Freshfields secures partial victory in Tesco dairy price-fixing case

Freshfields Bruckhaus Deringer has secured a partial victory for grocery giant Tesco in a long-running OFT dairy price-fixing case.

Dinah Rose QC
Dinah Rose QC

Judgment handed down by Lord Carlile QC following a Competition Appeal Tribunal ruled that Tesco’s appeal against the OFT’s price-rigging findings over two separate ‘cheese initiatives’ should be allowed in part.

Tesco’s case was run by Blackstone Chambers’ Dinah Rose QC, leading Maya Lester and Daniel Piccinin of Brick Court Chambers, instructed by Freshfields partner Deirdre Trapp, who worked alongside litigation partner Paul Lomas, senior associate Dan Burton and associate Mary Wilks.

The supermarket giant had been fined £10m by the OFT for alleged price-fixing in the cheese market with suppliers and other retailers in 2002 and 2003 (12 August 2011). But it lodged an appeal, saying the claims were “entirely without substance”.

The regulator’s general counsel Frances Barr instructed Stephen Morris QC and Josephine Davies of 20 Essex Street and Kassie Smith of Monckton Chambers.

The CAT concluded that for the 2003 cheese initiative, there was insufficient evidence to say that Tesco colluded to rig the price of cheddar cheese and milk and set aside the OFT’s finding. However, in the 2002 cheese initiative, the CAT set aside some of the strands, but asked for more information on three specific communications between Tesco, suppliers Dairy Crest and McLelland, and Sainsbury’s.

The judgment said: “Tesco did engage in conduct, which had as its object the restriction of competition in relation to the supply of British-produced cheddar and territorial cheeses in the UK, contrary to the Chapter I prohibition.

“Whether that’s sufficient to amount to participation by Tesco in the single overall concerted practice referred to as the 2002 Cheese Initiative and found by the OFT in the decision, or whether those three instances should be viewed as single, isolated infringements, is a matter for further argument.”

The CAT will now seek further argument on that aspect and the level of fine.

A statement from Tesco said: “Tesco is pleased with today’s judgment by the Competition Appeal Tribunal. It overturned the OFT’s decision that Tesco colluded with suppliers and other retailers to fix cheese prices in 2003. It also overturns a large part of the cheese 2002 decision.

“The OFT’s case focused on events which took place a decade ago. It is common ground that the industry faced unprecedented public pressure to increase the price received by farmers for their milk. We have noted the CAT’s findings about three isolated communications in 2002. We have of course updated our compliance practices since that date.

“We’ve always maintained that we were not part of an overall plan to collude on prices. All the other allegations against us in this 10-year process have already been dropped.”

An OFT spokesman said: The OFT welcomes today’s CAT findings that Tesco infringed competition law in relation to certain anti-competitive exchanges of its pricing intentions on cheese products in 2002.

“Tesco was found to have been involved in three anti-competitive A to B to C exchanges of information. The OFT welcomes the CAT’s confirmation that a concerted practice consisting of indirect contact between competitors via their common supplier is no different in substance from two competing retailers sitting across the table and telling each other what their prices will be next week.

“This judgment sends a clear signal to all businesses that this conduct infringes competition law. All other parties to the OFT’s 2011 Dairy Retail Price Initiatives decision admitted liability for the infringements and paid penalties totalling over £39m. The OFT will consider the judgment in detail, including the next steps.”

In the build-up to the CAT hearing, Rose notched up a small victory by fending off the OFT’s request for disclosure of the grocery retailer’s interviews with its solicitors relating to the dairy-fixing probe (23 March 2012).

Then dairy price-fixing case followed the OFT’s longest-running collusion investigation.