On June 22 2015 the Belgian Competition Authority adopted a settlement decision and fined 18 retailers and suppliers €174 million. The retailers and suppliers had engaged in a 'hub and spoke' cartel (ie, where commercially sensitive information flows from one competitor to another via a common customer or supplier as part of a broader collusive scheme) between 2002 and 2007, resulting in coordinated end-consumer price increases for branded pharmacy, perfumery and hygiene products. The cartel involved the largest Belgian retail chains and the most important suppliers of pharmacy, perfumery and hygiene products in Belgium. The decision was the Competition Authority's first:
- settlement decision;
- hub and spoke case; and
- cartel case in which such high fines were imposed.
The Competition Authority started its investigation into alleged price-fixing agreements between the major Belgian supermarkets regarding pharmacy, perfumery and hygiene products back in 2007. The authority was tipped off by Colgate-Palmolive, which was granted immunity.
The investigation revealed repeated coordinated increases of end-consumer prices for a large number of branded products in Belgium. The core of the infringement was at a retail level. The aim was to stabilise and/or increase end-consumer prices. The cartel involved 18 retailers and suppliers, including major retail chains such as Carrefour, Colruyt, Cora, Delhaize, Intermarché, Makro, Mestdagh and the most important suppliers of pharmacy, perfumery and hygiene products in Belgium, such as Colgate-Palmolive, Beiersdorf, GSK, L'Oreal, Henkel, Procter & Gamble and Unilever.
The Competition Authority found no proof of direct contact between the distributors or suppliers. The coordination of prices was the result of indirect contact between the retailers by way of their suppliers, which acted as intermediaries and facilitators. Although each supplier was involved exclusively for its own products, the practices were similar for all suppliers and were carried out according to the same scheme.
This is the first hub and spoke cartel that the Competition Authority has successfully proven and that has resulted in fines. A critical element is the state of mind test, which in the context of this particular case involved a distributor conveying certain information to the common supplier and the distributor that was on the receiving end being aware of the context and objective of the information exchange (ie, a deliberate effort to stabilise and/or increase retail prices). Since the information exchange related to pricing, the Competition Authority treated it as a restriction by object.
Hub and spoke collusion has been a hot topic in competition law circles over the past few years. However, the number of cases has been limited and most have been concentrated in the United Kingdom. Experience has shown that this type of collusion is not easy to prove.
In addition to being the first Belgian decision concerning a hub and spoke cartel, this decision is also the first in which the Competition Authority made use of the settlement procedure. This option was introduced in the revised Competition Act, which entered into force in September 2013. As under EU law, undertakings can obtain a 10% reduction of their fine if they agree to settle. In the case at hand, all undertakings involved agreed to a settlement and obtained this reduction in exchange. A specific feature of the Belgian settlement procedure is that settlement decisions cannot be appealed. As a result, the parties that enter into a settlement waive their right to appeal. The decision also brings an end to pending litigation before the Brussels Court of Appeal on the conduct of the authority's investigation.
The decision is a boost for the new Competition Authority, especially as it puts a definitive end to this particular case. The fines imposed by the authority are unprecedented and are the highest fines ever imposed for a cartel infringement in Belgium. By way of comparison, the previous record was the €14.7 million fine imposed on a cement cartel. The level of fine may therefore indicate the Competition Authority's willingness – after a slow start – to step up its enforcement efforts significantly.
For further information on this topic please contact Koen Platteau or Geneviève Borremans at Simmons & Simmons LLP by telephone (+32 2 542 0960) or email (firstname.lastname@example.org or email@example.com). The Simmons & Simmons LLP website can be accessed at www.simmons-simmons.com.
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