Transcription

• Narrator

  This podcast is brought to you by the French Competition Authority, France's independent watchdog in charge of tackling anti-competitive practices. This podcast was originally produced in French. You're listening to an English translation by the French Competition Authority voiced by professional actors. All names are unchanged.

• journalist

  You’re listening to Cartels & Co., a podcast about major cases of economic fraud in France. My name is Isabelle Souquet, and I’m a journalist. In this eight-part series, I’m taking you behind the scenes of investigations by the French Competition Authority, right to the heart of scandals involving big-name companies. I wanted to take a closer look at the world of cartels – what they are, how they work and how they hurt us, the consumers. Because when companies secretly agree to fix prices, it’s our pockets that take the hit, whether that’s through higher prices on the things we buy or the way our tax money gets used. Along the way, you’ll hear from the people on the inside – the teams that spend their days uncovering and dismantling cartels. Second investigation: the floor covering cartel. This is the story of how France’s biggest flooring manufacturers managed to cheat the French taxpayer out of millions of euros. Episode 1 – Raids with Results

• Speaker #2

  Direction financière, c'est au troisième étage. Bonjour, monsieur. Bonjour, madame. Bonjour, merci de me recevoir chez vous. Pas de souci.(background sound of people arriving for a meeting)

• journalist

  Bruno Gallet is Head of Finance and Property at Paul Guiraud Hospital in Villejuif, just south of Paris. I met him there, at the hospital.

• B. Gallet

  Hospitals have been using glued-down flooring for decades. It’s smooth, seamless and easy to clean – in short, it’s a hygienic option. When you think about just how big hospitals are – around 80,000 square metres for a typical general infirmary –, that’s a lot of flooring… and a lot of money.

• journalist

  For more than 20 years, Villejuif Hospital bought metre after metre of PVC and linoleum flooring. But for years, the three leading companies in the sector had been colluding on prices, to the detriment of both private and public institutions. By overpaying its suppliers, Villejuif Hospital faced significant extra costs, potentially running into millions of euros.

• archive

  Blending traditional style and modern design, it's easy to clean, durable and waterproof. Everything you'd expect from a from modern flooring.

• journalist

  In the 1950s, France fell in love with plastic. Linoleum , PVC and other vinyl flooring became must-haves in French homes.

• archive

  Children can play freely. without a care for scratch or scuffs. And cleaning ? It couldn't be easier. But the real appeal of this flooring lies in its design.

• journalist

  After the war, public buildings like hospitals and schools started using linoleum. It was quick to install, easy to clean and budget-friendly. Public contracts boomed and the market became increasingly lucrative for manufacturers. Then came September 2010. Like every year, a flooring installation company received the annual catalogues from France’s three major linoleum manufacturers: Gerflor, Tarkett and Forbo. All three had increased their prices slightly. Normally, that wouldn’t raise an eyebrow – except the increases were almost identical. Even the letters that came with the catalogues looked like copy-and-paste jobs. Bonjour. Bonjour.

• E. Kerguelen

  Monsieur Kerguelen ? Oui. c'est moi.

• journalist

  Super. Et moi, je ne peux pas rentrer ici sans vous. Erwann Kerguelen was a case officer at the French Competition Authority at the time. He investigated the floor covering case.

• E. Kerguelen

  All three manufacturers sent letters to their customers, announcing there’d be price rises. That in itself wasn’t unusual, but something didn’t add up. The percentage increases were exactly the same for each manufacturer, and all three letters were even dated the same day. One industry professional, who’d already noticed the manufacturers’ prices were starting to look very similar, became even more suspicious when he received all three letters at once. Something was clearly off. So he decided to file an anonymous complaint with the DGCCRF, flagging what he suspected could be some dodgy behaviour.

• journalist

  The DGCCRF is the authority in France responsible for consumer affairs and fraud control. After receiving the anonymous complaint in early 2011, the watchdog passed the tip-off to the French Competition Authority. The first thing Erwann Kerguelen did was check whether the economic context could perhaps account for a simultaneous increase in prices across all manufacturers. For example, raw material prices and the introduction of the euro had caused price jumps before.

• E. Kerguelen

  We went through all the evidence. Was there anything that could justify the price increases? Rising costs, maybe? Or market pressures? But there was nothing. No clear reason why all three manufacturers would’ve raised their prices at the same time, by exactly the same amount. If anything, the market looked like a textbook case for collusion: three major operators, controlling a huge chunk of the French market. The conditions were perfect for price-fixing. That’s when we began to consider going to the judge to request authorisation to raid their offices.

• journalist

  After reviewing all the evidence gathered by the French Competition Authority, The judge gave the green light. Raids were authorized at the premises of Gerflor, Forbo and Tarket.

• E. Kerguelen

  Let me set the scene for a dawn raid. We arrive early in the morning, accompanied by a police officer. The first thing we do is ask to see a manager – that’s who we show the judge’s order to. Then the search begins. Physical sweeps of the offices and digital searches through computers, servers and phones. The evidence gathering usually takes the whole day. Once we confirm that whatever we’ve found – whether that’s documents, data, devices or anything else – are relevant to the investigation, we seize them and place them under seal. What comes next is the longer, more meticulous phase: the analysis. That’s when we cross-check everything and slowly piece together the full story.

• journalist

  Meanwhile, investigators looked deeper. Further investigations were launched to uncover new evidence and corroborate the clues already found.

• E. Kerguelen

  In particular, we requested their expense reports. The main operators often met in hotels to discuss business, so we compared their claims to show they’d been in the same places, on the same dates.

• journalist

  Investigators soon realised that not only did a cartel exist, but that it’d been running for at least 10 years. It was 2011, but the trail of evidence stretched back to 2001.

• E. Kerguelen

  The smoking guns? Handwritten and digital documents we’d seized from the companies, detailing the outcomes of their discussions. For example, they gave their meetings code names: “1, 2, 3” – one for each manufacturer. The documents listed price increases, minimum prices and sales volumes. And then came the expense reports, which tied everything together. They showed that executives from the three companies had been in the same places, on the same dates. They’d spend the night, then meet the next day to discuss business – often in rather upscale surroundings, like hotels in Annecy or Saint-Malo, or restaurants such as the Blue Elephant in Paris.

• journalist

  That's the end of the first episode on the floor-covering cartel. Next time, the three companies devise a secret way to keep in touch.

• Narrator

  Cartels & Co. is brought to you by the French Competition Authority and produced in English by Peech Studio.