Transcription

• Speaker #0

  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

  I’m Isabelle Souquet, a journalist, and you’re listening to Cartels & Co., a series diving into the French Competition Authority’s investigations. Second investigation: the floor covering cartel. Episode 2 – Secret Phone Calls In the last episode, we heard about a customer who raised the alarm. He’d noticed something unusual, perhaps even anticompetitive: France’s three biggest linoleum manufacturers had all announced identical price increases. The French Competition Authority decided to investigate. Before long, a series of raids was underway – and what investigators found proved to be highly revealing.

• Anne Krenzer

  What’s particularly interesting in the floor covering case is that much of the cartel members’ dealings happened by mobile phone.

• journalist

  That’s Anne Krenzer, head of the Leniency Unit at the French Competition Authority. She explains one of the more unusual features of the case.

• Anne Krenzer

  Here’s how it worked: if Forbo wanted to talk to someone at Tarkett, they’d buy two phones – one for themselves, and one they’d hand over to Tarkett. On paper, it looked like a regular call between two Forbo employees. Forbo even paid both phone bills. And the other companies all did the same. So each company ended up with three phones – one for every “contact”.

• journalist

  With this setup, the competitors could talk to each without anyone knowing – and without leaving a trace. Take, for example, a call from Forbo to Tarkett. The call was made from a phone bought by Forbo and received on another phone also bought by Forbo. On the phone records, it looked like nothing more than a routine call between two colleagues at the same company. - But the floor covering cartel didn’t stop at price-fixing. What investigators uncovered along the way went much deeper: Forbo, Gerflor and Tarkett were also coordinating their commercial strategies and sales teams, and had even reached a gentlemen’s agreement not to poach each other’s staff.

• E. Kerguelen

  This wasn’t small-time coordination; the companies were shaping their commercial strategies in concert.

• journalist

  That’s Erwann Kerguelen, who was a case officer at the French Competition Authority at the time.

• E. Kerguelen

  They discussed everything: price rises, minimum prices, sales volumes and even other specific issues that came up from time to time, like a new competitor entering the market or the emergence of a large buyer with strong negotiating power. You name it, they discussed it. It was actually harder to find topics they hadn’t discussed than topics they had. That’s what made this case different. Usually, coordination focuses on just one part of commercial strategy – but here, the discussions were extremely broad.

• journalist

  Not only did the three companies collude for 10 years, but they did so with the support of their professional trade association. In fact, it all began at one of the association’s general meetings, where sales reps from the three companies met for the first time. At first, their conversations were informal. But over time, the trade association started hosting some of their secret meetings – and even shared confidential commercial information about other players in the market. Armed with that inside knowledge, Gerflor, Tarkett and Forbo could anticipate market developments and coordinate their strategies and sales policies. Through this collusion, the three flooring manufacturers took control of the market. Beyond the economic impact, the cartel also stifled innovation, especially around environmental standards. PVC and linoleum flooring, for example, can contain volatile organic compounds (or VOCs), which can affect health. That’s an important factor for consumers, especially if you’re putting the flooring in a child’s bedroom.

• archive

  First Dad, now the whole family! We’ve all switched to plastic flooring – and not just any kind.

• journalist

  While digging through the archives at France’s national audiovisual institute, I came across a report describing the craze for plastic flooring.

• archive

  So why did we pick this flooring? Well, it’s bright and colourful, like a giant puzzle – perfect for a playroom. And the best part? It even glows in the dark! It’s playful and practical – perfect for kids’ bedrooms.

• journalist

  Those clips date back to 2009. At the time, the health risks of microplastics were barely on anyone’s radar. Yet, rather than being transparent about what was in their products, Gerflor, Tarkett and Forbo withheld key information from consumers. To find out more, I went to meet Élise Provost, Head of the Sustainability Network at the French Competition Authority.

• E. Provost

  Together, the manufacturers and their trade association agreed not to communicate on the environmental performance of their products – specifically, the VOC levels. That’s a parameter the companies could’ve competed on, to the benefit of consumers. But instead, they chose to stay silent and to avoid competing on this aspect altogether.

• journalist

  Not only were consumers left without the information needed to compare products and make free and informed choices, but the decision not to disclose products’ environmental performance also stifled the development of innovative materials and compounds.

• E. Provost

  The cartel was problematic for two reasons. In the short term, the companies weren’t competing on the VOC levels in their products. But the bigger concern was the medium to long term. There was a risk that operators would be disincentivised from innovating or competing on their products’ environmental qualities of their products – from going beyond regulations, for example, to make their products cleaner, greener and healthier. For consumers, it was a double blow. After the raids by the French Competition Authority laid bare the full scale of the collusion, one of the three companies tried to limit the damage. We’ve reached the end of episode two on the floor covering cartel. Next time, the cartel proves extremely costly for the companies. Cartels & Co. is brought to you by the French Competition Authority and produced in English by Peech Studio.