Co-op hit with £14m fine after tobacco price fixing probe

THE Co-operative Group has been fined more than £14m by the Office of Fair Trading for unlawful pricing of cigarettes and other tobacco products.

In addition, Somerfield, which the Manchester-based group bought last year, was fined £3.98m after a lengthy OFT investigation.

The Co-op’s £14.1m fine was the largest of any levied on any of the 10 retailers implicated, but Imperial Tobacco, which makes brands such as Embassy, John Player Special and Lambert & Butler was fined £112.3m.

Rival Gallaher, the firm behind the Benson & Hedges and Silk Cut brands, was fined £50.3m. In total the OFT fines amount to £225m.

A spokesman for the Co-operative Group, said the mutual business was considering appealing as it did not believe its actions had infringed competition law.

“We are in the course of studying the OFT’s decision in detail, but throughout the investigation to date our judgement has been that our behaviour during the years in question did not infringe competition law nor did it result in consumers paying more for tobacco products than they otherwise would have done. 

“As a result, we are actively considering pursuing an appeal to the Competition Appeal Tribunal.  In respect of Somerfield, all the relevant events pre-date our acquisition of Somerfield and, indeed, the former Somerfield management had entered into an early resolution agreement with the OFT in the summer of 2008,” a spokesman added.

The other retailers fined were Asda, Morrisons, First Quench, One Stop Stores (formerly T&S Stores), Shell, and TM Retail.

The OFT concluded that the arrangements between the tobacco manufacturers and retailers restricted the ability of retailers to determine their selling prices independently and breached the Competition Act 1998.

However, the OFT said some retailers had benefited from discounts in their fines after helping the OFT with its investigation. Sainsbury’s escaped any fine at all, because it had blown the whistle to the OFT. There was insufficient evidence to pursue allegations against market leader Tesco.

Simon Williams, the OFT’s senior director of goods, said: “Practices such as these, which restrict the ability of retailers to set their resale prices for competing brands independently, are unlawful. They can lead to reduced competition and ultimately disadvantage consumers.

“This enforcement action will send out a strong message that such practices, which could in principle be applied to the sale of many different products, can result in substantial penalties for those who engage in them.”