OFT launches probe into cigarette sales
Friday, 25 Apr 2008 08:37
OFT investigates cigarette sales
After taking on the banks, the Office of Fair Trading (OFT) is going after the tobacco retail industry.
The regulator has issued a statement of objections alleging cigarette manufacturers and retailers fixed the prices of their products, in breach of the Competition Act.
Betweeen 2000 and 2003, the OFT claims tobacco manufacturers Imperial Tobacco and Gallaher are involved, along with 11 retailers - Asda, the Co-operative Group, First Quench, Morrisons, Safeway, Sainsbury, Shell, Somerfield, T&S Stores, Tesco and TM Retail.
According to the watchdog, arrangements between the manufacturers and the retailers linked the retail price of one manufacturer's brand to the retail price of a competing brand, restricting the stores' ability to vary its prices.
In the case of Gallaher, Imperial Tobacco, Asda, Sainsbury, Shell, Somerfield and Tesco, the OFT claims the companies participated in an indirect exchange of proposed future retail prices between competitors.
OFT chief executive 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.
"If proven, the alleged practices would amount to a serious breach of the law."
The OFT added that at this stage, no conclusion has yet been reached on whether any of the companies involved broke the law.
The regulator is currently investigating grocers Tesco and Morrisons on allegations of dairy price fixing, and had to apologise to Morrisons this week after a press release appeared to accuse the supermarket of breaking the law before the investigation had been concluded.