First on P&G, Henkel AG and Colgate-Palmolive Co.

First up, there are the price fixing cases. In January
2002, Unilever, Procter and Gamble and German company Henkel, agreed to fix
prices on detergents for three years. Unilever and Procter and Gamble were
fines over 300 Mn Euros while Henkel got out for ratting them out. Did Unilever
learn their lesson though? Not really. They are on trial again, this time in
South Africa, this time for price fixing with a big Malaysian conglomerate Sime
Darby. The watchdog handling this case wants 10% of their local turnover as a
fine.

 

On an ecological level, Unilever have played a role on
the devastating impact that palm oil has had on the environment. Indonesia is
losing 2% of its rain forest every year with palm oil production being the main
cause for that which coincidentally involves many of Unilever’s suppliers. In
2016 they had to set away allegations that they had poisoned 100 of Indian
workers with mercury and the list of controversies goes on and on.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

Price
Fixing

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 and its rivals were indicted of fixing detergent
prices in France. The Autorite? de la Concurrence slapped fines for a total of €360
Mn ($485 Mn) on P, 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&G and
“Christian” for Colgate-Palmolive. Unilever PLC—which went by the name
“Laurence”—was not fined, because it was the first company which
agreed to comply with the investigators and it received immunity for the same.
The company said it is dedicated to following 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&G, Unilever and Henkel
took part in anticompetitive practices in the detergent market from 2002 to
2005 in 8 European countries.

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&G 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 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 rolled out
buy-one-get-one-free deals.

P was fined
€233.6 Mn, Henkel €92.3 Mn and Colgate €35.4 Mn. P 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 €211.2 Mn
and Unilever €104.0 Mn 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.