The Office of Fair Trading ("OFT") has today fined two tobacco manufacturers and ten retailers a total of £225 million for engaging in unlawful practices in relation to retail prices for tobacco products in the UK. It is the largest total fine imposed by the OFT to date.

The OFT found that Imperial Tobacco and Gallaher each had a series of individual arrangements with each of ten retailers comprising Asda, The Co-operative Group, First Quench, Morrisons, One Stop Stores, Safeway, Sainsbury's, Shell, Somerfield and TM Retail.

The arrangements, which were in force between 2001 and 2003, linked the price of a tobacco brand with that of a competing manufacturer's brand and restricted the ability of retailers to determine their selling prices individually.

However, the OFT has decided not to pursue additional allegations against a number of the parties relating to the indirect exchange of proposed future retail prices as it considers it has insufficient evidence to proceed to an infringement finding.

Imperial Tobacco has been fined £112 million and Gallaher has been fined £50 million with each of the retailers receiving fines of between £1.3 million and £14 million. A number of the parties have received discounted fines as a result of participating in the OFT's leniency programme, or because following the OFT's Statement of Objections issued in April 2008, they each admitted liability in respect of the infringements alleged against them. Sainsbury's escaped a fine after alerting the OFT to the infringements and being the first to apply to the OFT for leniency.

This decision is a further indication of the OFT's ongoing focus on competition law enforcement in the consumer products sector and the substantial fines awarded clearly illustrate that the OFT takes the coordination of retail prices very seriously.

However, of significance to many consumer products companies is the OFT's decision not to pursue allegations relating to the indirect exchange of proposed future retail prices. The indirect exchange of pricing information or "hub and spoke" arrangements are a key area of concern for the consumer products sector and are an issue in a number of current OFT grocery related cases. The OFT's publication of the full decision in this case, not expected until sometime during the summer of 2010, is therefore keenly awaited in order to identify why the OFT felt that there was insufficient evidence to pursue the hub and spoke allegations.

The OFT's announcement can be found here .

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 16/04/2010.