French Competition Authority imposes an overall fine of just less than €1 billion on manufacturers of personal hygiene and cleaning products
The French Competition Authority has just imposed one of the biggest fines in its history on a number of personal hygiene and cleaning product manufacturers for their involvement in two price cartels.
The first cartel, related to the cleaning products sector was reported by one of the offenders, SC Johnson, with a view to obtaining its complete exoneration from sanctions, thus allowing the Authority to carry out raids in real time during a lunch between the cartel participants in a Parisian brasserie.
These search and seizure operations led to another of the companies involved in the cartel, and present at the lunch in question, approaching the Authority, not only to provide new information regarding the practices reported by SC Johnson with a view to obtaining a lesser sanction, but also to report a second cartel in another sector, the personal hygiene products sector, so as to obtain complete exoneration from sanctions imposed for participation in this second cartel.
According to the Authority, these cartels, which took the form of secret meetings and telephone calls, sought to promote coordination in the positions adopted by the suppliers during business negotiations with the distributors.
In response to the participants of the cartels who claimed the countervailing power of distribution in order to minimize damage to the economy, the Authority acknowledged that in the mass distribution supply sector, brands have bargaining powers over suppliers.
Nonetheless, the Authority decided that the distributors’ bargaining powers vis-à-vis suppliers in the cleaning and personal hygiene products sectors must be assessed in light of the market power of these suppliers. In this respect, the Authority highlighted in particular that it is more difficult for major distributors to exercise their power when the manufacturers deal with renowned brands, as is the case in this instance where the companies concerned by the practices represent almost all major national brands.
That being said, the Authority does not seem to completely dismiss the argument concerning the countervailing effect of mass distribution and its assessment thereof seems to be circumstantial. It highlights that in certain branches of the agro-food sector, the often fragmented nature of the offer, the variations in production which result in volatile prices, the unstable nature of demand which is dependent on climatic vagaries and sanitary crises, and the often perishable nature of products, place producers of certain agricultural or agro-food products in an imbalanced position in relation to mass distribution; this is not comparable to the personal hygiene and cleaning sectors.
It should be noted that the Authority refuses to allow certain companies to benefit from the mitigating circumstances related to their single-product offer, despite the fact that 100 percent of their turnover comes from the products concerned by the practices.
To justify this stance, the Authority argues that as each of the companies in question involved in the cartels belongs to an international group which recorded only a small percentage of its consolidated turnover for the concerned products through the cartels. As a result, it is concluded that the company is not in fact a single-product company.
This reasoning is surprising as it seems to openly contradict the recent order handed down by the Paris Court of Appeal in the pork products case: in order to assess status as a single-product company the Court had taken into account the circumstances of the offender and not those of its group.
Several companies have already announced that they will appeal the decision. The discussions before the Paris Court of Appeal on the individual fines will no doubt be intense.
The French Competition Authority recalls that any exchange between competitors on future prices and commercial conditions is a very serious concerted practice
By decision of December 22, 2014, the Competition Authority imposed sanctions on wallpaper manufacturers for concerting products designed for sale to wholesalers.
The practices for which they are criticized largely concerned shared collections presented in the form of albums of wallpaper samples created for wholesalers so that they can make them available to their own customers.
During meetings the suppliers exchanged information on the business conditions of shared collections, in particular on sample and depreciation discounts and profit-sharing for each cut roll, and also discussed the foreseeable evolutions of prices and the development of their respective turnovers.
The Authority qualified these exchanges as anticompetitive practices and rejected the argument that it was a “simple exchange of information”. Given that the exchanges concern, in particular, future prices, an essential factor of competition is manipulated. They constitute a particularly serious concerted practice, even if, strictly speaking, no agreements were entered into on the prices. Likewise, the fact that the price increases were not implemented does not call into question the intrinsic seriousness of the practice but may be taken into account in order to assess the extent of harm caused to the economy. However, with regard to the exchanges on the evolution of monthly and quarterly turnover, the Authority noted that this constituted a simple one-off exchange of retrospective information and therefore was of a less serious nature.
Moreover, while maintaining that the difficult situation in which the sector finds itself cannot justify the implementation of a cartel, the Authority nonetheless takes into account, in the context of imposing individual fines, the difficult financial situation of certain companies which are suffering due to the rapid decline of the sector and whose turnover and results have dropped considerably between the date on which practices began and the date on which the sanction must be paid. The Authority reduced the basic amount of the fine by 65 percent for each of the companies in question.
Thus, as in the previous case of costume gadgets and articles, the Authority finds a way to adjust the amount of the fine when it considers it appropriate.
The Dutch Competition Authority has imposed fines on the management firms of investment funds for anticompetitive practices committed by companies in their portfolios
On December 30, 2014, the Dutch Competition Authority for the first time ordered management firms to pay fines of between €450,000 and €1.5 million for their involvement in the “packaged flour” cartel.
The Dutch Authority imposed sanctions on these management firms because in the case at hand they exercised a decisive influence on the companies who participated in the packaged flour cartel. These fines were imposed despite the fact that investment funds held these companies on a temporary basis and that the management firms were not aware of the anticompetitive practices.
The Dutch Authority’s position is in line with the decision of the European Commission concerning the investment bank Goldman Sachs (GS), which was condemned for the anticompetitive behavior of one of the companies owned by its investment fund GS Capital Partners. The European Commission specified at the time the criteria for the existence of a decisive influence allowing the management company’s liability to be incurred, noting in particular that GS actively participated in the management of the company in question and received monthly reports on the company’s activity.
Thus, the management firms of investment funds are in no way protected from the risks related to competition law when they exercise a decisive influence on the companies that their funds hold. Consequently, they will have to use suitable monitoring tools to ensure that antitrust regulations are respected by companies in their portfolio.