Bundeskartellamt imposes multi-million fines against manufacturers of luxury cosmetics products on account of market information exchange

The Bundeskartellamt has imposed fines of just under 10 million euros against manufacturers of high-quality perfumery and cosmetics products. The luxury cosmetics products are sold selectively via exclusive perfumeries. The decision imposing the fines concerns 9 companies and 13 previous and current CEOs. The companies affected are the German subsidiaries of leading manufacturers of luxury cosmetics products such as Chanel, Clarins, Cosmopolitan Cosmetics Prestige (now P&G Prestige Products) Coty Prestige Lancaster, Estée Lauder, L’Oréal, LVMH Parfums & Kosmetik, Shiseido and YSL Beauté.

Since at least 1995 the companies have met in the so-called „castle round“ to exchange numerous internal company data. Every three months they reported detailed sales data to the moderator of the castle round, a former employee of L’Oréal, and informed one another on advertising expenditure, returned goods, planed product launches and price rises, conduct vis-à-vis the selected perfumeries and other market strategic aspects. Almost all major suppliers of luxury cosmetics products were represented in the castle round. The market has an annual turnover of approx. 1.5 billion euros.

The market information system constitutes a systematic exchange of information on turnover, product launches and other competitively relevant business data between the major brand manufacturers. The market information was also clearly attributable to the individual companies which led to competition restraints. In addition, the information exchange carried the risk of a coordination of the cosmetics manufacturers’ market behaviour. This violates German and European competition law and is resolutely punished by the Bundeskartellamt, as could also be seen in the recent case on drugstore products (cf. Bundeskartellamt press release of 20 February 2008).

The fines imposed on the companies range between 250,000 Euro and 2.1 million euros. For the period since the latest amendment to the ARC in 2005 the fines were calculated on the basis of the companies’ turnover (See the Guidelines on Fines BKartA). For the period from the beginning of the violation until the amendment the then applicable level of fines of 500,000 euros was applied, since a calculation of the additional proceeds was not possible.

The orders imposing the fines are not yet final. The companies and individuals affected may file an appeal against the decisions imposing the fines with the Düsseldorf Higher Regional Court.