Friday, September 21, 2007

Supermarkets Fixing Prices of Butter and Milk

The OFT has launched a 'serious' investigation into the major supermarkets. It is alleged the supermarkets have been fixing the price of milk and cheese for many years.

Supermarkets like to give the impression it is a cut throat industry, with each supermarket trying to outdo the others with price cuts. However, these price cuts are very selective and in recent years the main supermarkets like Sainsbury's and Tesco have been able to make very significant profits.

At the moment the allegations have not been proved, but, if they are found guilty they could be fined millions of pounds.

In the UK price fixing is illegal. The supermarkets have apparently been communicating in various ways to keep the price of cheese and milk high to consumers.

The supermarkets have also been apparently colluding to keep the purchasing power of milk low. Farmers have long complained that the price they receive for milk is barely enough to make any profit.
  • This is an example of supermarkets using their monopsonistic purchasing power.

The investigation may spread to other areas.

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