U.K. Cigarette Producers and Retailers Fined by OFT

Imperial Tobacco, Gallaher Group Ltd and 10 more retailers were charged $346 million for coordinating tobacco process between 2001 and 2003, a U.K. anti-monopoly regulator stated. Imperial Tobacco the producer of such popular cigarette brands as West, Davidoff and Gauloises received the highest fine of 112.3 million pounds. Gallaher that is a subdivision of Japan Tobacco was fined 50.4 million pounds. Such fine is considered the highest of its kind.

“Such actions, which limit the ability of retailers to establish their own prices for rival brands independently, are illegal. They can bring to reduced competition and consequently to less consumers,” stated OFT (Office of Fair Trading) Senior Director Simon Williams. The OFT representative declared that said withdrew its allegation made in 2008 regarding the link between the cigarette companies and Tesco Plc, as it didn’t have sufficient evidence. The representative also added it backed down the indirect exchange interaction of advised future retail prices.

Imperial Tobacco refused infringing any laws and declared in an interview that it would direct to the Competition Appeal Tribunal. Japan Tobacco considers the fine as a positive action. The OFT issued its first fines two years ago after affirming that some retailers and producers linked retail prices of cigarette brands to those of rival products. The regulator started its investigation six years ago.

“The actions to which the OFT invokes were designed to decrease the retail prices fined to consumers, and the OFT has itself admitted that its case is grounded on a new interpretation of the law,” William Morrison Supermarkets Plc. declared in a statement. J Sainsbury Plc, the U.K.’s third-largest supermarket owner, prevented the OFT to the price-setting agreement and was the first to request to the watchdog for indulgence. The company acquired full immunity from charges. Sainsbury’s initially prevented the OFT and has collaborated with them since March 2003. Imperial hasn’t undertook any provisions for the fine, and “any appeal to the court will bring to the temporary suspension of the fine,” Imperial Tobacco representative Simon Evans declared in an interview. Gallaher, First Quench, Somerfield and TM retail were allowed reductions to their fines because they acknowledged obligation when they received the OFT’s certificate of no objection in April 2008. “All these events date back approximately 10 years and though we can’t change the time, we admit there were many lessons to be learned. As you would expect we have collaborated with the OFT throughout its investigation and we consider this matter as closed,” stated Clair Hufton, a representative for Gallaher. The retailers “admitted to a streamlined procedure allowing parts of the case to be solved more quickly,” the OFT concluded.