Procter & Gamble, Unilever Fined For Collusion on Sustainable Products

Proctor & Gamble (NYSE: PG) and Unilever (NYSE: UL) received a fine of EUR 315 million from the European Commission because they broke competition laws in eight EU countries. 

The two corporations and competitor Henkel, agreed to protect their market shares and control pricing when they introduced more sustainable laundry detergents, Jason Clay writes in the Guardian. Henkel escaped without a fine, because it alerted the Commission to the collusion, which began in 2002.

This raises questions about what kinds of industry collaboration are appropriate for encouraging market adoption of more sustainable products.

On the surface, the case seems cut and dry, but as Clay explains, the end goal of the cooperation was to "shift consumers away from big-box powder detergents and reduce energy, packaging and shipping, storage and selling space, and to help with waste disposal." The companies also worked together to introduce cold-water, concentrated detergent to the market.

So where is the line drawn between pre-competitive behavior and collusion?

If one of the companies had acted first to reduce packaging and introduce more concentrated products, the effort likely would not have been as effective. Many people would have continued purchasing larger boxes of powdered detergents at what appeared to be a cheaper price. And that company would have lost money.

To avoid the first-mover disadvantage, the companies coordinated the release timing of their new products. But ultimately where the companies got into trouble was with setting price controls and not including regulators and other stakeholders in the process.

"We can better understand the complicated balance between what is precompetitive behavior addressing legitimate sustainability issues, and what is collusion around fixing prices or market share," Clay writes. "The key component to striking this balance is multi-stakeholder participation. The project should be inclusive of other stakeholders, including regulatory officials and perhaps even NGOs, many of whom don’t have a direct financial interest. This is how successful global sustainability round tables have avoided these issues."

Read Clay’s coverage:

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