On 1October 2012, the College of Competition Prosecutors submitted a reasoned report to the Competition Council and the companies involved, in relation to an investigation into coordinated retail prices increases of "household, bodycare and hygiene" roducts in the supermarket sector. The Prosecutors considers this "hub and spoke" practice an infringement of Belgian and European competition law (Article 2 of the Belgian Competition Act and Article 101 of the Treaty on the Functioning of the European Union).
Competition law prohibits all agreements or understandings which directly or indirectly fix purchase or selling prices.
A more subtle way of setting up a horizontal price cartel is the “hub and spoke” model. Instead of directly contacting a competitor and agreeing on resale prices, or instead of directly obtaining information from competitors regarding their resale prices, supermarkets could make use of their suppliers to obtain information on and influence prices of their competitors. This is what seven Belgian supermarkets allegedly organized with 11 leading suppliers of household, bodycare and hygiene products.
A supermarkets with a higher cost structure for the products in question allegedly contacts its supplier in order to notify with the other six supermarkets whether they would be willing to increase prices. If they agreed, all supermarkets would increase their prices to a certain level.
When speaking of a "hub and spoke" model, several conditions must be met:
- Supermarket A discloses to toothpaste supplier B its future pricing intentions in circumstances where supermarket A may be taken to intend that B will make use of that information to influence market conditions by passing that information to other retailers (e.g. supermarkets C ,D and E).
- Toothpaste supplier B does, in fact, pass that information to other supermarkets in circumstances where that supermarkets may be taken to know the circumstances in which the information was disclosed by A to B.
- Supermarket C does, in fact, use the information in determining its own future pricing intentions.
If these conditions are met A, B and C are all to be regarded as parties to a concerted practice having as its object the restriction or distortion of competition. The final agreement between the different supermarkets to increase prices is thus not as such necessary. The mere (indirect) exchange of information via the suppliers and a consecutive adapted behaviour of one undertaking is enough to constitute an illicit cartel.
There is little dissent from the view that an illicit exchange of information is no less harmful merely because the information is channeled through a third party (being the supplier).
Contrary to what a reading of several Belgian newspapers might suggest, the supermarket cartel has not yet been established. The Prosecutors have only just issued their report.
The investigation was conducted by the College of Competition Prosecutors with the assistance of the Directorate General for Competition of the Federal Public Service Economy. During the investigation, inspections were carried out at the premises of supermarket companies.
This case will now be brought before a decision-making panel of the Belgian Competition Authority, where the undertakings concerned will be able to defend themselves. They can submit a reply in writing, and they will be heard at an oral hearing. The opportunity to defend themselves before a decision-making panel of the Belgian Competition Authority provides them with the possibility of bringing all factual elements and relates as much to the dispute about the facts on which the report is based as to the application of the law.
The decision-making panel of the Belgian Competition Authority will decide whether or not there has been an infringement of competition law. The report of the Prosecutors does in no way prejudge this decision.
