Thresher faces crippling fine

25 July, 2008

OFT penalises the group's parent company for links with tobacco price fixing

Thresher parent company First Quench Retailing is braced for a potentially crippling fine following an investigation into price fixing on tobacco.

The company has been penalised for linking the retail price of a manufacturer's brand to that of a competing product from another supplier in a period from March 2000 to mid-2003, during which time it was owned by Whitbread/Allied Domecq, and private equity groups Nomura and Terra Firma.

First Quench has been fined a portion of a combined £173.3 million penalty handed out to Asda, Somerfield, TM Retail, One Stop Stores and tobacco manufacturer Gallaher, for offences in the early part of the decade.

Sainsbury's was granted immunity from punishment after being first to agree to work with the OFT's investigation team.

Gallaher's share of the fine is well over half, and the combined penalty could come down to £132.2 million if the parties agree to support an ongoing investigation

into the Co-op, Morrisons, Safeway, Shell, Tesco and Imperial Tobacco.

Gallaher has already revealed that its share of the fine is 53.75%, which is £93 million if the fine remained at £173.3 million. Assuming the fine is reduced to £132.2 million and its proportion of the

penalty remained the same, that would leave Gallaher with a £71.1 million bill with the remaining amount split between the five retailers.

That could translate to a huge £12.2 million fine for Thresher, which analysts believe the company would struggle to cope with.

OFT chief executive John Fingleton said: "The OFT's objective is to make markets work well for consumers and the economy alike. A cornersto ne of this is the principle that companies should set their prices independently."

First Quench refused to comment.

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