Nine retailers are among 12 businesses fined £225m by the Office of Fair Trading (OFT) for collusion on tobacco prices between 2001 and 2003.

Asda, Co-operative Group, First Quench, Morrisons, One Stop – formerly T&S Stores and now owned by Tesco) – Safeway (now owned by Morrisons), Sainsbury’s, Somerfield (now owned by Co-operative Group) and TM Retail were those affected, along with Shell and tobacco firms Gallaher and Imperial Tobacco.

The OFT said: “The OFT has concluded that each manufacturer had a series of individual arrangements with each retailer whereby the retail price of a tobacco brand was linked to that of a competing manufacturer’s brand. These arrangements restricted the ability of these retailers to determine their selling prices independently and breached the Competition Act 1998.”

Asda, One Stop, Sainsbury’s and Somerfield all had their fines discounted under the OFT’s leniency programme for volunteering information which helped the investigation.

Asda, First Quench, One Stop, Somerfield and TM Retail also received reductions for admitting liability and speeding up the inquiry.

OFT senior director of goods Simon Williams said: “This enforcement action will send out a strong message that such practices, which could in principle be applied to the sale of many different products, can result in substantial penalties.”

Morrisons will challenge the decision and said in a statement that the OFT’s stance is “illogical and without foundation”. It said: “The practices to which the OFT refers were intended to reduce the retail prices charged to consumers, and the OFT has itself acknowledged that its case is based on a novel interpretation of the law.  Morrisons fully expects that when this case is considered with proper judicial scrutiny by the Competition Appeal Tribunal, the OFT’s findings will be overturned.

“At all times Morrisons set its retail prices for tobacco products independently, and endeavoured to get the very best deal for its customers.  It is therefore disappointing that the OFT has claimed that legitimate arrangements between Morrisons and its suppliers, aimed at reducing the price paid by Morrisons customers, are unlawful.

“Morrisons takes adherence to competition law very seriously, and operates a comprehensive and robust compliance programme, which was extended to cover Safeway immediately on its acquisition by Morrisons.”