Retailers and suppliers settle with Belgian Competition Authority in “hub and spoke” cartel involving drugstore, perfumery and hygiene products.
On 22 June 2015 the Belgian Competition Authority (BCA) adopted a settlement decision, fining 18 retailers and suppliers a total amount of €174m. The retailers and suppliers engaged in a “hub and spoke” cartel between 2002 and 2007, resulting in coordinated end consumer price increases for branded drugstore, perfumery and hygiene products (DPH products). The cartel involved the largest Belgian retail chains and the most important suppliers of DPH products in Belgium. This decision is a first for the Belgian Competition Authority in several ways: the first settlement decision, the first “hub and spoke” case and the first cartel case in which such high total fines are imposed.
The BCA started its investigation into alleged price fixing agreements between the major Belgian supermarkets for DPH products back in 2007. The BCA was tipped off by Colgate-Palmolive, which was granted immunity.
The investigation unveiled repeated coordinated increases of end consumer prices for a large number of branded DPH products on the whole of the Belgian territory. The core of the infringement was at the retail level. The aim was to stabilize and/or increase the end consumer prices. The cartel involved in total 18 retailers and suppliers. The cartel participants include major retail chains (such as Carrefour, Colruyt, Cora, Delhaize, Intermarché, Makro and Mestdagh) and the most important suppliers of DPH products in Belgium (such as Colgate-Palmolive, Beiersdorf, GSK, L’Oreal, Henkel, Procter & Gamble and Unilever).
The BCA found no proof of direct contacts between the distributors or between the suppliers. The coordination of the prices was the result of indirect contacts between the retailers by way of their suppliers, who acted as intermediaries and facilitators. Although each supplier was involved exclusively for its own products, the practices were similar for all suppliers and carried out according to the same scheme.
This is the first “hub and spoke” cartel to be established by the BCA and to result in fines. “Hub and spoke” collusion occurs where commercially sensitive information flows from one competitor to another via a common customer or supplier as part of a broader collusive scheme. A critical element is the “state of mind” test, that is (in the context of this particular case), both the distributor that conveys certain information to the common supplier and the distributor that is on the receiving end are aware of the context and objective of the information exchange, ie a deliberate effort to stabilize and/or increase retail prices. Since the information exchange related to the prices, the BCA treated it as a restriction by object.
“Hub and spoke” collusion has been a hot topic in competition law circles over the past few years. However, the number of cases has been limited and most cases were concentrated in the UK. Experience has shown that this type of collusion is not easy to prove.
In addition to being the first Belgian decision concerning a “hub and spoke” cartel, this decision is also the first in which the BCA made use of the settlement procedure. This option was introduced in the revised Belgian Competition Act, which entered into force in September 2013. As under EU law, undertakings can receive a 10% reduction of their fine when they agree to settle. In the case at hand, all undertakings involved agreed to a settlement, in exchange for which they all received this reduction. A specific feature of the Belgian settlement procedure is that settlement decisions cannot be appealed. As a result, the parties which enter into a settlement waive their right to appeal. The decision also brings an end to pending litigation before the Brussels Court of Appeal on the conduct of the Authority’s investigation.
This decision is a boost for the new BCA, especially since it puts a definitive end to this particular case. The fines imposed by the BCA in this case are of a level unprecedented in Belgium and are the highest fines ever imposed for a cartel infringement in Belgium. By way of comparison, the previous record was the €14.7m fine imposed in the cement cartel. The level of fine may therefore indicate the BCA’s willingness, after a slow start, to step up its enforcement efforts significantly.
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