Retailers face OFT tobacco pricing investigation

by Nikki Sandison, Brand Republic 25-Apr-08, 09:20

LONDON - The Office of Fair Trading has started investigating allegations that some tobacco manufacturers and retailers, including Asda, Sainsbury's and Tesco, have engaged in unlawful practices in relation to retail prices for tobacco products in the UK.

It has alleged that there was an understanding that the retail price of a manufacturer's brand would be linked to rival brands.

The OFT also alleges that retailers and tobacco groups arranged to exchange information on future pricing.

Companies involved in the investigation include tobacco manufacturers Imperial Tobacco and Gallaher and 11 retailers: Asda; the Co-operative Group; First Quench; Morrisons; Safeway; Sainsbury; Shell; Somerfield; T&S Stores; Tesco; and TM Retail.

In the case of Gallaher, Imperial Tobacco, Asda, Sainsbury, Shell, Somerfield and Tesco, there was an indirect exchange of proposed future retail prices between competitors allegedly 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 proven, the allegations would amount to a serious breach of the law."

The OFT said that at this stage it should not be assumed that the parties involved have broken the law.

If a business is found guilty of the allegations it could be fined up to 10% of annual turnover.

A spokesperson for the OFT was reported by the BBC to have said: "This is not about price fixing, this is about retail price co-ordination, which is also illegal. We have information that manufacturers and retailers were indirectly exchanging information about future prices."

In a statement, Imperial Tobacco said: "We take compliance with competition law very seriously and we reject any suggestion that we have acted in a way that's contrary to the interests of our customers."