The Commission for the Protection of Competition (hereinafter the “CPC”), issued the decision no: 53/2019, following a complaint lodged by K.A.C. Constantinides Trading Ltd (hereinafter “K.A.C”.) against GPM-Henkel Ltd (hereinafter “GPM-Henkel”).
K.A.C is active in the parallel import of Henkel products in Cyprus. The allegations in the complaint focused on GPM-Henkel's actions that aimed at preventing retailers from buying parallel import products, which led many customers of K.A.C. to avoid buying parallel import products despite the fact that the prices of these products were lower. According to the complaint, GPM-Henkel’s acts had affected adversely the sales of K.A.C.
In the course of the preliminary investigation procedure, an unannounced on-the-spot inspection (dawn raid) was carried out at the premises of GPM-Henkel and at five retail stores which sold Henkel products in the area of Nicosia. During the inspection, the representatives of retail stores, as well as the officers/employees of GPM-Henkel, were asked to answer questions related to the investigation.
During the preliminary investigation, the CPC has gathered evidence, such as statements of the representatives of retail stores, internal correspondence between officers of Henkel AG & Co KGaA and its subsidiaries, answers of third parties to the questionnaires of the Commission, GPM-Henkel’s letters of notice addressed to retail stores and to wholesalers and importers of parallel products, executive meetings presentations, notes, sales invoices, credit notes and other documents.
The CPC, following the completion of the preliminary investigation and acting under Section 17 of the Protection of Competition Laws of 2008 and 2014 (hereinafter the “Law”), decided to initiate proceedings against Henkel AG & Co KGaA and its subsidiary GPM Henkel Ltd, jointly and severally, concerning a prima facie infringement of Section 6(1)(b) of the Law and Article 102 (b) of the Treaty for the Functioning of the EU (hereinafter “TFEU”) and to this effect, on 14/9/2017, it notified Statements of Objections to the aforementioned undertakings.
The CPC defined the relevant product market as follows: (a) the market of wholesale distribution of heavy duty laundry detergents, (b) the market of wholesale distribution of mass health and beauty products, and reached the conclusion that GPM-Henkel has a dominant position in the relevant wholesale market for heavy-duty detergents in Cyprus.
The CPC concluded that GPM-Henkel, which holds a dominant position in the relevant wholesale market for heavy-duty detergents in Cyprus, obstructed by various means, the sale of parallel imports of Henkel products in Cyprus. More specifically, GPM-Henkel sent letters of notice to importers/wholesalers demanding that they stop importing Henkel products, reserving GPM-Henkel’s and Henkel’s AG & Co KgaA rights to take any and all legal actions necessary against them. Similar letters of notice were also sent to specific retail stores that sold Henkel products of parallel import, demanding from them to terminate the sale of these products. Furthermore, GPM-Henkel through its Directors and Sales personnel, in individual meetings with the owners or employees of retail stores, urged them to terminate the sale of these products.
According to the evidence collected, it was established that the parallel trade products are genuine Henkel products. Also it was established that GPM-Henkel, in order to achieve the goal of preventing the parallel imports, used various means of intervention, as described by the representatives of retail stores, namely, threats to terminate its own cooperation with the retail stores if they continued to sell products from parallel imports (and in one case GPM-Henkel stopped supplying a retail store temporarily), or that the terms of their cooperation would change, or that it would stop giving discounts and other favourable terms. Also evidence was found, that GPM-Henkel proposed to a retail store better/more favorable terms of cooperation and discounts, in case of exclusive cooperation, and when this specific retail store continued its cooperation with K.A.C., GPM-Henkel appears to have changed the terms of their cooperation - they stopped some discounts, credit and merchandising services. It should be noted that GPM-Henkel also contacted the Ministry of Energy, Commerce, Industry and Tourism complaining about the importation of these products, claiming that these constituted inferior products compared to those sold by GPM-Henkel and that consumers were misled. Evidence was also found which indicated that Henkel AG & Co. KGaA was aware of the actions of GPM-Henkel in the Cyprus market.
The CPC concluded that GPM-Henkel did not establish any objective justification for its conduct, since there were no efficiencies which outweighed any anti-competitive effects on consumers.
The CPC having evaluated the evidence before it, has unanimously concluded that GPM-Henkel and Henkel AG & Co. KGaA (parent company) have with their actions and/or acquiescence, infringed Section 6(1)(b) of the Law and the corresponding Article 102 (b) of the TFEU by exploiting their dominant position in the relevant market, resulting in the restriction of the wholesale supply of heavy-duty detergents in the Republic of Cyprus, to the detriment of the consumers.
The CPC by exercising discretion in the context of the legal principle of proportionality and acting in accordance to Section 24(a)(i) and 42(1) of the Law 13(I)/2008 by taking into consideration the nature, the severity, the duration of the infringement, the mitigating factors and the consolidated turnover of the group, has decided by majority vote to impose an administrative fine amounting to €3.302.000 (three million, three hundred and two thousand euro) for the infringement of Section 6(1)(b) of the Law and the corresponding Article 102(b) of the TFEU on Henkel AG & Co. KGaA, jointly and severally with GPM-Henkel.
The CPC has unanimously obliged GPM-Henkel and Henkel AG & Co. KGaA to avoid any future repetition of the aforementioned infringement of Section 6(1)(b).
The CPC’s decision has been published in the Official Government Gazette on the 30/4/2020 and may also be found (in Greek) on the CPC’s official website.