Record fines for tobacco price-fixing as cartel goes up in smoke

Today the Office of Fair Trading (OFT) has given out the largest ever total fine in a case under the UK Competition Act 1998.

A huge fine has been imposed on two two tobacco manufacturers and ten retailers engaged in illegal price fixing for tobacco products in the UK.This is a good example of the financial risks that companies face when found guilty of anti-competitive behaviour. The tobacco manufacturers involved are Imperial Tobacco and Gallaher, and the retailers are Asda, The Co-operative Group, First Quench, Morrisons, One Stop Stores (formerly T&S Stores), Safeway, Sainsbury’s, Shell, Somerfield and TM Retail.

Imperial Tobacco was fined £112m and Co-op and Asda were penalised by £14m each

The Office of Fair Trading - the main cartel-buster in the UK and pivotal in carrying out UK competition policy - has concluded that each manufacturer had a series of individual agreements with each retailer whereby the retail price of a tobacco brand was linked to that of a competing manufacturer’s brand.

Anti-trust policy now provides incentives for parties involved in collusion to blow the whistle on price-fixing in return for leniency and this has happened in this example. According to the OFT “Asda, One Stop Stores, and Somerfield were given reduced penalties under the OFT’s leniency programme, which provides co-operating parties with a discount in fines where they proactively volunteer information which assists the OFT’s investigation. Sainsbury’s had alerted the OFT to the infringements and as the first to apply to the OFT for leniency, it receives complete immunity from fines.”

Suggestions for further reading

‘Unlawful’ tobacco pricing leads to £225m fine by OFT

OFT levies £225m fine for cigarette price fixing (Guardian)

In this BBC news video, Simon Williams from the OFT explains the impact of the pricing practices on consumers