PRICES 2

Tesco has threatened legal action after being hit with a £10m fine from the Office of Fair Trading (OFT) following an inquiry into the price fixing of dairy products. The supermarket was one of nine firms facing penalties totalling close to £50m for colluding over the price of milk and cheese in 2002 and 2003. Tesco expressed "surprise and dismay" that it was included in the penalties handed down by the regulator and denies it colluded with others. The OFT estimated that the collusion saw shoppers pay 2 pence extra for a litre of milk and 2p extra on 100g of cheese.

The regulator originally calculated that an extra £270m was spent by UK consumers as a result of the price fixing, but no total figure has been included in the final report. The OFT found that Arla, Asda, Dairy Crest, McLelland, Safeway, Sainsbury's, The Cheese Company, Wiseman, and Tesco infringed the Competition Act by co-ordinating rises in the prices consumers paid for certain dairy products in 2002 and, or 2003.

Lucy Neville-Rolfe, Tesco's director of corporate and legal affairs, said, "We surely have now reached the stage where the absurdity of the OFT operating as investigator, prosecutor and judge cannot be allowed to continue." The OFT said that supermarkets had indirectly exchanged pricing details with each other via the dairy processors. However, it said that not all the companies were involved in all the infringements that it had found.

The final penalties announced by the OFT were £9.39m for Asda, £7.14m for Dairy Crest, £1.66m for McLelland, £5.69m for Safeway, £11.04m for Sainsbury's, £1.26m for The Cheese Company, £3.2m for Wiseman and £10.43m for Tesco. Although Arla was found to been involved in the infringement regarding milk in 2003, it has not been fined as it alerted the OFT to price fixing and was given immunity.

OFT chief executive John Fingleton said, "Competition in the supermarket sector is generally intense and has delivered significant benefits to shoppers across the UK in terms of innovation, choice and improved value for money. Our investigation and this final decision will help ensure that this competition is maintained." (Source: BBC News, Aug/11)

Households will spend on average an extra £350 on essential bills in the next 12 months. Families struggling with rising inflation and pay freezes face rises in the cost of 'must pay' items such as water, phone calls, stamps, council tax and the BBC licence fee. And motorists could be worst hit if the Government pushes ahead with its decision to raise the tax on a litre of petrol by 3p from April 1. It would mean a family with two petrol cars will have to pay an extra £201.60 a year in fuel tax, according to the AA. The rise is also likely to push up the price of groceries because of the increase in business transport costs.

Edmund King, president of the AA, said, "If price increases turn out as badly as we fear, they will become an important issue in the coming election." The Government is also increasing road tax for 21million vehicles, with tax on Band H vehicles going up by £65 to £240 per year. The average council tax bill is set to rise by an average of 1.6%, taking the typical bill up 36p a week to £18.72. A postcode lottery for water suppliers means that some homes will see their annual bill fall by up to £16, while others, such as those served by Northumbrian Water, will pay £11 more this year, taking the annual figure to £311.

BT is shifting its off-peak period on weekdays from between 6pm and 6am to between 7pm and 7am. This means customers on its Evening and Weekend plan who make one call of less than a minute between 6pm and 7pm every day will either have to pay an extra £57.67 a year, or pay £24 more a year to join BT's Anytime Plan. April 1 also sees the cost of a BBC colour TV licence fee rise by £3 to £145.50. The Royal Mail is putting up the price of a first class stamp by 2p to 41p, after a rise of 3p last year. Second class goes up 2p to 32p. The increases take effect from April 6.

Anyone buying a new car from April 1 faces a paying a 'showroom tax'. For the first year this will replace the road tax, and can be up to £950 for gas-guzzling vehicles, and £250 for Band H cars. Inflation hit 3.5% in January, almost double the November figure, according to the Office for National Statistics. This was fuelled by the return of VAT to 17.5% in that month. Savers are seeing their nest eggs shrink because bank interest rates are too small to counter inflation. Meanwhile private sector workers have seen their average wages fall 0.1% in the last year.

Finance expert Rebecca Atkinson, editor of Moneywise.co.uk, said, "'The expected fuel duty increase is coming on top of petrol prices which have gone up by quite a lot already. An increase of 3p a weekend is quite a big burden on people, and will filter through to food prices because retailers will have to pay more for petrol too. By changing the time for off-peak phone calls, BT will make people either go for a higher tariff, or mean people using the phone between 6pm and 7pm will have to pay more." (Source: Daily Mail, Mar/10)

The story gets worse. The Japanese drive on the left, as we do. So it should be easy for dealers there to export their cheap cars here. But even such 'grey' imports have been kept out. It has been made virtually impossible for a Japanese dealer to sell to, say, Asda or Tesco. A limit of 100 cars every five years has been imposed on importers. To its credit, the Government has realised that this is a restriction on trade and announced this weekend that it intends to end it. So we might at last see Japanese or Korean cars at British supermarkets.

The Government was not so helpful with regard to prices in the Budget. The extra excise duties on petrol and diesel mean that delivery of every object we buy in the shops will cost us more. This comes after several years of tax increases on fuel that have made British petrol, the cheapest in Western Europe in 1993, now the most expensive. This in a country that is a net exporter of oil. Our oil importing neighbours, on the other hand, have seen fuel prices fluctuate with the market. Meanwhile, the VAT duty that we pay on most goods is much higher than the sales tax payable in most American states. In that direct way, too, it is government that makes our prices higher.

But the most important impact of government on prices has been through creating or sanctioning barriers to competition. In virtually every business where British prices are high, government has allowed an obstacle. Perhaps the most celebrated barrier is the Common Agricultural Policy which has cost British families as much as £1,000 a year in higher prices and taxes. Such barriers have been created by - or are supported by - governments (or the EU). Of course there are specific businesses that may gain from such barriers and lobby for them. All businesses love a monopoly. But governments cannot duck responsibility. If one is "angry" about high prices in Britain, one should be angry at governments - past and present.

British shoppers pay up to 40% more for branded items such as clothes and perfumes than consumers in other countries, according to a government report. The study, carried out jointly with the Swedish Government, has prompted Trade and Industry Secretary Stephen Byres to call for reforms to stop UK shoppers being ripped off. Under European Union (EU) trademark laws, manufacturers can dictate which retailers in the EU can sell their products and where they can import them from.

Mr Byers said companies were obviously abusing the legislation to keep prices artificially high in some countries. The legislation also prevents British retailers from sourcing goods from outside the EU on the "grey market" where they are often cheaper. He is now calling for an overhaul of the trademark laws. "Action is needed to reform the EU law on the protection of branded goods," he said. "I want the Tesco's and Asda's of this world to be able to source the best deals from anywhere in the world and pass those savings on to consumers." He said the findings had been circulated to other European Union member states. The report surveyed the price of 133 items in France, Germany, Sweden, the UK and the US. It found that High Street prices in Britain were often the most expensive.

In particular, music lovers are often paying significantly more for chart CDs, DVDs and computer game consoles. The findings will be discussed at a meeting of European consumer affairs ministers in Sweden on Thursday and Friday. Consumer Minister Kim Howells will be representing the UK. Court cases Mr Howells said: "We are working with the Swedes to push for removal of trademark restrictions on the import of such goods. "We hope other member states will support our joint approach. More cut-price designer goods could be sold on supermarket shelves "We want the European Commission to change the Trade Mark Directive so traders can import cheaper branded goods from any country. "Allowing brands to dictate which retailers can sell their products and where they can import them from is unacceptable. "Effectively the directive forces retailers to import goods from the most expensive suppliers."

Supermarkets, most notably Tesco, have gone head-to-head with companies and sourced goods from outside the EU on the "grey market". Clothes manufacturer Levi Strauss has argued this is illegal. But earlier, the European Court of Justice indicated that traders such as Tesco should have their interests considered.

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