Cartel action against Woolworths, Colgate and Cussons over laundry products

Eli Greenblat
December 12, 2013
The Age

The competition regulator has launched a cartel action against two of the world’s leading consumer goods companies and supermarket giant Woolworths, claiming local shoppers were denied access to lower prices for a range of laundry detergent products.

The Australian Competition and Consumer Commission will allege in court that the arrangements applied across the range of products sold by Colgate, Cussons and Unilever, including popular brands in the category such as Cold Power, Radiant and Omo, and that they had a significant effect on competition in an industry valued at almost $500 million per annum.

The ACCC filed civil proceedings in the Sydney registry of the Federal Court of Australia, and is seeking pecuniary penalties, declarations, injunctions, compliance programs and costs against international brand giants Colgate-Palmolive, PZ Cussons Australia, Woolworths and Paul Ansell, a former sales director of Colgate.

ACCC is claiming that Colgate and Cussons made and gave effect to cartel and other anti-competitive arrangements.

ACCC documents filed with the court detail one email from a Cussons executive about a series of meetings where the alleged cartel was discussed and planned, in which the co-ordination was dubbed “Project Mastermind”.

Colgate boosted its full-year net profit by 11 per cent rise to $70.3 million last financial year.

Documents lodged with ASIC show Colgate amassed a net profit after tax of $70.3 million for the 12 months ended December 31, 2012, up from $63.5 million for the same period in 2011.

Its revenue rose by 5.6 per cent to $495.2 million for calendar 2012, up from $469.1 million.

The ACCC alleges that Colgate, Cussons and Unilever Australia Limited (Unilever) entered into arrangements to; cease supplying standard concentrate laundry detergents in the first quarter of 2009 and supply only ultra concentrates from that time; simultaneously transition their laundry detergents to ultra concentrates which met certain requirements; and sell ultra concentrates for the same price per wash as the equivalent standard concentrated products and not pass on the cost savings to consumers.

It appears that Unilever blew the whistle on the cartel and approached the ACCC seeking immunity. The ACCC said that Unilever applied for immunity under the ACCC’s Immunity Policy for Cartel Conduct.

Unilever has consented to be named as the immunity applicant in this matter, the ACCC said this afternoon.

Business Day is awaiting a response from Woolworths over the cartel allegations and the supermarket is expected to release a statement soon.

The ACCC is also alleging that Mr Ansell, a former sales director of Colgate, and the nation’s biggest supermarket group Woolworths were knowingly concerned in the alleged arrangements.

“Ultra concentrate detergents are cheaper to produce, store and transport. The ACCC alleges that this offered significant cost savings which, by agreement, were not passed onto consumers. These alleged arrangements also standardised the ultra-concentrate products offered, denying consumers a variety of choices on pricing, package volumes and the strength of the concentrate product,” ACCC chairman Rod Sims said in a statement this afternoon.

“By way of contrast, when similar products were launched in New Zealand, there was significant discounting, such as offering a larger pack for the price of a smaller pack.

‘‘The ACCC alleges that the benefits of these competitive actions were denied to Australian consumers”.

The ACCC alleges in early 2008 Colgate, part of the Colgate-Palmolive group which is one of America’s biggest consumer products companies and one of the largest fast-moving consumer goods companies in the world, made a proposal that aimed to achieve an industry-wide transition to ultra concentrates.

The transition was executed in the first quarter of 2009.

The ACCC alleges that Colgate, Unilever and Cussons simultaneously moved to supply ultra concentrates to the major supermarkets and cease the supply of standard concentrated laundry detergents. The products introduced were twice as concentrated as standard concentrate products.

Woolworths’ alleged part
The ACCC has also alleged that Woolworths played a key role in organising the simultaneous transition to ultra concentrates and the introduction of an anti-competitive pricing strategy for the transition. The ACCC alleges that Woolworths was knowingly concerned in these arrangements.

‘‘The ACCC also alleges that Colgate and Unilever shared market sensitive information, including information about when they would increase the price of their laundry detergents.’’

The method of information sharing, according to the ACCC, included many instances of telephone contact between Mr Ansell, who was Colgate’s sales director at the time, and senior Unilever executives, including its sales director at the time.

‘‘In late 2008, Colgate and Unilever implemented price increases across a range of their laundry detergents.

‘‘The ACCC alleges this information sharing had the purpose, effect or likely effect of substantially lessening competition and controlling or maintaining prices.’’

Unilever gets immunity
Unilever and its employees have been granted conditional immunity from legal proceedings by the ACCC after the company came forward with information about the alleged conduct. The immunity was granted under the ACCC’s Immunity Policy for Cartel Conduct, and is conditional upon continuing full cooperation from the company and its executives in providing information to the ACCC about the alleged conduct.

The ACCC has long believed that its immunity policy provides clear and certain incentives to potential applicants to report evidence to the competition regulator and is a valuable tool in fighting illegal cartel conduct.

In court documents lodged with the Federal Court today it claims that at a meeting between it, Mr Ansell and Woolworths on or about January 8 2008, Colgate proposed an industry wide transition to ultra-concentrated laundry detergents.

At the meeting a representative of Colgate told those gathered that all manufacturers of laundry detergents in Australia would reach an agreement to transition to ultra-concentrate products by a certain date and that there would be pricing parity between standard concentrates and ultra concentrates.

The meeting was held at Woolworths offices in Sydney, court documents claim, and included Woolworths executives James Aylen, general manager longlife supermarkets, and two other Woolworths staff: Gordon Duncan and Stan Fuchs.

Other meetings were held in 2008 and 2009, including site visits overseas to North America where the transition to ultra-concentrates was further discussed and planned.

The court documents claim further that a meeting in April 2008 an agreement in principle was reached amongst Colgate, Cussons and Unilever to switch to ultra-concentrates in 2009.

An email obtained by the ACCC contained within its court documents show the level of co-operation within the industry.

In an email from a high ranking Colgate executive to various Colgate directors and staff about the move to ultra-concentrates and industry co-operation.

‘‘We need to be sensitive to this industry desire to create a new charter for detergents, to be more sustainable and all other reasons.

‘‘I do not care if it is ready tomorrow. That is not my issue. My issue is as an industry to work together, to maintain our credibility and not look suspicious.’’

In a brief statement released this afternoon Woolworths said it would vigorously defend the action brought against it by the competition regulator and has lashed out at the ACCC for the way the it dealt with it in the lead up to today’s court action.

The ACCC has sacrificed good process in favour of a deadline to launch the court action today, it said.

‘‘We are particularly concerned that good process has been compromised by the need to meet arbitrary deadlines set by the [ACCC].

Woolworths said it took the allegations around the alleged cartel seriously and would co-operate with the ACCC.

Woolworths said it should be made clear the ACCC has not alleged that Woolworths was party to any cartel. It also said its early analysis showed Woolworths’ retail price of about half the relevant products decreased in the year following the transition to ultra-concentrates.

But Woolworths has also hit out at the regulator.

‘‘Woolworths has serious concerns about the way the ACCC has engaged with us,’’ it said in a statement.

In court documents lodged with the Federal Court today it claims that at a meeting between, Mr Ansell and Woolworths on or about January 8 2008, Colgate proposed an industry wide transition to ultra-concentrated laundry detergents.

At the meeting a representative of Colgate told those gathered that all manufacturers of laundry detergents in Australia would reach an agreement to transition to ultra-concentrate products by a certain date and that there would be pricing parity between standard concentrates and ultra concentrates.

The meeting was held at Woolworths offices in Sydney, court documents claim, and included Woolworths executives James Aylen, general manager longlife supermarkets, and two other Woolworths staff: Gordon Duncan and Stan Fuchs.

Other meetings were held in 2008 and 2009, including site visits overseas to North America where the transition to ultra-concentrates was further discussed and planned.

The court documents claim further that a meeting in April 2008 an agreement in principle was reached amongst Colgate, Cussons and Unilever to switch to ultra-concentrates in 2009.

An email obtained by the ACCC contained within its court documents show the level of co-operation within the industry.

In an email from a high ranking Colgate executive to various Colgate directors and staff about the move to ultra-concentrates and industry co-operation.

‘‘We need to be sensitive to this industry desire to create a new charter for detergents, to be more sustainable and all other reasons.

‘‘I do not care if it is ready tomorrow. That is not my issue. My issue is as an industry to work together, to maintain our credibility and not look suspicious.’’

Read more: http://www.smh.com.au/business/cartel-action-against-woolworths-colgate-and-cussons-over-laundry-products-20131212-2z9m9.html#ixzz2nF7vCDQl