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OFT issues provisional decision against Scottish processing dairies

129/06    6 September 2006

The OFT has provisionally found that six Scottish dairies entered into an agreement and/or concerted practice in the supply of fresh processed milk to 'middle ground' customers, in breach of competition law, over a four year period from 2000 to 2003.
 
The OFT has issued a statement of objections setting out its provisional findings to the milk processing dairies concerned (Ballantyne, Grahams, Quothquan, Renfrew, Scottish Milk Dairies and Wiseman). The main provisional finding is that the dairies engaged in price fixing by sharing pricing information and co-ordinating a series of price increases between them and colluded over arrangements not to compete for each others' customers, a form of market sharing. Price fixing and market sharing are both forms of conduct which infringe Chapter I of the Competition Act 1998.
 
The alleged infringement relates to the 'middle ground' market sector in Scotland which consists of customers such as schools, shops, cafes and hotels but excludes the big supermarkets and doorstep customers.
 
The OFT has now given the parties the opportunity to make written and oral representations on the statement of objections, which the OFT will take into account before making its final decision as to whether the Chapter I prohibition has been infringed and as to the appropriate amount of any penalties the OFT may decide to impose on each of the firms concerned.

No assumption should be made at this stage that there has been an infringement of competition law. The OFT will not be in a position to decide if the law has been breached until it has received and reviewed the parties' responses to the statement of objections and any comments from interested third parties. 

NOTES

1. The Competition Act 1998 prohibits agreements, practices and conduct that may have a damaging effect on competition in the UK. The Chapter I prohibition covers anti-competitive agreements and concerted practices, that have the object or effect of preventing, restricting or distorting competition in the UK or a part thereof.

2. A statement of objections gives notice of a proposed infringement decision under the Competition Act 1998 to the parties involved. The parties then have the opportunity to make written and oral representations in response to the case set out by the OFT. Such representations will be considered by the OFT before any final decision is made.

3. The statement of objections will not be published. In accordance with the OFT's guidance on Involving third parties in Competition Act investigations (pdf 290 kb), any person who wishes to comment on the OFT's provisional findings, and who is in a position to materially assist the OFT in testing its factual, legal or economic arguments, may request a non-confidential version of the statement of objections by contacting the OFT no later than 27 September 2006.

4. The OFT's provisional finding is that Wiseman and Grahams were involved for all four years; Scottish Milk Dairies and Renfrew were each involved for three years; Quothquan's involvement was for two years; and Ballantyne's involvement was for one year only. The OFT has provisionally found that all six firms were involved in price fixing and that five firms were also involved in market sharing, namely Grahams, Quothquan, Renfrew, Scottish Milk Dairies and Wiseman.

5. Both Renfrew and SMD have sold their milk processing businesses to Grahams, but the sellers each remain liable for their conduct between 2000 and 2003.

6. In calculating financial penalties, the OFT takes into account a number of factors including seriousness of infringement, relevant turnover and any mitigating and/or aggravating factors. The basis of the OFT's considerations are set out in OFT's guidance as to the appropriate amount of a penalty (pdf 146 kb). The final amount of a penalty calculated in accordance with the guidance may not in any event exceed 10 per cent of the worldwide turnover of an undertaking in its last business year (or 10 per cent of its UK-wide turnover in the financial year preceding the date when the infringement ended, for each year of the infringement up to a maximum of three years, for infringements ending prior to 1 May 2004).

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