OFT Tesco Dairy Investigation

The OFT has decided to drop certain allegations against Tesco as part of its Dairy investigation, at the same time as agreeing a penalty discount in recognition of Tesco notifying the OFT that it does not intend to contest the remaining aspects.

Having considered detailed representations and new evidence from Tesco following the issue of the Statement of Objections in September 2007, and a supplementary Statement of Objections, the OFT has concluded that the evidence it now has on file is insufficient to support an infringement finding against Tesco with regard to three alleged dairy initiatives - relating to liquid milk in 2002 and 2003 and value butter in 2003. The OFT did not receive any representations from Tesco relating to UK produced cheese in accordance with Tesco's non-contest stance.

In addition, on being notified by Tesco that it does not intend to contest the provisional OFT findings of a breach of competition law relating to the exchange of commercially sensitive information on certain cheese lines with two of its cheese suppliers in 2002 and one of its cheese suppliers in 2003, the OFT has agreed a discretionary penalty discount of 10 per cent consistent with previous case precedent.

The OFT expects to conclude and issue its decision by early summer 2010.

The OFT has today made a separate announcement concerning its ongoing Dairy investigation.

NOTES

1. Previous case precedent refers, in particular, to the West Midlands flat-roofing decision in 2004, where a number of companies agreed not to contest the OFT's findings of infringement and received a discretionary 10% discount in recognition of the process savings to the OFT's investigation. This is not the same as the OFT's early resolution procedures where, in exchange for admissions and ongoing cooperation with the OFT's investigations, parties typically receive a significantly larger discount on penalty. A number of parties to the OFT's Dairy investigation made admissions under early resolution procedures.

2. On 20 September 2007, the OFT issued a Statement of Objections, setting out its provisional findings to: Asda, Morrisons, Safeway (in relation to conduct prior to its acquisition by Morrisons), Sainsbury's and Tesco, as well as dairy processors Arla, Dairy Crest, Lactalis McLelland (in relation to conduct by A McLelland and Son Limited prior to its acquisition by Groupe Lactalis), The Cheese Company (formerly Glanbia Foods Limited) and Wiseman.

3. On 7 December 2007 and on 15 February 2008, the OFT announced that it had reached early resolution agreements with seven of the parties, who accepted liability in principle for a breach of competition law, namely Asda, Dairy Crest, Lactalis McLelland (in relation to conduct by A McLelland and Son Limited prior to its acquisition by Groupe Lactalis), Safeway (in relation to conduct prior to its acquisition by Morrisons), Sainsbury's, The Cheese Company (formerly Glanbia Foods Limited) and Wiseman. See press releases 170/07 and 22/08 for further information on the early resolution.

4. On 23 July 2009 the OFT issued a supplementary Statement of Objections, setting out additional evidence in support of the OFT's allegations.

5. A Statement of Objections (SO), including a supplementary Statement of Objections (SSO), gives notice of a proposed infringement decision under the Competition Act 1998 (the Act) to the parties involved. It sets out the provisional view of the OFT, including the facts on which the OFT relies, the objections raised by the OFT, the action it proposes to take and the reasons for it. The OFT carefully considers any representations received in response to the SO (and any SSO), and the evidence as a whole, before reaching a final decision in relation to whether or not the law has been breached.

6. Since the OFT is not required to demonstrate any effect on prices in order to establish a breach of the Chapter I prohibition of the Act in this case, the OFT makes no finding as to whether there was any such effect.

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