Colgate ordered to pay $18 million penalty in laundry detergent cartel proceedings

The Federal Court has made orders that Colgate-Palmolive Pty Ltd (Colgate) pay total penalties of $18 million for contraventions of the Trade Practices Act 1974 (now called the Competition and Consumer Act 2010) (the Act), following admissions by Colgate in proceedings brought by the Australian Competition and Consumer Commission.

Colgate admitted to entering understandings which limited the supply, and controlled the price, of laundry detergents, and agreed with the ACCC to joint submissions on penalty being put to the court.

The Court described the conduct as serious and the penalty as significant but proportionate.

“By ordering these substantial penalties, the Court has recognised the seriousness of this conduct, which affected the supply and pricing of laundry detergents, a consumer staple, ACCC Chair Rod Sims said.

“The information sharing understanding involved phone calls between senior managers of competing companies, many of which started as social calls, but turned to unlawful exchanges of pricing information.  Any contact between competitors carries risk and while discussion of price is particularly serious, there are many topics which may lead to an anticompetitive understanding.”

“This is the equal third largest penalty that the court has ordered for breaches of the competition provisions of the Act and is an indicator of how seriously the court views the conduct,” Mr Sims said.

“These penalties were based on Colgate’s turnover, under the current penalty regime for anticompetitive conduct. The ACCC regards this regime as a key tool in obtaining appropriate penalties for breaches of the Act.” Mr Sims also said.

Specifically, Colgate admitted that it made, and gave effect to, an understanding with Unilever Australia Limited (Unilever) and PZ Cussons Australia Pty Ltd whereby they agreed to cease supplying standard concentrate laundry detergents in early 2009 and supply only ultra concentrates from that time.

Colgate also admitted that it and Unilever shared sensitive market information, including information about when they would increase the price of their laundry detergents through telephone contact between Mr Ansell and senior Unilever executives, including Unilever’s sales director at the time.

The penalties ordered against Colgate comprise $12 million for the understanding to withhold supply, and $6 million for the information sharing understanding.

The ACCC has also, by consent, resolved its proceedings against Mr Paul Ansell, a former Colgate sales director, who has admitted to being knowingly concerned in the same conduct.

By consent, the Court also ordered that Mr Ansell be disqualified from managing corporations for seven years and pay a contribution of $75,000 towards the ACCC’s costs.

The Federal Court also made other orders by consent that Colgate update its trade practices compliance program and maintain that program for three years and pay a contribution of $450,000 towards the ACCC’s costs.

Background

In December 2013, the ACCC filed proceedings in the Federal Court against Colgate, Cussons, Woolworths and Mr Ansell. The ACCC alleged that Colgate, Cussons and Unilever made and gave effect to cartel and other anti-competitive 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.

The ACCC also alleged that Mr Ansell and Woolworths were knowingly concerned in these arrangements.

Unilever applied for immunity under the ACCC’s Immunity Policy for Cartel Conduct and consented to be named as the immunity applicant in this matter.

The ACCC’s case against Cussons and Woolworths is listed for hearing in June 2016. The ACCC is seeking pecuniary penalties, declarations, injunctions, compliance programs and costs.