Tesco rejects OFT ruling on cheese and calls for better regulation framework

10 Aug 2011

Tesco has reacted with surprise and dismay over the Office of Fair Trading (OFT)’s ruling that it colluded with suppliers and other retailers to fix cheese prices in 2002-03.

Tesco has reacted with surprise and dismay over the Office of Fair Trading (OFT)’s ruling that it colluded with suppliers and other retailers to fix cheese prices in 2002-03.

Tesco says the OFT’s ruling is entirely without substance and believes the long delay in resolving these cases, together with their evidential flaws, illustrate some important weaknesses in the current UK competition regime.

Lucy Neville-Rolfe, Tesco’s Director of Corporate and Legal Affairs, said:

"We are disheartened and disturbed that the OFT continues to pursue this costly and time consuming case at the expense of both the tax payer and UK business. This is all the more surprising given that the OFT itself said that ‘competition in the supermarket sector is generally intense and has delivered significant benefits to shoppers’. We have always said we did not collude on prices on cheese and we stand firm in our rebuttal of these ongoing allegations. We will continue to defend our position vigorously, through the courts if necessary."

In 2010 the OFT dropped its 2002 milk allegation and 2003 butter allegation against all parties, and its 2003 milk allegation against Tesco. The dropping of the 2002 milk allegation was a significant climb-down by the OFT since it had been the central plank of its case.

Today the OFT announced an infringement decision in relation to the pricing of UK cheese more than seven years ago, despite Tesco’s insistence - backed by firm evidence – that its pricing decisions were unilateral and it did not collude with other retailers.

Lucy Neville-Rolfe adds:

"We surely have now reached the stage where the absurdity of the OFT operating as investigator, prosecutor and judge cannot be allowed to continue. The Government’s plans for the new competition regime must address this anomaly, in the interests of the consumer and the business community."

In April 2010, the OFT cleared Tesco of any wrongdoing following a seven year investigation into alleged tobacco price fixing. In refuting the OFT’s cheese pricing allegation, Tesco has criticised the legitimacy of evidence and the length and execution of the administrative process.

Ends

Notes to editors

Chronology

  • 2001-2003: Sustained campaign by UK dairy farmers demanding higher milk prices at the farm gate.
  • 2004: OFT launches dairy investigation into alleged price fixing between 5 retailers and 5 processors affecting retail prices of milk, cheese and butter in 2002 and 2003.
  • 19 September 2007: OFT issues formal allegations against the 10 parties. The allegations claim indirect communication of commercially sensitive information on future retail prices between UK grocery retailers through their dairy processors.
  • December 2007 – February 2008: The OFT enters into early resolution agreements with all parties except Tesco and Morrisons.
  • April 2008: The OFT settles a defamation law suit launched by Morrisons and pays damages and costs. The law suit related to a press release issued by the OFT in September 2007 concerning provisional infringement findings.
  • April 2010: The OFT drops the two milk allegations (2002 and 2003) and the 2003 butter allegation against Tesco. The 2002 milk allegation and the 2003 butter allegations are also dropped against all parties.