In provisional decision, the Office of Fair Trading (OFT) alleged supermarkets Asda, Morrisons, Safeway, Sainsbury, and Tesco, as well as dairy processors Arla, Dairy Crest, Lactalis McLellan, the Cheese Company and Wiseman, collaborated to fix the retail price of milk, butter and cheese.
Various representatives of the UK farming and dairy industry as well as the retail agencies have started to release statements today regarding these allegations.
If found to be true, these supermarkets and dairy processors will have broken UK law under the Competition Act 1998, which "prohibits agreements, practices and conduct that may have a damaging effect on competition in the UK".
OFT claims the companies shared "highly commercially sensitive information, including details of the levels of price increases" over a two year period of 2002 to 2003.
"This is a very serious case," said Sean Williams, executive director of OFT.
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We believe supermarkets have been colluding to put up the price of dairy products.
This kind of collusion on price is a very serious breach of the law."
OFT alleges the supermarkets and dairy processors were aware that these collaborations were illegal and anti-competitive, and had been warned about this in the past by the regulator.
"Businesses should understand that where we find evidence of this kind of anti-competitive activity, we will use the powers at our disposal to punish the companies involved and to deter other businesses from taking such actions," said Williams.
The OFT has said it will not make a full decision until it has reviewed the responses from the parties involved.
If the companies decide not to settle they may face OFT in court.
Update:
In response to the OFT statement on dairy prices, several companies have released statements today.
Dairy Crest said it has co-operated fully with the OFT's investigations over the past three years, and will continue to do so.
"The OFT explains for the first time since the investigation began what evidence it proposes to rely on to support the allegations of infringement of competition law," the company said.
"The next steps for Dairy Crest will be to review the OFT's provisional findings in detail, and respond accordingly."
Morrisons, however, denies involvement in the pricing scandal suggested in the OFT report.
"Morrisons firmly believes that it was not directly involved in the Dairy Products Retail Price Initiatives that are the subject of the OFT's enquiry," the company said.
"The OFT has been investigating the conduct of Safeway, prior to ints acquisition by Morrisons.
However, Morrisons has not been made aware of any evidence that suggests that Morrisons itself was involved."
The company said it is reviewing the OFT statement, although believes there is no reasonable ground for the company to be involved.
"Morrisons takes adherence to competition law very seriously and operates a comprehensive and robust compliance programme, which was extended to cover Safeway immediately on the company's takeover," the supermarket group added.
Morrisons acquired Safeway in March 2004, while the allegations against the company were for the period 2002 - 2003.
The British Retail Consortium (BRC) also denied any price fixing took place.
"There was no collusion between supermarkets over milk prices and no sharing of confidential information," said BRC's director Kevin Hawkins.
"In 2002 there was a surplus of raw milk which led to a fall in farm-gate milk prices.
Some induvidual retailers independently raised the prices charged to customers in an attempt to ensure farmers received more and were able to continue in business so ensuring future milk supplies."
Hawkins said the retailers did this following advice from MPs and farming groups.
"At no time were retailers acting against the best interest of customers.
In fact this move helped customers by ensuring they did not go short of milk," added Hawkins.