OFT launches tobacco pricing inquiry

25 April, 2008

The Office of Fair Trading has launched an investigation into allegations that 11 retailers have been engaging in illegal pricing practices with tobacco manufacturers.

In a statement of objections, the OFT alleges that Imperial Tobacco and Gallaher engaged in unlawful practices with Asda, the Co-operative Group, First Quench, Morrisons, Safeway, Sainsbury’s, Shell, Somerfield, T&S Stores, Tesco and TM Retail at different times between 2000 and 2003.

One allegation is that the tobacco companies made arrangements with retailers that restricted the ability to determine selling prices independently between 2000 and 2003.

Another is that the tobacco firms and Asda, Sainsbury’s, Shell, Somerfield and Tesco had 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.”

In a statement, Imperial said it would review the statement of objections and submit its response.

"Imperial Tobacco takes compliance with competition law very seriously and rejects any suggestion that it has acted in any way contrary to the interests of consumers," it said.

All companies involved will have the chance to submit their responses to the OFT before it decides if they are guilty of breaching the law.

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