Supermarkets 'in cigarette price fix plot'

Eleven supermarkets were today accused of conspiring with tobacco giants to fix the price of cigarettes.

The Office of Fair Trading says retailers including Tesco, Sainsbury and Somerfield broke the law by agreeing to keep costs of several brands at similar prices - a breach of competition rules.

The consumer watchdog says Imperial Tobacco, which owns Embassy and John Player Special, and Gallaher, which owns Benson & Hedges, were part of a conspiracy between 2001 and 2003. If the case is proven, large fines could be handed out.

OFT chief executive John Fingleton said: "For markets to work well for consumers, it is a fundamental principle that pricing decisions should be made independently.

"If proven, the alleged practices would amount to a serious breach of the law."

The cigarette makers deny the claims. Imperial said: "We take compliance with competition law very seriously and reject any suggestion we have acted in a way contrary to the interests of our customers."

This week the OFT was forced to apologised to supermarket Morrisons for alleging it was part of a scheme to fix prices on dairy products.