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Last Updated: Friday, 7 December 2007, 11:03 GMT
Q&A: Dairy price-fixing probe
Milk bottles on production line
Sainsbury's said it was pleased to reach a settlement.

Six firms including Sainsbury's and Asda have admitted colluding to fix the price of dairy products following an investigation by the Office of Fair Trading.

Now they have each agreed to pay fines - totalling more than 116m.

What were the allegations?

The OFT probe relates to claims of price-fixing of dairy products in 2002 and 2003.

Asda, Morrisons, Safeway, Sainsbury's and Tesco were each accused of colluding with other retailers on the price they charged for milk.

Asda, Safeway, Sainsbury's and Tesco also fixed the prices of cheese it was alleged, while Safeway and Tesco were accused of colluding on the price of some butter.

Meanwhile, dairy processors Arla, Dairy Crest, Wiseman Dairies, The Cheese Company and Lactalis McLelland were accused of helping the retailers share information.

Who has admitted what?

Of the retailers, Sainsbury's, Asda and Safeway (operating before it was bought by Morrisons) have admitted anti-competitive behaviour.

So too have Dairy Crest, Wiseman Dairies and The Cheese Company.

Arla has been given immunity from financial penalty on the condition it continues to co-operate having applied for leniency.

All the firms have agreed fines - which they say are smaller than if they had not admitted their involvement at this stage.

So is this the end of the probe?

No. Tesco, Morrisons and dairy processor Lactalis McLelland have not accepted liability.

They must now make representations on the OFT's provisional findings which will then be considered before a final decision is made.

Why did this happen?

All those involved who have admitted liability say that their actions were motivated by trying to help British farmers.

At the time retailers and dairy firms were under pressure form farmers and politicians to give a better deal to their suppliers.

It came in the aftermath of the foot and mouth outbreak crisis that had devastated much of the UK farming community.

So did farmers end up better off?

The National Farmers Union did not want to comment on the findings.

However, earlier this year the union said that it was unconvinced that members had gained from the higher prices charged.

And the OFT said that it had seen no evidence that the extra revenue raised by the price hikes went to farmers.

And what about the shoppers?

The OFT has said that as a result of the price fixing, an extra 270m was spent by UK consumers.

It estimates that the collusion saw shoppers pay 3 pence extra for a pint of milk, and 15p extra per quarter-pound of butter.

The overcharging also led to customers being allegedly overcharged by 15p per half-pound of cheese, the watchdog said.

Where do the fines go?

The income from the fines will go to the Treasury - though it is not ringfenced for spending by any particular goverment department.

Why the fined firms found themselves in trouble

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28 Aug 07 |  Business
Tesco to pay dairy farmers more
03 Apr 07 |  Business
Price squeeze 'hitting farmers'
26 Feb 07 |  Business
Milk farmers protest over prices
06 Feb 07 |  Business

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