Competition lawyers have rejected claims that they dished out poor legal advice to clients who have just been fined vast sums by the Office of Fair Trading (OFT) for collusion over dairy pricing and instead attacked the watchdog for wasting public money.
Their comments came as Asda, Sainsbury, Dairy Crest, The Cheese Company (Glanbia) and Robert Wiseman agreed to pay substantial fines after admitting involvement in anti-competitive practices over the price of dairy products in 2002-3.
Tesco, Morrison and Lactalis McLelland are still contesting the allegations, while Arla Foods, as the ‘whistleblower’ in the case, will not have to pay any penalties as long as it continues to co-operate with the OFT.
One anti-trust lawyer who asked not to be named, said: “I am not saying that there weren’t technical breaches of the Enterprise Act relating to the exchange of commercially sensitive information, but that’s not the same as price fixing. It’s not as if bosses at these firms were sitting in a smoke filled room together hammering out a deal. You just get the feeling that John Fingleton [OFT chief executive] is a headline hunter out to raise his profile and manipulate the media. The OFT has a limited budget and I wonder if going after the big ticket cases like this is really the best use of that resource.”
A second source close to the case added: “There is a feeling that while on a technical level there were breaches, it was quite clear that the parties acted in good faith in this circumstance and as such, feel pretty aggrieved that the OFT should spend so much time and money pursuing this.”
According to the OFT, supermarkets and processors colluded to increase the retail prices of milk, value butter and UK-produced cheese through the sharing of commercially sensitive information in 2002-3.
The companies have always maintained that the so-called ‘Retail Price Initiatives’ of the time were designed to pass on extra money added to the retail price of milk back to the farmers at a time when the sector was facing particular challenges.
Robert Wiseman chairman Alan Wiseman insisted that his company had not profited in any way from the price increases: “The intention of the Retail Price Initiatives was to provide support for farmers at a time of crisis, and every penny of additional revenues paid to Wiseman was passed directly to our suppliers.”
He added: “While we are disappointed with the outcome of the investigation, this agreement removes a long shadow hanging over the company, and we now look forward to the group's continued growth and success.”
Separately, the British Retail Consortium (BRC) rejected the OFT's contention that increases in retail milk prices were not passed on to farmers. Figures from the Milk Development Council showed that between June 2002 and December 2003 the average farmgate price for milk rose from 15.3ppl to 19.1ppl, reflecting the increase in supermarket prices, said BRC director general Kevin Hawkins. "This is clear evidence that the increases in retail milk prices introduced by supermarkets benefited farmers as they were meant to."
He added: "The fact that these increases could not be sustained in subsequent years was not supermarkets' fault but reflected continuing instability in the UK liquid milk market, in particular the structural imbalance between supply and demand."
Bernardine Adkins, anti trust partner at legal firm Wragge & Co, said that the decision by some of the parties to settle so swiftly could set a worrying precedent: "This will make other companies more vulnerable to damages claims, where victims have to prove causation and loss rather than having to establish the substantive breach."
She added: "We have seen the lead UK and EU regulators talk up the level of fines that will be imposed. The more the regulators up the ante, and the more they are naive in not understanding that there needs to be a level of reciprocity in any settlement, the more companies will wish to fight it out."