Consumer goods giants Unilever and Procter & Gamble were fined 315.2 million euros ($456 million) by EU regulators on Wednesday for fixing washing powder prices in eight EU countries. Germany's Henkel, which alerted the European Commission to the cartel in laundry detergents, was not fined. The penalty for Unilever was 104 million euros, while P&G was fined 211.2 million euros. The announcement confirmed a Reuters report from Monday.
The price fixing began when the companies, through a trade association, were working to make their detergents more environmentally friendly, EU Competition Commissioner Joaquin Almunia told a news conference. "The three companies took the opportunity of these discussions on environmental agreements promoted by their trade organisation to organise a cartel," Almunia said, adding that the three agreed not to decrease prices when making their packages smaller and even agreed later to raise prices.
As part of the Commission's settlement procedure, the EU watchdog cut the fines by 10 percent in return for the firms' admission that they participated in the cartel, which the Commission had dubbed "Purity" in its investigation. "By acknowledging their participation in the cartel, the companies enabled the Commission to swiftly conclude its investigation," Almunia said in a statement.
The fines were also reduced under the Commission's leniency programme related to voluntary disclosure of information. World No 1 household products producer P&G owns the Tide, Gain and Era brands of washing powder, while Anglo-Dutch Unilever makes detergent products under the brand names Omo and Surf. Henkel owns the Persil brand in most of Europe, while Unilever owns it in Britain, Ireland and France.
The cartel operated in Belgium, France, Germany, Greece, Italy, Portugal, Spain and the Netherlands between 2002 and 2005, the regulator said. Unilever said it had used the investigation findings to tighten up its internal procedures, adding that the fine was covered by provisions made in its 2010 results.
"All key managers in Europe have been retrained on the European competition rules and are well placed to participate fully in industrywide environmental initiatives," the company said in a statement. P&G said it has taken the appropriate financial reserves for the case.
"Perhaps more importantly, we have already taken the appropriate internal action, including strengthening our global compliance program, which includes extensive training, reinforcement of key policies and regular auditing," P&G spokesman Paul Fox said in a statement.
Unilever shares were up 0.8 percent at 19.31 pounds in London; Henkel stock was 0.9 percent higher at 43.85 euros. P&G shares were up 1 cent at $62.90 on the New York Stock Exchange. The Commission can fine companies up to 10 percent of annual turnover for breaching EU competition rules. This is the third EU decision using the settlement procedure, after cases in the electronic chipmaking and animal feed sectors last year. The EU watchdog raided the three firms in June 2008 on suspicion of price fixing, and also sought information from US-based household products firm Sara Lee. It has imposed fines close to 12 billion euros on cartels in the five years to 2010.