The European Commission today fined household brands Unilever and Proctor & Gamble (P&G) a total of €315.2 million following a three-year investigation on washing powder price-fixing between the two companies and Henkel (the owners of Persil).
Henkel blew the whistle on the cartel between the three companies back in 2008 and a result of Henkel's disclosure to the European Commission, the company was awarded 100% immunity from fines.
The three companies are the leading producers of washing powder across the whole of Europe. According to the Commission, the cartel lasted from January 2002 until March 2005 and covered a number of countries within the EU such as France, Germany, Italy and Spain.
In 2002 the companies introduced an initiative for the production of eco-friendly detergent products. The initiative was set up by way of a trade association and its purpose was to enable the production of smaller, more environmentally friendly packaging. Whilst the initiative itself did not require the companies to enter into discussions over price or market shares, it would appear that such discussions did take place. According to the Commission, "Henkel, Proctor & Gamble and Unilever did this on their own initiative and at their own risk". Such discussions are a clear breach of EU competition law.
When revealing the penalty, the Commission said that "companies should be under no illusion that the Commission will pursue its relentless fight against cartels, which extract higher prices from consumers than if companies compete fairly". This is the third cartel investigation that the Commission have carried out so far this year.
Whilst the two companies both received a 10% fine reduction for their cooperation in the investigation, due to the serious nature of the competition law infringement, their respective market shares and annual sales, Unilever and Proctor & Gamble still face a hefty fine.
According to Unilever, their fine of €104 million will be covered by their 2010 profits and "all key managers in Europe have been retrained on the European competition rules". This point cannot be over emphasised - training your staff can help to prevent infringements occurring in the first place and the costs of training will generally be less than any potential penalty!
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