Lloydspharmacy seriously breached competition law by entering a cartel with a pharmaceutical company to supply medicines to care homes, the Office of Fair Trading (OFT) has said.
Lloydspharmacy established an agreement with Tomms Pharmacy between May and November 2011 that the two companies would not supply prescription medicines to care homes in England already supplied by the other, an OFT investigation found.
Lloydspharmacy is expected to escape a fine because it brought the agreement to the OFT's attention and has co-operated with the investigation under the watchdog's leniency policy, the OFT announced yesterday (December 12).
Hamsard 3149 Limited, which owns Tomms Pharmacy and Quantum Pharmaceutical, was fined £387,856.
The OFT said the arrangement between Lloydspharmacy and Tomms Pharmacy was a "serious breach of competition law"
More on Lloydspharmacy
Lloydspharmacy had stopped the agreement within 48 hours of its discovery by the company's internal compliance function, a spokesperson for Lloydspharmacy's parent company Celesio said.
Hamsard said the agreement had been a "brief, isolated incident" that had not affected the pricing or quality of its prescription services to care homes.
The OFT said it considered the market-sharing agreement between Lloydspharmacy and Tomms Pharmacy to be a "serious breach of competition law".
"These two companies have admitted to entering into a cartel to reduce competition for supplies to care homes, which look after some of the most vulnerable members of society," said OFT senior director Ann Pope.
"We will take strong action against companies that collude to deny customers the benefit of fair competition," she added.
Hamsard was initially fined £646,426 but the amount was reduced after it admitted to its participation in the cartel and agreed to co-operate with the OFT.
It told C+D it had taken "remedial action to prevent reoccurrence, including additional competition law training for relevant employees". Since this time, Tomms had also undergone "significant structural, operational and management change", a spokesperson said.
Lloydspharmacy said a "very small number of staff" were involved in the agreement and they had since left the company.
"Our own comprehensive investigation showed the arrangement lasted for a period of seven months and was largely confined to care homes in the north west and south west of England," a Lloydspharmacy spokesperson told C+D.
The Competition Act 1998 prohibits agreements, practices or conduct that may have a damaging effect on competition in the UK. Under the Act, the OFT has the power to impose penalties on companies of up to 10 per cent of their turnover for breaches of competition law.
What do you think of the OFT's decision?