In a decision dated 18 October 2017, the French Competition Authority (FCA) imposed a record fine on the “resilient floor covering cartel” (one of the seven biggest fines in the history of the FCA), totalling 302 million EUR.
The cartel, composed of the three main resilient floor covering groups, Tarkett, Forbo and Gerflor, together with the floor covering trade union (SFEC), were sanctioned for wide-ranging anti-competitive practices including price fixing, some of which lasted for more than 20 years.
The case started in 2011, when the “General Directorate for Competition, Consumer Affairs and Fraud Control” (DGCCRF) submitted information relating to the anti-competitive practices of the three floor covering groups to the FCA. The relevant companies were placed under investigation and the FCA conducted dawn raids in order to gather the necessary information to evidence the existence of the cartel.
Subsequently, Tarkett and Forbo both filed leniency requests under Article L. 464-2 Section IV of the French Commercial Code, which enables a party guilty of agreements restricting or distorting competition to be exempted from all or part of the penalty, in return for submitting evidence regarding the cartel.
The FCA notified three grievances to the cartel in violation of Article L. 420-1 of the French Commercial Code and Article 101 of the TFEU:
-
From 2001 until 2011, the cartel restricted competition on the floor covering market though agreements on prices and price increases and on market strategy in general. Their system was rather sophisticated: the three manufacturers would meet at secret so-called “1,2,3 meetings”, and discuss over the phone using dedicated phone lines. Each person involved had one phone from their own company and one that belonged to the competitors, such that calls were always made between two phones belonging to the same company in order to avoid suspicions.
-
From 1990 until 2013, within the trade union, the three floor covering manufacturers met and exchanged confidential information regarding their strategies and commercial behaviors, information to which their other competitors had no access.
-
Finally, from 2002 until 2011, Tarkett, Forbo, Gerflor and the SFEC had entered into an agreement under which each entity was prohibited from advertising the environmental performance of its products, in order to eliminate competing marketing practices based on environmental characteristics. In addition to the possible restriction of competition on the market, this agreement may have acted as a disincentive to manufacturers to improve the environmental characteristics of their products, thereby impacting a product differentiation factor.
The FCA determined the amount of the penalty in light of the seriousness, duration and institutionalized nature of the practices, as well as the market share of the cartel (which accounted for between 65% and 85% of the market depending on the period and the consumer/professional distribution channel).
Furthermore, the significant amount of the fine imposed on the cartel is explained by the fact that, although the FCA entered into settlement agreements with each of the parties, it announced that it would not further reduce the fines in exchange for the parties’ undertakings to implement compliance programs, as it considers that such programs should be standard practice, especially for large groups.
Decisions:
FCA decision no. 17-D-20 dated 18 October 2017
FCA release dated 19 October 2017
[View source.]
