The OFT's decision last week to hand out a £116m fine to some of the UK's leading supermarkets and dairies for colluding to fix the price of milk, cheese and butter had more than a whiff of pyrrhic victory about it.
They may have rightly been penalised for the collusion, which supposedly cost consumers £270m, but what impact will the OFT's decision have on dairy farmers? They, after all, were the people who were supposed to benefit from the pricing initiatives in 2002 and 2003. Could it put retailers off agreeing to fresh price rises?
The decision has come at an unfortunate time for the dairy industry. On the one hand there has been an improvement in farmgate prices, which have risen from a low of 15ppl in 2002 to a 23ppl this September. But on the other, the price of milk production has soared, pushing many farmers to the brink and forcing them to ask for yet higher prices.
Whether Tesco, which is still under investigation, can persuade the OFT that it acted independently of other retailers and dairies in raising prices will be key. If it can't, there's a danger that retailers will take the view that raising prices is too risky. Even if there is no collusion, why risk being accused of it?
And the issue of whether there was collusion masks a deeper question of whether the dairy farmers saw any of the money. Richard Clothier, managing director of Wyke Farms, believes they did and calls the OFT's decision "an absolute travesty". "I hope this isn't an excuse not to put initiatives in place in the future," he adds.
The BRC adds there is "clear evidence" that farmers benefited, citing an increase in farmgate prices from 15.3ppl to 19.1ppl by the end of 2003. "The fact these increases could not be sustained in subsequent years was not the supermarkets' fault but reflected continuing instability in the UK liquid milk market, in particular the structural imbalance between supply and demand," says director general Kevin Hawkins.
Alan Wiseman, chairman of Robert Wiseman Dairies, is equally adamant. "The intention of the Retail Price Initiatives was to provide support for farmers at a time of crisis and every penny of additional revenues paid to Wiseman was passed directly to our suppliers."
Farmers For Action chairman David Handley is sceptical. " The money never came back or when it did come back in small increments it was recovered by the processors," he says, adding that the £116m in fines should be passed to the dairy industry, not the Treasury.
Another person who remains to be convinced is James Lowman, chief executive of the ACS. "It is becoming clear that suppliers did not benefit from this price fixing in the way that the superstore PR machines would have us believe," he says.
The lack of a clear auditing process over the period in question didn't help. Better processes are now in place to ensure the promised returns do make their way to farmers and supermarkets are now putting dedicated supply chains in place to bring more transparency to the process, says NFU chief dairy adviser Thomas Hind.
But will those returns be forthcoming? Arla, which escaped a fine, fuelling speculation that it was the whistleblower, is unlikely to suffer long-term consequences. "They may well have their legs smacked but I don't think anyone in the retail sector will want to lose Arla's products," says an industry insider. "If it had been a weaker player it may have harmed them though." It may yet harm those that are.n