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.

High Court judgment

CMA statement on High Court judgment in Tobacco (26.01.15)

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.

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.

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 [2011] 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

Notes 

  1. 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').
  2. 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.

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