Tesco and Sky off the hook with regulators - for now

Sky reaches a temporary compromise over live sport, as Tesco cuts a deal on its price-fixing charges.

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Last Updated: 06 Nov 2012

Some respite for Tesco and BSkyB in their latest rows with regulators: Sky has agreed an interim deal with Ofcom that will allow rivals to access its premium sports channels without it having to cut its charges (for now), while the Office of Fair Trading is dropping most of the charges against Tesco in its investigation into dairy price-fixing. Tesco isn’t getting off scot-free: it will have to stump up a penalty over cheese pricing, though it’s not been forced to admit culpability. Tesco's opponents (of which there are many) will no doubt claim that it's getting off lightly again. But the regulator may not be too disappointed - at least it's come out with something. And in the longer term, that's probably in all our interests...

The Sky deal is actually more of a temporary fix: it’s agreed with Ofcom that rivals who buy its sports channels will still have to pay the full rate, rather than the cheaper rate recommended (much to Sky’s chagrin) by Ofcom – but the difference will go into an escrow account pending the result of Sky’s appeal against the ruling. That means they won’t have to take a financial hit in the short term that could be reversed on appeal.

The Tesco solution is a more permanent one, however; apparently the OFT has concluded that there’s not enough evidence to support charges against the giant retailer for colluding with suppliers to fix the price of milk and butter way back in 2002 and 2003 – which has led to fines totalling £70m for the companies that have ‘fessed up (including Asda and Sainsbury’s). But in a face-saving move, the regulator will squeeze one fine out of Tesco; the retailer continues to protest its cheesy innocence, but has agreed not to contest the charges – presumably with the intention of making all this go away.

Regulators are presumably about as popular at Sky and Tesco as Gordon Brown would be at Gillian Duffy’s birthday party. But it's probably no bad thing in these cases for them to emerge with something. When they work properly, they're an important check and balance on the power of big companies, and they can't do that unless their authority remains intact.

What's more, although strong regulators may be a pain for companies, they're good for customers. Look at Apple, which has just gone public in its row with Adobe over Flash player. Apple refuses to include Flash on its iPhones or iPads on the grounds that it's rubbish, and wants developers to switch en masse to open standards like the new HTML5 (a bit rich, since Apple is about as secretive as they come - unless its engineers are let loose in German beer tents, that is). Apple has a strong incentive to freeze Adobe out – it saves it having to rely on a third party for development, not to mention the cost of royalties - and its power is such that it's hard for smaller firms to argue with it. But it’s not necessarily in the consumer’s best interest for the biggest players to be able to dictate the market. So we wouldn’t be surprised if the US antitrust authorities are keeping a beady eye on that little spat.


In today's bulletin:

Leaders ignore 30% tax hike predictions
Barclays cashes in on investment banking as profits leap to £1.8bn
Tesco and Sky off the hook with regulators - for now
Mervyn King: Election win will be poisoned chalice
Marks & Spencer has brief encounter with Which?

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