Imperial Tobacco Group shares drop following £112.3m fine
Imperial Tobacco Group (LON:IMT) shares dropped sufficiently this morning after the UK Office of Fair Trading confirmed it has fined the company £112.3m for restricting competition.
Rob Hull
shareprices.com - Friday, April 16, 2010
The Group has been fined alongside another manufacturer, Gallaher, and a number of retailers for a total sum of £225m collectively – the largest total fine imposed by the OFT in a case under the Competition Act 1998.
The tobacco group, which has brand giants including Gauloises Blondes, Davidoff and Rizla under their banner, has already issued a statement declaring its disappointment and claim it may appeal the decision after reviewing the details from the OFT later today.
The news has had an immediate effect on the group's FTSE standing this morning with share prices dropping to an opening price of 1973p compared to the closing price yesterday of 2008p and losing as much as two per cent already today on yesterday’s final price.
And the shares currently sit just under one per cent down at 10am.
The OFT concluded both Imperial Tobacco Group and Gallaher had a series of individual arrangements with certain retailers to fix the retail price of their brands to match competing manufacturer’s brands from 1 March 2000 to 15 August 2003.
Because these arrangements have been claimed to restrict the ability of the retailers to determine their selling prices independently, the OFT believe the manufacturers have breached the Competition Act 1998.
The OFT has offered discounts on the fines to Gallaher, Asda, First Quench, One Stop Stores, Somerfield and TM Retail for admitting liability and being forthcoming with information to keep the cost of the investigation down.
Simon Williams, Office of Fair Trading Senior Director of Goods, said: “Practice such as these, which restrict the ability of retailers to set their resale prices for competing brands independently, are unlawful.
“They can lead to reduced competition and ultimately disadvantage customers.
“This enforcement action will send out a strong message that such practices, which could in principle be applied to the sale of many different products, can result in substantial penalties for those who engage them.”
In their defence, Imperial Tobacco Group said that the arrangements were created to encourage its brands to be priced competitively and that promotional discounts given to retailers were passed on to the consumer in the form of lower retail prices.
The group also added that retailers remained free to set their own prices.
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