30 June 2010

Jim'll Fix It

Andrew Davies

Editor Andrew Davies on the EU price fixing fines for the bathroom market...

I had an email last week from someone in the industry and the subject line read simply "Crikey!"

In the email was a link through to a variation on this story, a damning conclusion to a price fixing investigation into the European bathroom market. Fines totalling €622 million across 17 of the biggest and most famous companies in the bathroom industry.

The UK wasn't involved, but Germany, Austria, Italy, Belgium and France were and despite the geographic differences it's difficult to see how this verdict doesn't damn the whole industry with a very sticky tar-covered brush.

In fact, let's be honest about this, it stinks. Sitting around at trade association meetings, fixing minimum prices and agreeing price increases in a bid to get one over on the retailer, plumber and customer should make anyone involved in the sale of bathroom products seethe more than an England fan who'd already booked his ticket to South Africa for the quarter finals.

It deserves much more of a reaction than 'crikey!' 

The EU investigation pinpoints this practice to between 1992 and 2004 and all the companies involved have been quick to distance themselves as much as possible from the individuals they see as responsible. They all stressed how seriously they take compliance with anti-competition regulations both now and in the future.

But the truth is that all these companies must take responsibility and find a way to rebuild trust with their customers. Where does the buck stop in cases like this? How is it possible for practices like this to go on with the complete ignorance of the senior management?

The ultimate irony, of course, is that the very companies fixing prices in order to get maximum cash out of their customers are the ones who have pleaded poverty in order to get the fines reduced. Ideal Standard and Grohe had their penalties reduced by 30% to acknowledge their cooperation in the investigation and Masco had theirs dropped to zero for blowing the whistle in the first place.

But five out of the 14 companies remaining had their fines reduced by between 25% and 50% because they convinced the Commission that it would have almost certainly lead to bankruptcy. Some may say that would be a fitting consequence for their actions.

The real winners in this whole sorry saga are, as usual, the lawyers. There's an inevitable long road of appeals that will need to be transversed before cheques are written, but it's a shot across the bows for those participating in a practice that I suspect is much more frequent across large industries as a whole than anyone would care to admit.

The real lesson here for those companies? Is it 'don't do it again'? Or is it more likely to be  'For god's sake don't write anything down...'

What do you think? Email the editor