DAIRY companies operating in Britain, including Avonmore Foods and Waterford Foods, have turned up the heat in their row with Milk Marque, the farmer's co operative, when they called for a boycott of the organisation's selling system.

The Dairy Industry Federation (DIF), which represents milk processors, said its members should not have to commit to supply contracts for up to 18 months when the Office of Fair Trading is about to conclude its investigation into milk sales. ,Avonmore and Waterford currently source about two thirds of their supplies from Milk Marque with the balance bought directly from farmers.

Mr John Bridgeman, director general of fair trading, told MFs last week he would make a decision on whether to refer Milk Marque to the Monopolies and Mergers Commission before he goes on holiday at the end of August. The OFT has been looking into complaints about Milk Marque since November 1994, when the market was deregulated.

"We don't think it is reasonable that member companies should be asked to commit themselves to bid for milk on six, 12, 18 month contracts when the selling system itself could be changed or Milk Marque referred to the MMC," said Mr Neil Davidson, president of the DIF and group executive at Northern Foods.

Mr Andrew Dare, director of Milk Marque, said the dairies were talking "absolute nonsense". "What they're suggesting is illegal," he said.

Milk Marque is currently auctioning milk for delivery from September. "Companies have legally binding contracts which end in September. We have to go out and sell milk again," said Mr Dare.

The dairies have accused Milk Marque of using its monopoly over supply in England and Wales to force up prices. Mr Davidson said Milk Marque's prices at 27.7p per litre are 3p a litre higher than the cost of similar quality milk in Northern Ireland.

Household consumers saw price rises of 1p to 2p a pint in 1994 when the market was liberalised. But the purchasing power of supermarkets has meant dairy companies have to absorb most of the increase themselves.

Mr Bridgeman told the agriculture select committee last week that he was concerned about some of Milk Marque's practices and, in particular, found the method of charging for haulage as well as milk to be "anti-competitive".

Mr Dare suggested the dairies did, not understand how long an MMC inquiry would take. "The idea we, have to hold up our selling process until there is a report by the MMC is ridiculous, it could take over a year."