For fine represents one of the largest set


For almost a
decade, executives from FMCG giants like Procter & Gamble Co. secretly met
in discreet restaurants around Paris, purportedly to fix the price of laundry
detergent in France. P&G and its rivals were indicted of fixing detergent
prices in France. The Autorite? de la Concurrence slapped fines for a total of €361
million ($484 million) on P&G, Henkel AG and Colgate-Palmolive Co. for colluding
to set the price of soaps in France between 1997 and 2004. The French regulator
listed what it called a scheme that jacked prices for consumers before finally
falling when the group’s interests differed. The French authority said in its
report that the companies used aliases to hide their identity at meetings:
“Hugues” for Henkel, “Pierre” for P and
“Christian” for Colgate-Palmolive. Unilever PLC—which went by the name
“Laurence”—was not fined, because it was the first to cooperate with
the investigation and received immunity. The company said it is committed to
complying with all laws. Colgate said it, too, cooperated with French
authorities in their investigation and is reviewing the judgment. Henkel,
Germany is planning to appeal, saying it considers the fine disproportionate given
its full cooperation with the investigation.

The fine represents
one of the largest set by French antitrust authorities and represents the
latest in a long list of cartel-busting efforts by members of the European
Union. In April the European Commission said that P, Unilever and Henkel
took part in anticompetitive practices in the detergent market from 2002 to
2005 in 8 European countries.

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The 177-page
report details the lengths to which the companies went to carry out their
detailed price-fixing plan. Managers from the three companies met as early as
the 1980s to share price information, the antitrust authority said. According
to a statement a Henkel manager made to the commission, the companies wanted
“to limit the intensity of the competition between them and clean up the
market.” Even so, by the early 1990s, a price war had broken out among
them. In 1996, four brand directors met in the restaurant La Te?te Noire in the
western outskirts of Paris. The aim was to make sure that they pitched their detergents
to supermarkets at determined and agreed prices and notified each other of any
special offers, the antitrust authority said. They allegedly took turns
choosing spots for the clandestine meetings, which occurred multiple times
annually. To ensure that very few people actually knew what was going on, those
who attended the meetings—dubbed the “Store Checks”—took the checks
home with them and expensed the same under different aliases. During the
meetings, which sometimes lasted as long as eight hours, the groups discussed
complex pricing mechanisms. For example, P marketed its Ariel laundry
brand as geared towards the premium market, and so it fixed an agreement to
make sure Ariel remained at least 3% more costly than Unilever’s Skip brand.
Several rules were written had to be abided by.The concept of buy-one-get-one
was no longer going to be used and the companies agreed that no one will use it
as they would eat into its profits and undermine the effort that was being
taken with respect to price fixing. Cost savings, such as from more-concentrated
detergent, would not be passed on to customers. Promotions for adding extra
quantity free were also restricted. The group was helped by a French law that
makes it illegal for shops to sell products below cost. As a result, the end
consumer was the one that had to bear all such resulting increases in cost measures
and had to bear the full brunt of it without any competitive subsidies.

According to one
anonymous Unilever employee, the companies stood by their words and rarely
broke the tacit understanding between them. “They were aware that there
had already been price wars and they didn’t want to revive them.” Yet
while fixing prices proved relatively simple, monitoring special offers was
proving to be a complicated task. One executive recalled unorganised and
dysfunctional meetings as each side tried to work out how the other had bent
the rules. By 2004, the scheme began to fall apart. The companies disagreed on
price increases and promotions. Unilever was the first to break the unwritten
rules, launching a June month deal of marginal discounts. At the end of the
year, P&G responded by slashing the price on its entry-level Gama detergent
by 25%. At the beginning of 2005, Henkel fired back with 40% off one of its
detergents. Shortly thereafter, both Unilever and P&G rolled out
buy-one-get-one-free deals.

P&G was fined €233.6
million, Henkel €92.3 million and Colgate €35.4 million. P&G said the
larger fine was a representation of its large business volume in the country of
France. After its own investigation, the European Commission fined P&G
€211.2 million and Unilever €104.0 million in April. Henkel wasn’t fined,
because it alerted the commission to the cartel and received immunity. This
spooked Unilever, which in 2008 handed over a 283-page report to French
antitrust authorities. The report—which an employee had stashed at home —
included detailed charts of the price fixing and the code names of the
participants. In exchange Unilever was given clemency and was not given any
monetary fines


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