While the probe itself was initiated based on a whistleblower complaint by one of these three companies, now the other companies have also approached CCI with similar applications.
Global powerhouses in the fragrance market Givaudan, Firmenich and IFF who are key suppliers to world’s largest consumer companies including LVMH, Pepsico and Nestle have approached the Competition Commission of India(CCI) seeking to settle an ongoing cartel probe under lesser penalty rules, said people with direct knowledge of the matter. While the probe itself was initiated based on a whistleblower complaint by one of these three companies, now the other companies have also approached CCI with similar applications. These three companies put together hold a global market share of 50-55% in the fragrances and flavor market.
Under CCI’s lesser penalty rules, any company that is operating in a cartel like arrangement could come forward voluntarily and report a cartel arrangement to CCI. In return, CCI levies lesser penalty on the company for voluntarily coming forward. A company can even apply under the lesser penalty route even after CCI has initiated a probe, however the amount of penalty reduction will be lower.
None of these companies have any permanent establishment in India, however they have an indirect business connection: they supply materials to several leading Indian consumer companies ranging from perfume companies to snack brands. If these settlements are successful, it would become CCI’s first enforcement in a case pertaining to alleged actions of global cartels: having to do with anti-competitive arrangements that happen outside India but impact Indians. CCI’s cartel probes are confidential until an order is issued and Moneycontrol could not ascertain who amongst the three was the initial whistleblower.
Emails sent to CCI, Givaudan and Firmenich remained unanswered.
“The investigation into global fragrance companies by India's Competition Commission relates to past conduct which is the subject of on-going, previously disclosed regulatory investigations and civil matters. IFF is committed to conducting business with integrity, holding itself to the highest ethical standards and complying with all applicable laws and regulations. As with other investigations, the company is cooperating fully with the relevant authorities and will continue to do so throughout the process.” IFF said in response to a query sent by Moneycontrol.
At the heart of the issue are certain so-called ‘soft cartel’ arrangements these companies were getting into. CCI’s investigation was into alleged anti-competitive coordination in labor market. More specifically, no-poach agreements the three companies were getting into included provisions not to hire or target each other's specialized employees. This allegedly restricted talent mobility and adversely impacted wages paid.
“The first company which blew the whistle will be eligible for upto 100% exemption on penalty while the second and third companies may get a relief by about 30-50% lesser penalty. Opting for the lesser penalty route means the company has voluntarily accepted wrong doing and implies the CCI order will not be challenged in courts,” said one of the persons cited above.
This CCI probe was a direct consequence of a joint crackdown by anti-trust regulators in the US, Europe and Switzerland, initiated in 2023. These regulators had raided the key offices of the fragrance companies in March 2023. The raids focused on alleged cartel behavior, including price-fixing, market-sharing, and customer allocation in raw fragrance ingredients used in everyday personal care and household item.
People cited above said, these global raids had triggered internal audits in the fragrance companies regarding their industry arrangements. Following these audits, one of the companies turned whistleblower with CCI and self-reported the anti-competitive arrangement.
forwarded from Global fragrance giants supplying LVMH, PepsiCo and Nestle seek lesser penalties in India