OFT Accuses Retailers and Tobacco Firms of Price Collusion

28 April 2008

LONDON: The Office of Fair Trading – the UK's consumer protection watchdog – has issued an allegation that two tobacco firms and some of the country's biggest retailers have acted unlawfully in setting the price of cigarettes.

Gallaher and Imperial Tobacco are said to have illegally exchanged information – or engaged in what is termed "retail price co-ordination" – on the proposed future prices of cigarettes with retailers that include Tesco, Asda, Sainsbury's, Somerfield and Shell from 2001 to 2003.

Some further allegations relate to the linking of the prices of some brands with those of their competitors, although the OFT has also stated it should not be assumed that any of these companies have broken the law – the fine for which could be up to 10% of their annual turnover.

The organisation's ceo, John Fingleton, said: "For markets to work well for consumers, it is a fundamental principle that pricing decisions should be made independently.

"If we find evidence of anti-competitive activity, we are prepared to use the appropriate powers to punish the companies involved and to deter other businesses from taking part in such behaviour." 
A statement from Imperial Tobacco said the company "takes compliance with competition law very seriously and rejects any suggestion that it has acted in any way contrary to the interests of consumers."

Tesco responded that the "OFT's investigation appears to centre on major tobacco companies. We do not believe that Tesco has acted in a way that has harmed consumers and we will make this clear to the OFT when we see the details of their allegations."

Data sourced from bbc.co.uk; additional content by WARC staff