主播大秀

Where there's smoke...

• Robert Peston
• 25 Apr 08, 02:16 PM

As a passionate anti-smoker, my wife this morning said it would surely have been a good thing if tobacco companies and retailers had been conspiring to keep cigarette prices higher than they would otherwise have been.

I doubt that will be the defence put forward by and , the cigarette manufacturers accused - along with a bunch of retailers - of co-ordinating prices to the detriment of consumers.

What, however, is striking about the against Imps, Gallaher, Tesco, Sainsbury, Asda and Shell's forecourt business, inter alia, is it comes after a great wave of attempts by the competition watchdog to crack down on what it sees as harmful collusive behaviour by British companies.

Only last week it accused g. In December, Asda, Sainsbury and others admitted engaging in anti-competitive practices and in total. And the OFT roughed up British Airways something rotten for talking to Virgin about planned increases in the fuel surcharge on airline tickets.

Given how incredibly hard it is to find enough useable evidence of collusive behaviour even to allow a public statement of suspicion, let alone mount a successful prosecution, the great barrage of cases disclosed recently by the OFT may be indicative of a systemic problem in British industry, viz a tendency to share information in a chummy way to the potential harm of consumers.

That said, the OFT is stressing that those in the frame over tobacco prices may not have broken the law. And in some ways this case is less serious than some because the alleged breaches would all be civil offences, not criminal ones.

What the OFT fears happened was that between 2001 and 2003 there was an illegal dampener on proper price competition in cigarettes because retailers allegedly told manufacturers of their pricing plans and those manufacturers then allegedly conveyed that pricing information to other retailers.

A separate allegation is that there was an understanding between each retailer and each manufacturer from 2000 to 2003 that the price of certain cigarette brands would be linked to those of rival brands.

If true, the impact of both of these devices would have been to maintain prices at levels higher than they would otherwise have been.

But although it's embarrassing for the supermarkets, it is the manufacturers that would incur the heaviest fines, not the retailers (if any are levied).

Those fines would be fixed by reference to sales, up to a maximum of 10%.

What's that in real money? Well the market was worth 拢3bn (that's excluding tax), but double counting is allowed, since both makers and sellers are under investigation. So the maximum possible fine would be 10% of 拢6bn, or 拢600m.

However the OFT's fines have been averaging 6% of turnover - which in this case would translate into 拢360m.

At a time when most businesses are anxious about the outlook for sales and profits, that's quite enough for the manufacturers and retailers to work overtime to prove to the OFT that this is a case of smoke without fire.

• Permalink
• Comments (0)