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French Competition Authority fines three leading PVC and Linoleum manufacturers €302 million over price fixing accusation

Acting on information submitted by the Directorate General for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF), the Autorité started proceedings ex-officio and, in 2013, conducted dawn raids in the floor coverings industry.

The Autorité today published a decision sanctioning the three leading PVC and linoleum floor coverings manufacturers in France, Forbo, Gerflor and Tarkett, together with the relevant trade union, the SFEC (Syndicat Français des Enducteurs Calandreurs et Fabricants de Revêtements de Sols et Murs).

The Autorité revealed three practices implemented by these manufacturers:

– a wide-ranging anti-competitive agreement between the three main manufacturers of PVC floor coverings in France, covering numerous aspects of sales policy, including prices, with the aim of drastically reducing or eliminating competition in the production and marketing of PVC and linoleum floor coverings, and stabilising the respective situations of Forbo, Gerflor and Tarkett ;

– exchanges, under the aegis of the SFEC, of specific confidential information relating to their activities, enabling sales policies to be adjusted accordingly;

– the signing of a non-competition agreement, entered into with the consent of the SFEC, concerning communication relating to the environmental performance of their products.

Neither the companies nor the industry association disputed the facts.

In calculating the applicable sanctions, the Autorité considered the severity of the anticompetitive practices, their duration (up to 23 years in one case, 9 and 10 years for the two others), the requests for leniencysubmitted by
Forbo and Tarkett, and finally the settlement procedure  for all parties involved in the anti-competitive agreement.

Products concerned by the agreement

The materials covered by the  agreement are PVC and linoleum floor coverings. The hard-wearing nature of such products makes them a popular choice for use in, among others, social housing and public facilities such as schools and hospitals. They may be sold in the form of tiles or rolls.

There are two main distribution channels:

– the “Building Trade” channel, supplying construction industry professionals (building material distributors and wholesalers and fitting contractors), and focused on the sale of products or their installation at project sites;

– the “Consumer” channel, supplying private customers, who may purchase either directly from small and large DIY (Mr Bricolage, Bricorama, Castorama, Leroy Merlin, etc.) or else indirectly, via distributors and wholesalers, when they contract fitters to lay such materials.


Manufacturers met secretly to, in particular, discuss prices

  • Secret meetings at hotels in Paris and provincial France

Over a period extending from late 2001 until 2011, the three main manufacturers of floor coverings in France, Forbo, Gerflor and Tarkett met in secret at so-called “1, 2, 3” meetings, at which they notably discussed minimum prices for products and price increases for all their products that would be passed on to their respective customers, as well as multiple issues relating to their sales strategy over time.

For example, regarding generalised price increases, the three competitors would discuss percentage price increases for each category of floor covering, which would vary slightly between manufacturers. They would also discuss implementation dates for such increases, which might be either staggered or simultaneous, and decided which company would be the first to notify its customers of the price increase.
A manager with  Forbo explained the mechanism for agreeing on minimum prices as follows:

“(…) The idea was not to organise our market shares but to define a differentiation between the prices of our products that would not be detrimental to us from a sales & marketing perspective. As a rule, we observed the minimum prices agreed with Gerflor and Tarkett (…). ” (see §94 of the Decision)
“In setting minimum prices, our goal was to maintain the lowest prices at a certain level. (…)” (see §99 of the Decision)

The CEO of  Tarkett France explained the meaning of these  discussions:

“(…) we had an agreement not to discount below those minimum prices, which were largely equivalent across Forbo, Gerflor and Tarkett.” (§97)

“However, the three manufacturers’ minimum prices had to avoid being completely identical. We therefore ensured that our prices differed by  at least a few euro cents: plus or minus 10 cents for premium products, and plus or minus 2 to 3 cents  for entry-level products. ” (§98)

The manufacturers also entered into agreement regarding a series of specific issues, such as strategies to adopt with regard to particular customers or competitors, customer relationship management, hiring policy, organisation of sales activities, and sampling of new products.

Initially, these meetings, hosted by each participant in turn, were held on the sidelines of official meetings of the SFEC, or in a café near the industry association’s offices. Later, they were held in hotels or restaurants in Paris and elsewhere in France (see § 63 of the decision). The Novotel hotel in Charenton-le-Pont and the Novotel near the Gare de Lyon in Paris were among the venues chosen to host these “1, 2, 3” meetings. The documentary evidence relating to the case (bank statements, hotel and restaurant bills, toll  tickets, diaries, etc.) establishes a record of about 30 meetings, which provided a framework for the anticompetitive agreement, excluding the meetings on specific issues (17 on client relationship).

  • A sophisticated system of telephone discussions

In addition to these secret meetings, the companies’ CEOs and Sales Directors used nine dedicated telephone lines to hold confidential discussions. Tarkett described this covert telephone system as follows:
Each participant at the “1, 2, 3” meetings was “issued with a phone with a package contracted by a competitor, such that all calls were made between two phones belonging to the same company. In practice, everyone had two phones: one from their own company and one with a package contracted by another manufacturer (… )” (§ 78 of the decision).

Confidential information exchanged via the SFEC

Forbo, Gerflor and  Tarkett also exchanged, in the context of official meetings of the SFEC, very precise information relating to trading volumes, revenues per product category and sales forecasts. The trade association played an active role in these discussions. It received this information from its members, including the three manufacturers, and passed on their respective declarations in full.

For full text and source – http://www.autoritedelaconcurrence.fr

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