Grocers in a bit of a fix

In the lexicon of white-collar crime, price-fixing is a serious offence with career-terminating consequences if you happen to be found out. Ask Martin George, formerly board-level marketing director of British Airways.

Yet the fact is, until recently, not many people have been found out. There are a number of reasons for this. First, though price-fixing is suspected of being routine practice across a slew of consumer industries – cars, groceries, aviation, petrol retail among them – complicity is extremely difficult to prove. All the more so when, as is often the case, the cartel is international in its reach. It follows that, even when the complex evidence is forthcoming, it takes years to amass, and can easily fail on technicalities once in court.

Going a stage further, if a conviction is secured, it is something of a hollow triumph for the authorities, since the company or companies in question can shrug their shoulders, fingering a long-since departed management team whose practices are no doubt to be deprecated utterly – but whose actions can have no present relevance to that company’s standing all these years later.

Last, but not least, there has been a lingering belief that price-fixing is, rather like insider trading and City concert parties, a ‘victimless’ crime with no serious consequences for anyone in particular. This complacent (and flawed) argument found comfortable reinforcement in the paltry fines (viewed from a corporate point of view) that used to be incurred by convicted malefactors.

It may well be that the outcome of the BA affair will mark a sea-change in that thinking, with unpleasant consequences for other brands caught on the hop.

BA Watershed?
The details of the BA case are less important than the way in which it was handled. Top executives (the BA head of communications, Iain Burns, as well as George) were invited to fall on their swords early on. The case remained high profile, compounding a series of other woes afflicting the BA brand. And when it was wrapped up – in lightning time by legal standards – the punishment was severe: a corporately eye-watering $300m fine (explain that one away to shareholders) and a promise to ‘name and shame’ eight other BA executives. (Technically, they’re not suspects, more ‘arguidos’.) Civil class-actions against BA seem sure to follow.

Ah, you may object – noting the $-sign prefixing the fine – that’s over there. Over here, the authorities are much too sluggish and ineffectual to do anything that Draconian. And you could rightly point to the number of occasions on which the regulators have vainly attempted to pin unfair trading practices on the supermarkets – for which there seems to have been a fair amount of anecdotal evidence over the years.

This time, though, things could be different. The Office of Fair Trading, which has been leading an investigation into fixing dairy product prices, seems to think it has it got its culprits ‘bang to rights’.

The great milk scandal
Those in the dock comprise some of the most respected members of the brand community, including Asda, Sainsbury’s, Tesco and Morrisons. Among those aiding and abetting them were dairy processors Arla and Dairy Crest, best known for their Lurpak, Anchor butter, Utterly Butterly and Cathedral City cheese brands.

The evidence is admittedly a wee bit historic – covering the years 2002-3 – but unfortunately for the defendants, rather more intelligible to the general public than most of these things. It’s a story, if we take it at face value, of manufacturers and retailers conspiring to rip off the general public by raising the price of dairy products while hypocritically claiming to be acting in the interests of downtrodden dairy farmers – which they patently weren’t.

The fines, if the indicted parties are indeed found guilty, will be “sizeable” according to the regulator. But it is not the fines that should worry them. This is an issue which, like the Rip-Off Britain campaign of a few years ago, is likely to preoccupy headline writers for some time to come. More worrying still, the Great Milk Price Rip-Off looks like the first plank in a much more complex investigation by the Competition Commission into the supermarkets’ aggressive and anti-competitive behaviour. Could it be that the worm has really turned?

Stuart Smith

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