On 18 December 2014, the French Competition Authority (“FCA”) issued two separate fines for price-fixing schemes, presenting similar characteristics, in the household and personal care products industries.
Both schemes occurred between 2003 and 2006 and involved 13 companies in total including such big-name, pan-European manufacturers as Colgate-Palmolive, Henkel, Unilever, and Procter & Gamble, which were found liable in both schemes.
Such familiar day-to-day products as the Paic and Palmolive detergents, or the Sun and Calgonit dishwasher tablets were involved in the household products price-fixing scheme. Likewise, the personal care product price-fixing scheme included household names such as Elseve, Head & Shoulders, Signal, Colgate, Gillette.
The schemes aimed at coordinating the companies’ commercial policies prior to negotiating contracts with distributors, most notably concerning price hikes, in a concerted effort to restrict competition. The prices charged to the distributors were thus maintained at an artificially high level, at the expense of consumers. For instance, in the year 2006, the participants in the personal care products scheme pulled off a 4% to 6% price increase in France, while in other European countries the increase in the prices charged by the same manufacturers to their distributors was estimated to range from 1% to 2.5%. The schemes also included exchanges of information related to non-contractual commercial policies, such as the harmonization of promotional events held by the participant companies.
In order to exchange information, the participants in the schemes - mostly directors and heads of sales – would secretly meet on a regular basis in the private room located in the basement of a Paris restaurant, and then telephone one another or exchange correspondence using their home addresses.
The FCA’s decision is remarkable in that it showed the full extent of the FCA investigation tools.
First, the evidence gathered by the FCA came primarily from companies involved that offered information in return for reduced fines under the FCA’s leniency program, pursuant to which partial or total immunity may be granted to a company which comes forward to report an anti-competitive practice it took part in.
Colgate-Palmolive and Henkel both received reduced fines for their collaboration in the investigations. SC Johnson avoided payments altogether thanks to its role as the initial whistleblower in 2006.
This is only the eighth time in the FCA’s history that a decision was rendered with the help of the leniency program.
Second, the FCA collected evidence of its own through raids in some of the participant companies’ headquarters, as well as in the restaurant where the meetings were held.
Third, the decision shows the benefits for companies in not challenging the facts while also undertaking commitments to modify their anti-competitive practices in the future. In application of Article L.464-2 (III) of the French Commercial Code, the non-challenge and commitment combination can lead to a substantial reduction in fines, as in the present case, where seven companies saw their total fines dropped by 16% to 18%. L’Oreal was the most heavily fined company, although it was found implicated only in one of the two price-fixing schemes, largely because it openly challenged the FCA’s findings.
Last, but not least, the fines are record-breaking. In fact, the € 605.9 Million total fine for personal care products price-fixing is the highest ever issued by the FCA, topping the fine levied out on 30 November 2005 for the mobile telephone cartel. The € 345.2 Million total fine for household products is the fifth-largest, and the largest ever issued for that industry.
The FCA declared the fines were proportional to the size of the respective markets in France. In the evaluation of the fines, the FCA also took into account the complexity and the continuousness of the scheme, as well as the particular features of the markets at hand, which are characterized by only a few major players offering essential everyday products nationwide.