The penalty was handed out by Britain's competition watchdog, the Office of Fair Trading (OFT), in its first fine handed down for abuse of a dominant position since 2003 and followed complaints from a generic producer of the medicine.

Reckitt admitted infringing British and European competition law by withdrawing and delisting Gaviscon Liquid original from Britain's National Health Service (NHS) prescription service in 2005 and replacing it with a different-formula Gaviscon Liquid advance, for which there is no generic rival.

It meant that when family doctors searched for the product under the Gaviscon brand, the NHS prescription database would find only the advance version — which is still patent protected — and no cheaper generic alternatives.

Irish generic medicine maker Pinewood helped bring the action because the move affected sales of its Gaviscon alternative, Acidex.

“This shows that big companies cannot abuse a dominant position and escape unpunished for anti-competitive behavior,” said Marc Israel, competition lawyer at law firm Macfarlanes which acted for Pinewood in the action.

“Acidex is widely available but Reckitt's conduct resulted in market penetration of the cheaper generic alternative being severely limited.” The OFT, which first highlighted in February the possible abuse by Reckitt, said the fine was reduced from £12 million to reflect the British consumer goods group's admission and decision to cooperate with the OFT.

“Vigorous competition between firms supplying the public sector is vital to ensure taxpayers get the best value for money,” OFT chief executive John Fingleton said.

Reckitt replied in a statement: “This OFT investigation relates to an infringement that took place a number of years ago under a highly complex area of competition law, on which there have only more recently been clarifying cases.

“Therefore, while the company believed at the time it was acting within the law, as is always our intent, we respect the view of the OFT and have agreed to settle.” Reckitt shares were 0.1 percent higher at £34.54 by 1200 GMT, valuing the group, which also makes Nurofen painkillers, Finish dishwasher products and Air Wick air fresheners, at around £25 billion.