The Australian Competition and Consumer Commission (ACCC) is taking Colgate-Palmolive and PZ Cussons to the cleaners over alleged cartel conduct since 2008. Consumer watchdog, the ACCC, claims that the companies, along with Unilever Australia, made anti-competitive agreements about their ultra-concentrate products.
What is Cartel Conduct?
Australia’s Competition and Consumer Act (CCA) requires businesses to act fairly in relation to each other and keep prices and practices competitive for consumers. It encourages the market to innovate, is more effective in distinguishing quality and keeps costs down.
The CCA prohibits cartel conduct which occurs when businesses make agreements to work together on aspects such as setting artificial prices or controlling the supply of goods and services. It creates the illusion of competition in the market while manipulating consumers through cartel provisions.
What Are Cartel Provisions?
Four main types of behaviour could establish a cartel:
- Output restrictions
- Market sharing
The ACCC alleges two cartel provisions exist in the agreement between Colgate and Cussons – price fixing and output restrictions.
Price-fixing occurs when businesses agree to set a minimum price or a fixed price for goods or services. Output restrictions are where businesses limit the supply of goods or services to create a shortage and drive up the prices. Both tactics create an artificial market.
Supply of Ultra Concentrate
The ACCC’s primary claim is that the companies were coordinating their offering of their ultra concentrate laundry products, and offering a lower-cost product, but not passing on the savings to consumers.
The agreement between Colgate and Cussons was to stop selling their standard concentrate products and to introduce ultra concentrate products. The ACCC claims that ultra concentrate products are cheaper to produce, transport and store and so these savings for the business should have been passed on to the consumers.
However, the agreement between the three companies was to stop selling the standard concentrate products and sell the ultra concentrate laundry detergents at the same price per wash as the standard concentrate products. The result? There is less variety in the pricing and the types of laundry detergent products.
What Will Happen?
If the Federal Court finds that the companies have indeed engaged in a cartel and contravened the CCA, they could face up to a maximum fine of $10 million. Other maximum penalties that the companies could face are three times the total value of the benefits obtained by someone as a result of the contravention, or 10 per cent of the company’s annual turnover in the last 12 months.
The Federal Court may also grant an injunction or make orders to disqualify certain people from managing the companies, or make community service orders.
Individuals who are found guilty of cartel conduct could also face criminal or civil penalties. An individual could end up with a penalty of up to $500,000 for a civil contravention.
The hearing is listed for 7 June 2016 before Justice Wigney in the Federal Court.
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