EU, US Authorities Sniffing Around Suspected Price-Fixing Scheme In Big Fragrance
Executive Summary
Regulators in the EU and US have opened an investigation into whether Firmenich, Givaudan, IFF and Symrise engaged in price-fixing for fragrances and/or fragrance ingredients.
EU and US regulatory authorities have opened an anti-trust investigation into whether four leading global fragrance ingredient suppliers have colluded on pricing policy for fragrances and/or fragrance ingredients.
The Swiss Competition Commission (COMCO) announced 8 March it has opened an investigation into whether Firmenich International SA (Geneva), Givaudan SA (Geneva), International Flavors & Fragrances Inc. (New York) and Symrise AG (Holzminden) violated the country’s cartel law.
“Dawn raids were conducted at various locations,” said COMCO, part of the Swiss Federal Department of Economic Affairs, Education & Research. The raids were carried out in consultation with other competition authorities, the commission added, naming the European Commission, the US Department of Justice Antitrust Division, and the UK Competition and Markets Authority.
The commission did not state what evidence it has suggesting anti-competitive activity. However, it noted, “There are suspicions that these undertakings have coordinated their pricing policy, prohibited their competitors from supplying certain customers, and limited the production of certain fragrances.”
COMCO states, “In the course of the investigation, it will be examined whether there are indeed restrictions of competition prohibited by cartel law. The presumption of innocence applies to the undertakings.”
Switzerland’s Federal Act on Cartels and other Restraints of Competition identifies as unlawful actions between companies, including agreements that directly or indirectly fix prices, that limit the quantities of goods or services to be produced, purchased or supplied, and agreements that allocate markets geographically or according to trading partners.
The EU, US and UK governments have similar anti-trust laws.
The EU has strict rules protecting free competition, including prohibitions on price-fixing, with enforcement carried out by the European Commission. Companies found in violation could be fined as much as 10% of their annual worldwide turnover, according to the European Union website.
In the US, where enforcement of anti-trust laws is executed by the DoJ, the Sherman Act prohibits any agreement among competitors to fix prices, rig bids or engage in other anti-competitive activity, according to the DOJ’s website. For corporations, violations of the Sherman Act is a felony punishable with a fine of up to $100m.
The named companies say they are complying with regulators.
In an 8 March statement, Firmenich confirmed the investigation and said unannounced inspections were carried out in its offices in France, Switzerland and the UK. “This does not mean that the company has engaged in anti-competitive behavior, nor does it prejudice the outcome of the investigation itself,” the firm says, adding it is “closely monitoring the situation and is fully cooperating with the investigators.”
On the same day, Symrise said EU cartel authorities contacted the firm at its headquarters on 8 March. “Symrise is cooperating fully with the authorities. At present, precise details and concrete content on this investigation are still pending.”
IFF likewise said in an email it is working closely with authorities and cooperating in the investigation. Givaudan had not yet responded to an inquiry at the time of publication.
Price-fixing investigations are rare in the fragrance and cosmetics space.
In 2011, Colorado Springs, Colo.-based Bioelements, Inc. agreed to settle with the California DOJ over an alleged “blatant price-fixing scheme” that prohibited retailers from selling its skin-care products online at a discount. Regulators said a two-year investigation found the firm entered into dozens of contracts with retailers that required them to sell its products online for at least as much as retail prices prescribed by Bioelements.
Bioelements agreed to $51,000 in civil penalties and attorneys’ fees and to inform distributors and retailers with whom it made price-fixing contracts that the contracts were void and would not be enforced.