On Sept. 20, the OFT said it had provisionally found evidence that 10 companies, including supermarket chains Asda, Safeway, Morrisons, Sainsbury's and Tesco Group PLC (TSCO.LN) and a number of dairy firms had colluded to increase the retail prices of milk, butter and cheese products in 2002 and 2003.

No agreement has been reached in other cases involving allegations against Tesco, Morrisons and dairy firm Lactalis McLelland. Investigations continue.

The OFT said companies that accepted liability and agree to fully cooperate in the investigation will receive a "significant reduction" in the financial penalty they would have had imposed on them.

"The OFT is very pleased that the early and constructive cooperation of Asda, Dairy Crest, Safeway, Sainsbury's, The Cheese Co. and Wiseman, has enabled some of this case to be resolved effectively and swiftly, which will significantly reduce the costs of pursuing the investigation to the OFT and to the businesses concerned," the watchdog said.

Another dairy company, Arla, has been given complete immunity from punishment after agreeing to fully cooperate in the probe. Arla is alleged to have facilitated the exchange of commercially sensitive information on liquid milk products between certain retailers.

J Sainsbury Friday said that it agreed to a settlement of GBP26 million with the OFT and would cooperate fully with the investigation.

"We are disappointed that we have been penalized for actions that were intended to help British farmers, but recognize the benefit of a speedy settlement with the OFT," Sainsbury Chief Executive Justin King said in a statement.

King added that the "price initiatives" were widely and publicly reported at the time and were designed to help the British dairy farmers during a time of "considerable economic pressure and public debate about whether farmers were getting a fair price for their products."

Greg Lawless, a retail analyst at Blue Oar Securities, said that the fines dished out to retailers and dairy companies were unfair, given that the price rises were passed on to the farming community, which was facing tough times during the early part of the decade. There was a political will for this to happen at the time, he said.

"The fines could have been far greater," he said.

Sainsbury's GBP26 million fine represents around 5% of the supermarket's pretax profit for the year, going on Blue Oar's forecasts of GBP500 million.

Asda said in a statement that it regretted what had happened and that it would fully cooperate with the OFT.

"Our intention was to provide more money for dairy farmers, who were under severe financial pressure at the time. These issues concern all the major supermarkets, but we've chosen to settle this matter quickly because we believe it's the right thing to do for our customers," Asda said in a statement.

Tesco Executive Director Lucy Neville-Rolfe said that Tesco had acted independently at the time and had not colluded with others.

"Our position is different from that of our competitors and we are defending our own case vigorously," she said.

At 1410 GMT, shares in Tesco, Sainsburys and Morrison remained relatively flat, while dairy companies Robert Wiseman saw shares up 2.8%, with Dairy Crest up 6.5%.

Dresdner Kleinwort analyst Victoria Watson said that a swift resolution by the OFT is positive for Dairy Crest, as it had been an overhang on its shares.

Dairy Crest's GBP9.4 million fine was relatively small given its fiscal 2008 revenue estimates of GBP1.5 billion.

Company Web site: http://www.oft.gov.uk

-By Daniel Thomas, Dow Jones Newswires; 44-20-7842-9264; dan.thomas@dowjones.com