Media playback is unsupported on your device Media caption French Consumer Affairs Minister Benoit Hamon: "The price per kilo was well-below market rate"

French meat processing company Spanghero knowingly sold horsemeat labelled as beef, the French government has said.

Spanghero's licence is being suspended while an inquiry continues, Agriculture Minister Stephane Le Foll said.

The firm has denied the allegations, saying it only ever dealt in meat it believed to be beef.

A widening scandal over mislabelled horsemeat has affected at least 12 European countries.

In the UK, three people have been arrested on suspicion of fraud in connection with the sale of horsemeat.

Two suspects were detained at a meat processing plant near Aberystwyth in Wales, and a third was arrested at an abattoir in West Yorkshire.

Paper trail

The French government believes that the sale of horsemeat labelled as beef went on for six months and involved about 750 tonnes of meat.

Spanghero imported meat from Romania and sold it on to another company, Comigel, which made frozen ready meals at its factory in Luxembourg.

French Consumer Affairs Minister Benoit Hamon said the meat had left Romania clearly and correctly labelled as horse. It was afterwards that it was relabelled as beef.

"From the investigation, it would seem that the first agent or actor in this network who stamped 'beef' on horsemeat from Romania was Spanghero," Mr Hamon said.

Meat scandal In mid-January, Irish food inspectors announced they had found horsemeat in some burgers stocked by UK supermarket chains

Subsequently, up to 100% horsemeat found in several ranges of prepared frozen food in Britain, France and Sweden

Concerns that a drug used to treat horses, and which may be harmful to humans, could be in food chain

Meat traced from France through Cyprus and The Netherlands to Romanian abattoirs

Investigation suggests adulteration was not accidental but the work of a criminal conspiracy

There was "no reason to doubt the good faith" of the Romanian abattoir that originally provided the meat, Mr Hamon added.

The investigation says some blame may rest with Comigel, which made the ready meals sold around Europe.

Staff there should have noticed anomalies in the paperwork, and realised from the smell and look of the meat once it was defrosted that it was not beef, Mr Hamon said.

Spanghero has strongly denied wrongdoing.

"Spanghero confirms having placed an order for beef, having been led to believe it received beef, and having sold back what it thought was beef, properly labelled as such, in line with European and French regulations," the company said in a statement.

International conspiracy

The latest country to be hit by the crisis is Germany, where some supermarket chains have removed frozen lasagne from sale after traces of horsemeat were detected.

The widening scandal has raised questions about the complexity of the food industry's supply chains across Europe.

Image caption The French government says about 750 tonnes of meat were involved

The UK has asked the European investigative agency Europol to co-ordinate a Continent-wide investigation into an alleged international conspiracy to pass horsemeat off as beef.

On Wednesday the EU urged member states to conduct random DNA tests for horsemeat in beef products from 1 March.

EU Health Commissioner Tonio Borg said the programme of random tests should report after 30 days, but testing should continue for three months.

Mr Borg was speaking after a meeting in Brussels with agriculture ministers from affected countries.

He said member states should also test for the presence of the veterinary medicine phenylbutazone - known as "bute".

The painkiller is used to treat horses - particularly racehorses - but is considered potentially harmful to humans.

On Thursday, Britain's Food Standard Agency - the FSA - said tests eight horses that were killed in the UK had tested positive for bute, and six may have entered the food chain in France.

But England's chief medical officer said the highest level detected posed "very little risk to human health".

The prime minister's spokesman said the UK was working closely with the French authorities to track the carcasses.