Morning:
6°c
One of Damilola Taylor's killers was back behind bars today - only 16 days after being released from jail. Ricky Preddie (pictured left) was recalled to prison last night after breaching the terms of his parole
More...
OFT probe into allegations of cigarette price fixing by supermarkets and tobacco firms
Last updated at 00:37am on 27.04.08
Pricey: Smokers may be paying over the odds
Imperial Tobacco, responsible for brands such as Embassy, and Gallaher, which owns Benson & Hedges and Silk Cut, are in the dock.
Eleven stores, including Tesco, Asda, Sainsbury's and Morrisons, are also under investigation for what has been described as 'dodgy dealing'.
The Office of Fair Trading yesterday announced it is investigating claims the companies colluded.
It is suggested the two tobacco firms were the hub of the scheme, passing on information to retailers about what their rivals would be charging for leading brands.
The net effect was that the prices of competing brands were kept at a comparable level across supermarkets, Shell petrol stations, Thresher off-licences and other outlets.
Campaigners point out that the price of cigarettes rose more quickly than the general rate of inflation and increases in duty when the collusion allegedly took place - from 2000 to 2003. The Retail Price Index rose by 6.46 per cent while the price of cigarettes went up by 12.49 per cent.
Collusion on prices is a very serious offence under the Competition Act and can generate fines equivalent to 10 per cent of the sales turnover of the product involved.
Scroll down for more ...
In this case, guilty verdicts could result in maximum fines totalling £140million - although a lower figure would be more likely.
The investigation by the OFT provides new evidence that the fair trade watchdog is taking a much more active role in stamping out
cartels and price-fixing by manufacturers and retailers.
Scroll down for more ...
The Office of Fair Trading is investigating 11 retail chains for price fixing on tobacco products in an inquiry focusing on 2000 to 2003
It is taking on the banks on overdraft charges, while it has fined leading supermarkets and dairies more than £100million over price fixing on milk and dairy products.
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.'
The anti-smoking group ASH has long campaigned for sharp increases in the price of tobacco. But it said these increases should be carried out through taxation to fund the NHS, rather than going into the pockets of retailers and manufacturers.
Tesco, Asda and Sainsbury's have been accused of price fixing on tobacco
LibDem business spokesman Sarah Teather described the investigation as 'welcome proof that the OFT is continuing to use its powers to hold Britain's largest companies to account'.
She said: 'The surge in food prices is already making it tough enough for British shoppers, without dodgy dealing from the big supermarkets adding to their misery.'
To date none of the companies has been found guilty of any offence. They will have the opportunity to explain what was happening and challenge the allegations.
Tesco said: 'We do not believe that Tesco has acted in a way that has harmed consumers and we will make this clear to the OFT.'
Imperial Tobacco said it rejected 'any suggestion that it has acted in any way contrary to the interests of consumers'.
Gallaher said the group was 'currently reviewing' the OFT's statement.
Reader views (3)
Fraser, Telford Park. So any item that has been price fixed should be banned from being sold, or does this only apply to cigarettes.
Are you talking about financial pressure being taken from the NHS, because the tax take from tobacco sales in the UK is something like £6-8billion a year. I don't know where the NHS would be without that sort of pressure.
- Simon Payton, London, UK, 25/04/2008 15:35
Report abuse
Easy answer . . . Totally "ban" the sale of cigarettes completely!
That at least will do away with any future possible "price-fixing". In the meantime "fine" all those involved massively as they obviously knew that what they were doing was both wrong and illegal!
The other benefit is that it will in the medium to long term take a huge amount of pressure off the NHS, which must make sense to absolutely everybody!
- Fraser, Telford Park, 25/04/2008 14:34
Report abuse
At the end of the day all we want to know is whether the price of cigarettes is going to go down. If only.
- Dr Finlays Casebook, London, UK, 25/04/2008 13:31
Report abuse
