreed to pay individual penalties. The supermarkets and dairy firms have the option of receiving a lesser penalty if they continue to cooperate with the OFT's ongoing investigation.

In the meantime, the OFT said it will pursue its case against Morrissons, Tesco and dairy firm Lactalis McLelland, having begun its investigation in September.

Consumer group Which? said consumers would be asking themselves what next after milk

Pula Houghton, campaigns pPolicy mManager 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?

"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."

She added that while the group was pleased that the firms involved have admitted price fixing and been fined, the fines will not repay consumers who have paid over the odds for basic provisions.

"The Office of Fair Trading must continue to press for the strongest possible punishments to stamp out these practices," she said.

Separately, Tesco's chief executive Sir Terence Leahy has been branded the "godfather of British binge drinking" by John Grogan, Labour MP for Selby.

Grogan, who was speaking in the House of Commons yesterday, said: "Beer is being sold below the cost of water. It is not baked beans we are talking about here, there has to be a totally different attitude.

"I would call on the supermarkets to abandon the practice of below cost selling and also to work out a code of practice against irresponsible promotions, similar to the one the pub industry operates under."

Tesco has since hit back at Grogan's remarks, labelling them as "offensive and inaccurate".

A spokesman for Tesco said: "[The remarks] do nothing to inform the serious social debate on binge drinking. Alcohol abuse is a serious concern to us all and we are playing a lead role in the efforts to tackle it.

"The vast majority of alcohol bought up at Tesco forms part of the weekly family shop. We also know people tend to stock up on beers and wines for home use during promotional periods and consequently buy less at other times."

Comments

Jonathan Godson - 07/12/2007

Good for John Grogan for outing this practice. How can the the retail industry claim social credentials when selling alcohol cheaper than many forms of bottled water and soft drinks? Considering a big chunk of the alcohol price must include excise duty, the price is absurd. It's cheaper for me to buy strong dutch lager for my kids than water or Fruit Shoot! (That would be a 440ml can of Grolsch for 37.5p multi pack price). Time to re address what sort of society we really want I think.

david hill - 08/12/2007

The Asda (Wall-Mart)/Sainsbury et al rip-off is just another example of what companies will do when they are driven by sheer 'Greed'. But if my arithmetic is right, it pays to be greedy. In this respect both supermarket groups and their collaborators pocketed over £300 million ($600 million plus), but where they were only fined jointly no more than £116 million ($235 million). Even if they broke even with their illegal and rip-off transactions, one does not have to be an Einstein to know that this certainly isn't a deterrent by any means. Therefore the greed will just continue and where as the supermarkets have so much dominance and power now, the people will just have to accept it and pay up. Unfortunately for humankind this greed is far more sinister than it appears at face value, for if you look at how the world's resources are being exploited at an alarming rate by corporates, this greed will be the eventual undoing of the human experience itself. Dr David Hill World Innovation Foundation Bern, Switzerland