The Office of Fair Trading has imposed its largest ever fine for a single case on tobacco suppliers and retailers for unlawfully having an agreement or arrangement that had an anti-competitive object or effect, contrary to the Chapter I Prohibition of the Competition Act 1998. The two issues were: (a) arrangements between the manufacturer and retailer in which the retailer would match the price of its brand to that of its competitors; and (b) the indirect exchange of proposed future retail prices between competitors through the retailers. Amongst the companies fined were Imperial Tobacco (£112m), Gallaher (£50m), Co-Op (£14m), Asda (£14m), Safeway (£11m), Morrisons (£9m), Somerfield (£4m). The fines totalled £225m.
Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘People generally know that agreements between competitors may be anti-competitive. What they don’t realise is that if they agree certain things with different levels of the supply chain then that can also be unlawful. Specifically, setting agreed or minimum resale prices with a customer is absolutely prohibited. I have had to warn many clients of the dangers of those sorts of provisions in supply contracts, as they could be fined big amounts, sued by third parties and find that their contracts are unenforceable for having a provision that is considered to be anti-competitive. It’s not always popular advice, but someone has to say it as it is!’