UPDATE ON DAIRY

The OFT has today published an update on its Dairy investigation (alongside a separate announcement that the OFT has today made in relation to Tesco).

In 2007 and 2008, the OFT concluded early resolution agreements with a number of parties who accepted liability in principle for a breach of competition law in relation to one or more of liquid milk, value butter and UK produced cheese in 2002 and/or 2003.

In light of detailed representations and new evidence received, the OFT has concluded that the evidence it now has on file is insufficient to support an infringement finding with regard to liquid milk in 2002 and value butter in 2003. As a result, the individual penalties that a number of early resolution parties had agreed to pay will be reduced. In addition, as the only allegation against Morrisons related to liquid milk in 2002, Morrisons is now no longer a party to the Dairy investigation.

The total penalties that the early resolution parties to the Dairy investigation have now agreed to pay are in aggregate approximately £70 million. Each party will get a penalty reduction provided it continues to cooperate with the OFT and in view of the procedural savings for the OFT from this early resolution process.

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

NOTES

1. The Competition Act 1998 (the Act) prohibits agreements, practices and conduct that may have an effect on competition in the UK. The Chapter I prohibition of the Act covers anti-competitive agreements and concerted practices, that have the object or effect of preventing, restricting or distorting competition in the UK or a part thereof.

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 as follows:

·; Asda (in respect of certain liquid milk products in 2002, fresh liquid milk in 2003, and UK produced cheese in 2002 and 2003),

·; Dairy Crest (in respect of UK produced cheese in 2002, and value butter and fresh liquid milk in 2003),

·; Lactalis McLelland (in relation to conduct by A McLelland and Son Limited prior to its acquisition by Groupe Lactalis) (in respect of UK produced cheese in 2002 and 2003),

·; Safeway (in relation to conduct prior to its acquisition by Morrisons) (in respect of certain liquid milk products and UK produced cheese in 2002, and value butter and fresh liquid milk in 2003),

·; Sainsbury's (in respect of certain liquid milk products in 2002, fresh liquid milk in 2003, and UK produced cheese in 2002 and 2003),

·; The Cheese Company (formerly Glanbia Foods Limited) (in respect of UK produced cheese in 2002),

·; Wiseman (in respect of fresh liquid milk in 2003).

See press releases 170/07 and 22/08 for further information on the early resolution.

4. Arla will receive complete immunity from financial penalty if it continues to cooperate fully with the OFT's investigation.

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

6. A Statement of Objections (SO), including a supplementary Statement of Objections (SSO), gives notice of a proposed infringement decision under 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.

7. 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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