The Co-op and Morrisons have hit back after being handed millions of pounds in fines by the Office of Fair Trading for unlawful pricing on tobacco products.
The Co-op was one of 10 retailers and two tobacco manufacturers hit with a record £225m in fines for ‘price matching’, where cigarette and tobacco prices of rival manufacturers were linked.
But it said it was considering appealing the decision.
The Co-operative, which was handed the biggest fine of any retailer at £14.2m, said: “Throughout the investigation to date our judgment has been that our behaviour during the years in question did not infringe competition law nor did it result in consumers paying more for tobacco products than they otherwise would have done.”
Morrisons – fined £8.6m – said the OFT’s stance was “disappointing”, as well as “illogical and without foundation”.
It said: “The practices to which the OFT refers were intended to reduce the retail prices charged to consumers.”
The appeal is likely to be the supermarket’s second clash with the watchdog in two years after the OFT wrongly accused it of anti-competitive behaviour in dairy markets in 2008. It apologised and paid £100,000.
Two other firms named – Lambert & Butler maker Imperial Tobacco and petrol station owner Shell – are either appealing or actively considering a challenge.
Imperial Tobacco – which has been landed with the biggest fine of £112.3 million – added: “Far from being anti-competitive, these arrangements were pro-competitive and to the benefit of consumers.”
The OFT said the breaches took place between 2001 and 2003. Sainsbury’s revealed the infringements and has escaped any fine.
The other firms caught up in the case were Asda, First Quench, One Stop Stores (formerly T&S Stores), Safeway, Somerfield and TM Retail, the owner of the McColls and Martins chains, as well as Silk Cut firm Gallaher.
These co-operated and received lower fines after admitting liability.
Safeway has since been bought by Morrisons, the Co-operative has acquired Somerfield and First Quench – which owned off-licence Threshers – went into administration last year.
The watchdog has dropped allegations against market leader Tesco due to lack of evidence.
But the OFT insisted the agreements over price links between rival brands “restricted the ability of these retailers to determine their selling prices independently”.
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.”
But Shell said it “strongly disagreed” with the OFT.
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