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Price fixing allegations against Shell which has a track record of participation in illegal cartels


Times Online
The Times
July 12, 2008

Supermarkets and tobacco firm are fined £173m for price fixing

Embassy cigarettes to illustrate results for Imperial Tobacco

(Nick Ray)

Six companies have admitted unlawful pricing practices

Supermarkets must pay a multimillion pound fine for ripping off smokers in collusion with Gallaher, the tobacco company, it was announced yesterday.

Asda and Somerfield have admitted fixing the price of cigarettes and overcharging customers under a secret deal with the manufacturer of brands including Benson & Hedges and Silk Cut. The Office of Fair Trading said that a total of £173.3 million in fines and costs had been agreed in one of the biggest settlements of its kind.

Other firms that admitted colluding in the pricing scam include the owner of Threshers, the off-licence chain, and One Stop convenience stores, which must contribute towards the settlement. But the lion’s share of the fine — £93 million — will be paid by Gallaher, owned by Japan Tobacco.

The OFT has been investigating an alleged price-fixing cartel in Britain’s £15 billion-a-year market for cigarettes and rolling tobacco for five years. In April it announced that 11 companies were suspected of swapping price information and linking prices with rival brands between 2000 and 2003. Other accused firms are fighting the allegations. These are Imperial Tobacco, which owns the Embassy, John Player and Golden Virginia brands, Tesco, Morrisons, Safeway (now taken over by Morrisons), the Co-op and Shell, for its petrol station stores. If they are found guilty of collusion they face serious penalties under the Competition Act.

If they are found guilty of collusion they face serious penalties under the Competition Act and stand to be fined as much as 10 per cent of turnover of each product involved in the cartel.

Sainsbury’s was also part of the original investigation but turned whistleblower and handed over all its papers identifying unlawful practices. It is to be spared a fine provided it continues to assist the investigation.

The six companies fined yesterday made prompt admissions of illicit competition practices in return for lenient fines.

A spokesman for Japan Tobacco said: “We acquired Gallaher’s last year and after applying due diligence in all of this we decided to apply for leniency and have agreed to pay £93 million in fines.”

An Asda spokesman said that it had also agreed to a multimillion-pound fine. “We put our hands up quickly and admitted we have done some wrong but we are not the villains of this piece,” he said.

However, Imperial Tobacco insisted that it had admitted any infringement of the law. A spokesman said that it took compliance with competition law “very seriously” and said that it rejected any suggestion that it had acted in any way contrary to the interests of consumers. “Imperial Tobacco has co-operated fully with the OFT throughout and continues to do so,” he said.

John Fingleton, chief executive at the OFT, said: “The OFT’s objective is to make markets work well for consumers and the economy alike. A cornerstone of this is the principle that companies should set their prices independently.

“The OFT is very pleased that the early co-operation of these parties has enabled the swift resolution of some of this case, which will significantly reduce the costs of pursuing the investigation for the OFT and the businesses concerned.”

The action by the OFT in taking a more active role stamping out cartels and price fixing by manufacturers and retailers has delighted consumer groups such as the National Consumer Council.

Jill Johnstone, its director of policy, said last night: “We are pleased that the OFT is snuffing out cartels as price-fixing clearly cheats consumers.

“One of the biggest issues is that we have no way of knowing when price fixing occurs — often it takes a whistleblower to come forward.”

Deborah Arnott, director of Ash (Action Against Smokers for Health), said that Gallaher had “shown complete contempt for its customers”. The OFT had suggested that the two tobacco firms, which make nine out of every ten cigarettes smoked in Britain, were the hub of the scheme, passing on information to retailers about what their rivals would be charging for leading brands. The net effect was that the prices of competing brands were kept at a comparable level across supermarkets, Shell petrol stations, Thresher offlicences and other outlets.

The regulator’s inquiry unearthed a complex web of indirect communications between retailers and two tobacco groups on future prices with various retail companies acting as middlemen.

Results for OFT

September 2002 Aberdeen Journals, a major seller of advertising space in Scottish newspapers, is fined £1.33 million for trying to expel its only significant rival from the market by unfairly manipulating its prices

March 2003 The pharmaceutical company Genzyme is penalised £6.8 million for abusing its position as the dominant supplier of drugs for a rare genetic disease to the NHS and trying to squeeze out competition

February 2006 A £2.25 million raft of fines is imposed on a cartel of 13 companies that colluded to avoid competition when giving quotes for roofing contracts. It is later reduced to £1.56 million after some companies co-operate in the investigation

March 2006 The OFT abandons a case against UKCPC, a consortium including BT, Cable & Wireless and Level 3, after spending £1.5 million investigating a complaint of unfair business practices

April 2006 Fines totalling more than £2 million, imposed after an investigation into three companies for fixing the price of pads used by waiters, are reduced to just under £135,000 to reward their co-operation

November 2006 The rail company EWS is fined £4.1 million for concluding contracts with customers of its freight service which excluded competitors

Source: OFT;; Times Database

Shell’s Illegal Cartel Track Record…


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