Tobacco manufacturers: investigation into anti-competitive practices
The Office of Fair Trading (OFT) investigated anti-competitive practices relating to the sale of tobacco.
No. CA98/01/2010 Case CE/2596-03
Court of Appeal judgment
The CMA has sought permission from the Supreme Court to appeal the Court of Appeal’s judgment.
- Court of Appeal judgment handed down on 15 July 2016 (update added on 27.10.16)
High Court judgment
Competition Appeal Tribunal Decision
The Competition Appeal Tribunal (CAT) handed down its judgment in the Tobacco appeals on 12 December 2011. The CAT upheld appeals brought by six parties and quashed the OFT’s Decision in relation to those parties, although it did not rule on the substantive issues raised in the appeals.
By its decision dated 15 April 2010, the OFT had found that two tobacco manufacturers and 10 retailers had engaged in unlawful practices in relation to retail prices for tobacco products in the UK, in breach of the Chapter I prohibition of the Competition Act 1998.
Following careful consideration of the CAT's judgment, the OFT has decided not to appeal that judgment and it has also decided not to issue a new Statement of Objections.
Summary of work
By its decision dated 15 April 2010, the OFT had found that two tobacco manufacturers and 10 retailers had breached the Chapter I prohibition of the Competition Act 1998 and imposed fines totalling £225m. The tobacco manufacturers involved were Imperial Tobacco and Gallaher and the retailers were Asda, The Co-operative Group, First Quench, Morrisons, One Stop Stores (formerly T&S Stores), Safeway, Sainsbury's, Shell, Somerfield and TM Retail.
- A list of the parties involved and the fines imposed (pdf 45kb).
The OFT had concluded that each manufacturer 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 had concluded that those arrangements restricted the ability of those retailers to determine their selling prices independently and breached the Competition Act 1998. The OFT had concluded that the infringements spanned different periods between 2001 and 2003 for different parties, and related variously to the markets for UK duty paid cigarettes, hand rolling tobacco, pipe tobacco, and cigars and cigarillos.
- A non-confidential version of the Decision (pdf 4Mb).
Imperial Tobacco, Asda, The Co-operative Group, Morrisons, Safeway and Shell appealed the OFT's decision to the CAT. On 12 December 2011, the CAT handed down its judgment, upholding those appeals and quashing the OFT's decision in relation to those parties on the basis that the OFT's refined case was not a part of, or within the Infringing Agreements in the OFT's Decision.
Update - TM Retail
In 2008 the OFT gave Martin McColl Retail Group Limited and TM Retail Limited ('TM Retail') assurances relating to the effect of any successful appeal brought by another party against the OFT's Tobacco Decision (dated 15 April 2010) in respect of TM Retail.
A number of other parties to the Tobacco Decision successfully appealed to the Competition Appeal Tribunal ('CAT') (ITL and Others v OFT  CAT 41, dated 12 December 2011). The Tobacco Decision remains as against those parties who did not appeal, including TM Retail.
In the light of the particular assurances provided to TM Retail, the OFT has agreed to make a payment to TM Retail in the amount of its penalty under the Tobacco Decision (namely £2,668,991) and a contribution to certain other costs.
OFT press releases
- Press release OFT statement on CAT judgment in Tobacco case (12 December 2011)
- Press release OFT imposes £225m fine against certain tobacco manufacturers and retailers over retail pricing practices (16 April 2010)
- Press release OFT reaches early resolution agreements in tobacco case (11 July 2008)
- Press release OFT issues proposed decision against certain tobacco manufacturers and retailers over retail price practices (25 April 2008)
- The Competition Act 1998 prohibits, among other matters, agreements and practices that have the object or effect of preventing, restricting or distorting competition in the UK or a part of it and which may affect trade in the UK or a part of it ('the Chapter I Prohibition').
- In April 2008 the OFT issued a Statement of Objections against certain tobacco manufacturers and retailers. On 11 July 2008 each of Gallaher, Asda, First Quench, One Stop Stores, Somerfield and TM Retail reached an early resolution agreement with the OFT admitting its involvement in the alleged infringing agreements to which each was party, in breach of the Chapter I Prohibition.