A UK regulator yesterday fined two tobacco groups and ten retailers a record £225 million for ripping off consumers by illegally inflating cigarette prices, but one tobacco giant ridiculed the ruling and said it would appeal.
The fine, the largest ever by the UK Office of Fair Trading (OFT) was imposed on Imperial Tobacco and Gallaher, and the retailers are Asda, The Co-operative Group, First Quench, Morrisons, One Stop Stores (formerly T&S Stores), Safeway, Sainsbury's, Shell, Somerfield and TM Retail.
The OFT ruled after a seven-year long investigation that Imperial Tobacco and Gallaher had a series of individual arrangements with each retailer whereby the retail price of a tobacco brand was linked to that of a competing manufacturer's brand.
The OFT said that these arrangements restricted the ability of these retailers to determine their selling prices independently and breached the Competition Act 1998.
What the OFT alleges is that if Imperial raised the price of one of their particular brand, then the retailers would also raise the price of similar competing brand of Gallaher.
This arbitrary price raising not only ripped off the consumer, but gave the added comfort in raising prices of their brand without fear of losing market share to its competitors since the retailers would also raise the price of its competitor's brand.