UPDATE 2-UK firms fined 225 mln stg for tobacco price fixing

* OFT imposes fine on 2 tobacco firms, 9 retailers

* Imperial Tobacco fined 112.3 mln stg, says will appeal

* Sainsbury’s escapes fine for reporting the infringement

* Case against Tesco dropped; Morrison says will appeal

* Imperial shares down 0.7 percent, lagging UK market

(Adds Imperial, Morrison, analyst comments, shares)

LONDON, April 16 (BestGrowthStock) – Britain’s consumer affairs
watchdog has slapped a record 225 million pound ($349 million)
fine on two tobacco firms and nine retailers accused of fixing
prices on tobacco products between 2001 and 2003.

A tenth retailer, J Sainsbury (SBRY.L: ), escaped a fine
because it alerted the Office of Fair Trading (OFT) to the
infringements, while the watchdog said it had insufficient
evidence to pursue a case against Tesco (TSCO.L: ).

Imperial Tobacco (IMT.L: ) said it had been hit with 112.3
million pounds of the fine and it would appeal the decision.

Retailer Wm Morrison (MRW.L: ) said it would also challenge
the OFT’s findings.

The other tobacco manufacturer involved is Gallaher
(2914.T: ), while the eight other retailers are Asda (WMT.N: ), The
Co-operative Group, First Quench, Morrisons (MRW.L: ), One Stop
Stores (formerly T&S Stores), Safeway, Shell (RDSa.L: ),
Somerfield and TM Retail.

“This enforcement action will send out a strong message that
such practices, which could in principle be applied to the sale
of many different products, can result in substantial penalties
for those who engage in them,” said OFT Senior Director of Goods
Simon Williams.

The OFT said the fine was the largest total penalty it had
ever imposed in a case under the Competition Act 1998.

Imperial said the OFT’s decision related to arrangements
aimed at ensuring promotional discounts given to retailers were
passed on to consumers in the form of lower prices.

“Far from being anti-competitive, these arrangements were
pro-competitive and to the benefit of consumers. Retailers
remained free to set their own prices,” it said.

Evolution analyst Chas Manso de Zuniga said an appeal might
take two years and the maximum fine Imperial could have to pay
was 10 percent of its UK turnover for the period in question, or
229 million pounds.

That equates to 17 pence a share, while the current fine is
worth 8.5 pence a share, he said, keeping his share price target
at 2,400 pence and his “buy” rating.

At 0950 GMT, Imperial shares were down 0.7 percent at 1,974
pence, underperforming a flat FTSE-100 index (.FTSE: ).

Asda, One Stop Stores, Sainsbury’s and Somerfield benefitted
from discounts in their fines under the OFT’s leniency
programme, which provides co-operating parties with a reduction
in penalties where they proactively volunteer information which
assists the OFT’s investigation.

Gallaher, Asda, First Quench, One Stop Stores, Somerfield
and TM Retail also received reductions because, after the OFT
published its initial statement of objections in April 2008,
they each admitted liability and agreed to a procedure that
enabled parts of the case to be resolved more quickly.

Stock Market

($1=.6444 Pound)
(Reporting by Mark Potter; editing by Simon Jessop and Jon
Loades-Carter)

UPDATE 2-UK firms fined 225 mln stg for tobacco price fixing