On 7 December 2007 the Office of Fair Trading (OFT) announced that it has concluded early resolution agreements with Asda, Dairy Crest, Safeway (regarding conduct before it was acquired by Morrisons), Sainsbury’s, The Cheese Company and Wiseman. These parties have admitted involvement in certain anti-competitive practices in the milk, butter and cheese sectors and have agreed to pay fines which together exceed £116 million. The OFT noted that each party will receive a significant reduction in its fine for on-going full cooperation.

These agreements bring to an end the OFT’s investigation into alleged cartel activity by these companies. The OFT is however continuing its investigation in relation to Lactalis McLelland, Morrisons and Tesco. Arla has applied to the OFT for leniency and will receive a 100% reduction in fines provided it continues to cooperate fully.

The allegations against the parties centre on the exchange of commercially sensitive information regarding the retail prices of milk, cheese and butter between 2002 and 2003.

The OFT noted that the early resolution agreements will significantly reduce the costs of pursuing its investigation, reduce the burden of investigations on business and maintain strong and effective competition law enforcement.

The use of "early resolution agreements" is an emerging practice. The OFT came to an agreement to reduce fines in an earlier case involving the exchange of sensitive information by certain independent schools. However, this was an exceptional case mainly because of the non-profit making status of the schools.

This seems to be the first time the OFT has formally referred to "early resolution agreements". It is not clear whether the OFT will award reductions in fines on a cumulative basis both for early resolution and for leniency.

The European Commission recently launched a consultation on a settlement procedure for cartels which would, subject to certain conditions, reward fine reductions on such a cumulative basis (see our earlier law-now on this).

The OFT would do well to clarify its use of "early resolution agreements".

Please click here for the OFT’s press release regarding the dairy sector resolutions.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 10/12/2007.