Sainsburys and Asda have admitted fixing the price of dairy products with producers in the aftermath of the Foot and Mouth outbreak of 2001 following an investigation by the Office of Fair Trading (OFT).

The supermarkets and producers who have admitted liability will receive fines of £116 million, but these could be reduced if they continue to help the competition watchdog continue with its investigations against other supermarket groups and producers.

Morrisons and Tesco, the UK's biggest supermarket, are refusing to admit that they exchanged sensitive information regarding milk, cheese and butter prices in 2002 and 2003. Producer Lactalis McLelland has also refused to admit guilt. The case against those companies will continue.

Lucy Neville-Rolfe, executive director at Tesco, said: "We acted independently and we did not collude with anyone. Our position is different from our competitors and we are defending our own case vigorously. Our whole philosophy is to give a good deal to customers. We continue to deliver on this in a fiercely competitive market."

Arla, the dairy company which has been helping the OFT with its investigation, is to receive complete immunity from any fines as long as it continues co-operating with the watchdog.

Five supermarket groups and five dairy companies have been investigate by the OFT over allegations of exchanging commercially sensitive information between retailers in respect of milk, butter and cheese during 2002 and 2003. The collusion is thought to have cost British shoppers £270 million.

In a statement today, the OFT said that it was very pleased with the early co-operation of Asda, Dairy Crest, Safeway (now owned by Wm Morrison), Sainsbury's, The Cheese Company and Wiseman. The watchdog said that their co-operationg had enabled some of this case to be resolved effectively and swiftly, reducing the costs of the investigation to both the OFT and the businesses.

J Sainsbury said it would pay a £26 million fine to the OFT, which it said would help bring the investigation to a conclusion.

"We are disappointed that we have been penalised for actions that were intended to help British farmers, but recognise the benefit of a speedy settlement with the OFT," Mr King said.

"The price initiatives in 2002 and 2003, which were widely and publicly reported at the time, were designed to help British dairy farmers at a time of considerable economic pressure and public debate about whether farmers were getting a fair price for their products," he added.

In a statement, Asda said: "Everyone at Asda regrets what happened, particularly as we are passionate about lowering prices. Our intention was to provide more money for dairy farmers, who were under severe financial pressure at the time."

Dairy Crest said today that it expected to pay a significantly reduced fine of £9.4 million, after agreeing to co-operate with the OFT. The original penalty levied had been £14.5 million.

The Cheese Company, a niche hard cheese company, has also admitted that it will pay a maximum fine of £2 million, but expects this penalty to be substantially lower.

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