Cosmetic manufacturers had a difficult start to the summer of 2008. From 17 to 19 July 2008 the European Commission along with several National Competition Authorities (NCAs) carried out investigations at the European offices of the largest cosmetics manufacturers, such as Sara Lee, Henkel, Reckitt Benckiser, Unilever and Procter & Gamble, amongst others. These investigations seem to have been initiated on the basis of an application for leniency by one of the investigated companies.
Following the information obtained in the leniency application, inspectors appeared in the premises of the companies in the jurisdictions of Belgium, Germany, Spain, Austria, Italy, Hungary and the Czech Republic. According to the press releases published so far, the EC and the NCAs seem to have gathered enough information about infringements of competition rules in the following markets:
ii. Body hygiene products;
iii. Oral hygiene products; and
iv. Hair hygiene products.
According to the information provided, the European Commission will lead the investigation and the proceedings about the alleged cartel in the detergents’ sector because it is deemed as the only infringement having a community-wide scope. As for the rest of the alleged infringements, NCAs shall decide whether they have enough evidence to initiate proceedings against cosmetic manufacturers within the scope of their territories. In fact, the Spanish NCA has already initiated three different proceedings for the alleged infringements in the gels market, the toothpaste market and the professional hairdressing products market. Also the Italian NCA seems to have initiated proceedings concerning the markets for hair, body and oral hygiene products.
It is important to stress two main aspects which arise out of this case; first, as is already well recognised that leniency programmes are key to disclose cartel cases along the European Union.
The second important feature of this case is the application of Chapter IV of Regulation 1/2003 on the implementation of competition rules laid down in Articles 81 and 82 of the EC Treaty, together with the “Commission Notice on cooperation within the Network of Competition Authorities” (Cooperation Notice). In our opinion, the “cosmetics” case is one of the better examples allowing an analysis of how the European Commission works together with the NCAs and the way in which, for instance, as to the allocation of work, the principle of best placed authority is applied.
Indeed, Paragraph 12 of the Cooperation Notice has its reflection on how the Spanish and Italian authorities have decided to initiate proceedings within their own jurisdictions against the cosmetic companies for those alleged infringements linked to those territories. Also Paragraph 14 of the Cooperation Notice is reflected in the fact that the Commission, as the best placed authority, will be involved in the investigation and initiation of proceedings concerning only the detergent sector.
This case together with the Italian infant milk case, where use of Article 22 of Regulation (EC) nº 1/2003 was made, reflects how the cooperation within the EU by competition authorities can make life difficult for infringing companies. In the second case in order to gather information for the Italian case, unannounced inspections were carried out in Germany, France and Spain, and indeed in Italy, on the same day.
If we take these two instances of cooperation, together it shows the difficulties of avoiding the scrutiny of competition authorities on the basis of national borders.
In a nutshell, the cosmetic case has highlighted the importance of the Cooperation Notice and the effects that it can have on infringing companies.