Supermarkets accused on dairy prices

Major supermarkets and dairies were last night under fire over claims they fixed the price of milk, butter and cheese costing consumers about £270m and running farmers into the ground.

Major supermarkets and dairies were last night under fire over claims they fixed the price of milk, butter and cheese costing consumers about £270m and running farmers into the ground.

The Office of Fair Trading (OFT) provisionally found the firms guilty of colluding to increase the price of dairy products but Tesco, Asda, Sainsbury's and Morrisons hotly denied the claims.

The firms shared “highly commercially sensitive information” such as details of price increase levels during the period 2002 and 2003, the OFT said.

This restricted the competitive process, pushed up prices and was therefore harmful to consumers, the OFT warned.

And last night Bob Young, National Farmers' Union (NFU) Norfolk chairman, said the cost to farmers should not be forgotten.

“This was at a time when prices for diary farmers were driven down but margins in supermarkets increased dramatically. During that time the dairy industry was transformed by people going out of business. A large number of people dropped out because they simply couldn't survive on the prices available whereas it seems the supermarkets were making hundreds of millions of pounds in profits.

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“There have been many changes since 2002. In those days there was a lot of milk about but that is not the case now with places such as India and China changing their eating habits. Now, all of a sudden, there is a shortage of milk which has driven prices back up.”

Asda, Morrisons, Tesco, Sainsbury and Safeway - now owned by Morrisons - were named by the OFT, along with dairy processors Arla, Dairy Crest, Lactalis McLelland, The Cheese Company and Wiseman.

Shadow rural affairs secretary Peter Ainsworth said: “The fact the OFT believes that the supermarkets have a case to answer will come as no surprise to dairy farmers who have been struggling for years to make any money at all.”

The OFT's statement of objections gives the firms notice of its proposed infringement decision under competition law.

All the accused supermarkets and dairy processors can now set out their cases in responses to the OFT.

The watchdog will review those representations and those of third parties before reaching a final decision on whether the supermarkets and dairy processors acted illegally.

Its evidence so far suggests the price paid to farmers did not go up as a result of the alleged collusion.

Tesco, Sainsbury's and Asda all vowed to “vigorously defend” themselves against the allegations.

Morrisons pledged to make “strong representations” to the OFT that it should not be part of this inquiry.

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