Retailers fined over cigarette pricing

TEN retailers, including Asda and Morrisons, were today handed heavy fines by the Office of Fair Trading following an investigation into unlawful cigarette pricing.

Asda has been fined £14.09m – the second largest amount following the investigation – and Morrisons £8.6m after the OFT found the pair colluded with tobacco manufacturers Imperial Tobacco and Gallaher to set the price of cigarettes.

The OFT found that between 2001 and 2003, Gallaher and Imperial Tobacco linked the retail price of their brands to the retail price of a competing brand of another manufacturer at Morrisons and Asda stores.

Safeway, which Morrisons acquired in 2004, was fined £10.9m as a total of £225m of fines were imposed.

Imperial and Gallaher were also fined £112.3m and £50.3m respectively.
Other retailers fined were The Co-operative Group, First Quench, One Stop Stores (formerly T&S Stores), Sainsbury’s, Shell, Somerfield 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.

The OFT has decided not to pursue allegations made between the tobacco manufacturers and Tesco and it is not to pursue additional allegations against Imperial Tobacco, Gallaher, Asda, Sainsbury’s, Shell, Somerfield and 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.”