The French Competition Authority recently 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, which related to the cleaning products sector, was reported by one of the offenders, SC Johnson, with a view to obtaining full exoneration from penalties. The information it provided enabled 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 prompted another company involved in the cartel, and present at the lunch in question, to approach the authority not only to provide new information regarding the practices reported by SC Johnson, with a view to obtaining a lesser penalty, but also to report a second cartel in the personal hygiene products sector in order to obtain full exoneration from penalties for its participation in this second cartel.
According to the authority, the cartels – which took the form of secret meetings and telephone calls – sought to promote coordination in the positions that the suppliers adopted in their negotiations with distributors.
In response to those cartel participants which claimed that the countervailing power of distribution would minimise economic harm, the authority acknowledged that in the mass distribution supply sector, brands have superior bargaining power over suppliers. Nonetheless, the authority decided that the distributors' bargaining power with regard to suppliers in the cleaning and personal hygiene products sectors had to be assessed in light of the suppliers' market power. In this respect, the authority emphasised in particular that it is more difficult for major distributors to exercise their power when manufacturers deal with renowned brands - as was the case in this instance, where the companies represented almost all major national brands.
That said, the authority did not seem to dismiss completely the argument on the countervailing effect of mass distribution, and its assessment thereof appears circumstantial. It highlighted that in certain branches of the agro-food sector, producers are in a more precarious position in relation to mass distribution, due to the often fragmented nature of the offer; production variations which result in volatile prices; the unstable nature of demand, which depends on climatic vagaries and sanitary crises; and the often perishable nature of products. However, this is not comparable to the personal hygiene and cleaning sectors.
The authority further refused to allow certain companies to benefit from the mitigating circumstances related to their single-product offer, despite the fact that 100% of their turnover came from the products involved in the practices. To justify this stance, the authority argued that each such company belonged to an international group which recorded only a small percentage of its consolidated turnover from the relevant products. As a result, it concluded that those companies were not in fact single-product companies. This reasoning is surprising, as it seems to contradict the recent order handed down by the Paris Court of Appeal in the pork products case: to assess status as a single-product company, the court considered the circumstances of the offender itself, rather than those of its group.
Several companies have announced that they will appeal the decision. The discussions before the Paris Court of Appeal on the individual fines will doubtless be intense.
Emmanuelle van den Broucke
Sara Pomar
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