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The Office of Fair Trade (OFT) is to pay Wm Morrison £100,000 for making untrue comments about the grocer in a press release.

As part of the watchdog's investigation into dairy product price-fixing between supermarkets and producers, the OFT released a statement in 2007 suggesting Morrisons was provisionally found to infringe competition law in relation to milk, butter and cheese over a two-year period (2002-2003).

The statement also said Morrisons had previously been warned by the OFT against anti-competitive behaviour.

But Morrisons brought legal action against the regulator, claiming the accusations were false. The OFT has agreed to pay Morrisons £100,000 in settlement of the defamation and has agreed to pay court costs.

In a statement, the watchdog said: "The OFT regrets that the press release contained these serious errors, and wishes to apologise sincerely to Morrisons for their publication."

The watchdog emphasised that it has not reached any final conclusions about Morrisons in relation to fixing the price of milk and is still considering all the evidence.

The OFT has accused supermarkets Asda, Morrisons, Safeway, Sainsbury's and Tesco of sharing commercially sensitive information, along with dairy processors Arla, Dairy Crest, Lactalis McLelland, The Cheese Company (formerly Glanbia Foods) and Wiseman.

Although most of the companies have admitted involvement and have agreed to pay a fine, Morrisons and Tesco's are still fighting the charges.