On October 19, 2017, the French Competition Authority (the “FCA”) imposed a EUR 302 million fine on the three leading companies in the PVC and linoleum floor coverings sector; Forbo, Gerflor and Tarkett, as well as the industry’s trade association, SFEC (Syndicat Français des Enducteurs Calandreurs et Fabricants de Revêtements de Sols et Murs), for price-fixing, sharing commercially sensitive information, and signing a non-compete agreement relating to environmental performance advertising.

The FCA said the significant fine reflected the gravity of the offence and the long duration of the anticompetitive behavior, which for one company lasted 23 years.

WHAT HAPPENED

The proceedings were originally initiated by unannounced inspections carried out in the floor coverings industry in 2013 by the FCA, acting on information submitted by the DGCCRF (Directorate General for Competition Policy, Consumer Affairs and Fraud Control), which resulted in the discovery of three distinct anticompetitive practices.

Price-fixing

The FCA found that the three main manufacturers of floor coverings in France met secretly at so-called “1, 2, 3” meetings, from October 2001 to September 2011, at hotels, on the margins of official meetings of the SFEC or through dedicated telephone lines, in order to discuss minimum prices and price increases for their products. The manufacturers also entered into agreements covering a great deal of other sensitive information, such as the strategies to adopt with regard to specific customers or competitors, organization of sales activities and sampling of new products.

Confidential information exchange via the trade association

The FCA found that from 1990 until the start of the FCA’s investigations in 2013, Forbo, Gerflor and Tarkett also exchanged, in the context of official meetings of the SFEC, very precise information relating to their trading volumes, revenues per product category and business forecasts. In its decision, the FCA also raised the active role played by the SFEC, supporting companies in their conduct.

Non-compete agreement relating to environmental performance advertising

The three main manufacturers of floor coverings in France, together with the trade association, also signed a ‘non-compete’ agreement which prevented each company from advertising the individual environmental performance of its products. The FCA considered that this agreement may have acted as a disincentive for manufacturers to innovate and offer new products, earmarked by better environmental performance, compared to the products offered by their competitors.

Neither the manufacturers nor the trade association disputed the facts and all of them sought a settlement procedure. In addition, Forbo and Tarkett, leniency applicants, benefited from fine reductions corresponding to the respective dates they approached the FCA (the sooner, the higher the fine reduction), the quality of the evidence they provided and their cooperation during the investigation.

WHAT THIS MEANS

The FCA’s decision in the floor coverings cartel case has significant impact due to the total amount of the fines imposed which is (i) higher than the aggregate amount of sanctions imposed by the FCA in 2016 (i.e., EUR 202,873,000), and (ii) until now the highest fine imposed by the FCA in 2017, the FCA having imposed a EUR 100 million fine on Engie for abusing its dominant position in the [...]

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