Warning: The OFT can seriously damage your health

Those bruisers at the OFT are at it again. This time it's the tobacco industry in the firing line...

Last Updated: 06 Nov 2012

Just days after launching a major probe into the construction industry, the Office of Fair Trading has announced that it also has its suspicions about the tobacco industry – specifically cigarette-makers Imperial Tobacco and Gallaher, and the supermarkets that sell their products. It’s accusing thirteen companies of colluding to co-ordinate the retail prices of cigarettes – not quite the same as price-fixing, but equally illegal nonetheless.

According to the OFT, which has apparently been sniffing around the industry for about five years, the manufacturers and retailers arranged to price cigarettes with reference to the price of rival brands – and thus ‘restricted the ability of each of these retailers to determine its selling prices independently’. It’s also alleging that seven of the companies exchanged ideas about future retail pricing. ‘If proven, the alleged practices would amount to a serious breach of the law,’ said chief executive John Fingleton.

This is all well and good – but we can’t help feeling that bit about proof is kind of important. The OFT itself admitted that ‘at this stage it should not be assumed that the parties involved have broken the law’ – so in which case, why is it naming and shaming the accused parties in such a public way? Its argument is that there might be a danger of insider trading if it tried to investigate discreetly - but then accusing someone of a wrong-doing that carries a possible fine of up to 10% of turnover might have the same effect. And as Tesco pointed out today (as it pleaded its innocence), it hasn’t even seen the details of the allegations yet...

Normally, you’d assume that the OFT had such a watertight case that it felt confident enough to go public with the allegations before approaching those involved – perhaps because of an inside mole who’s been supplying them with bullet-proof information. But it doesn’t exactly have a great track record in this area. Only this week, it agreed to pay £100k to Morrisons to settle a defamation case, after pre-empting an investigation with a press release suggesting that the supermarket had colluded with dairies to fix the price of dairy products (the investigation is apparently ongoing, but Morrisons says all the problems happened at Safeway years before they bought it). In fact, its relentless public pursuit of big corporates in recent years has led to widespread criticism that it’s developed a rather unseemly interest in seeing its name in the papers.

Still, you certainly couldn’t accuse it of lacking the stomach for a fight. It’s come back for a second round with Morrisons, just days after receiving a knockout punch – Morrisons is one of the 13 companies accused in the cigarette-pricing probe, while old OFT adversaries Tesco, Sainsbury, and Asda are also back in the firing line.

Imperial and Gallaher are unlikely to get much in the way of public support - Big Tobacco has to be just about the easiest target for a regulator - and the big supermarkets aren’t universally popular either. But since the taxpayer will end up footing the bill every time it has to shell out in compensation, let’s just hope Fingleton and co have actually got their facts right this time...

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