Unit 3: Unilever and Procter & Gamble in price fixing fine

The EU Competition Commission got into a LATHER about alleged price fixing by a number of multinational soap and washing powder producers and in a ruling today they have imposed fines on Unilever and Procter & Gamble €315.2m ($456m) for fixing washing powder prices in eight countries within the single market.

An investigation was prompted by whistle-blowing from Henkel, a German competitor (manufacturer of Persil) and so the investigation CYCLE began.

Unilever was fined €104m and Procter & Gamble was fined €211.2m. Henkel was not WHITER THAN WHITE but under EU cartel rules, it avoided a hefty fine because of alerting the authorities to the price fixing scheme.

The EU commission found that the three major producers in the washing powder oligopoly had agreed not to decrease prices when making their packages smaller and even agreed later to raise prices. The cartel operated in Belgium, France, Germany, Greece, Italy, Portugal, Spain and the Netherlands between 2002 and 2005.

Hopefully the size of the fines will be a deterrent for collusion.

This adds to the catalogue of fines from the EU Competition Commission for illegal price fixing activity within the single market. In May 2010 it hit 10 computer memory makers with fines totalling €331m. Two months later the commission fined producers of animal feed phosphates more than €175m.

Q) Lots of it going on, so why do the companies do it? What are the advantages to them?