The Cypriot Commission for the Protection of Competition (the “CPC”) found GPM Henkel Ltd (Cyprus) and Henkel AG & Co. KGaA (Germany) jointly and severally liable for an abuse of dominant position through the adoption of exclusionary practices against parallel imports of Henkel products in Cyprus and imposed on them an administrative fine of €3.302.000 for the infringement of section 6(1)(b) of the Cyprus Protection of Competition Law (the “Law”) and the corresponding Article 102(b) of the TFEU.
GPM Henkel is the importer and supplier of Henkel products in Cyprus whereas Henkel AG & Co. KGaA is the owner of GPM Henkel Ltd and the global parent company of the Henkel group. In a 250 page decision published earlier this year, the CPC concluded that GPM-Henkel, which was found to hold a dominant position in the relevant market of wholesale supply of heavy-duty detergents in Cyprus, obstructed by various means, the sale of parallel imports of the relevant Henkel products in Cyprus[i].
The case originated in a complaint filed in the end of 2012 by a Cypriot based parallel importer (Κ.A.C. Constantinides Trading Ltd) of well-known personal and household consumer brands. Following the opening of proceedings in 2013, the CPC conducted unannounced inspections at the premises of GPM Henkel and those of five local supermarkets.
The CPC’s findings and theory of harm
The CPC found that GPM-Henkel had sent warning letters to importers/wholesalers demanding that they stop importing Henkel products, reserving the rights of GPM-Henkel and Henkel AG & Co KgaA to take legal action against them. Similar warning letters were also sent to specific retail stores that sold Henkel products of parallel import origin demanding from them to terminate the sale of these products.
Furthermore, it found that GPM-Henkel through its management and sales staff, in individual meetings with representatives of retail stores, urged them to terminate the sale of these products. It was specifically established that GPM-Henkel had used various tactics towards retailers to achieve its aims such as through threating to terminate their relationship if they continued to sell products from parallel imports (and as the CPC noted it seems that it did so on one occasion), to change the terms of their cooperation and/or that it would stop giving them discounts or other favourable terms.
The CPC considered that these practices aimed at the obstruction and termination of parallel imports.
GPM Henkel and its mother company argued that the only affected wholesaler was the complainant and that this led to a de minimis effect on the relevant Cypriot wholesale market. The CPC rejected this argument. Referring to the decision of the ECJ in Hoffmann-La Roche it underlined that there is no de minimis threshold in article 102.
The CPC concluded unanimously that the abusive conduct was established because the dominant undertaking intended on the one hand to eliminate and/or limit the ability of choice of its customers (retailers) as regards their sources of supply and on the other hand it intended to keep its prices at a certain level through the obstruction of parallel imports by third parties. These, according to the CPC, were practices leading to the obstruction of parallel imports which is considered as a serious anti-competitive conduct leading to consumer harm and found a violation of both section 6(1)(b) of the Law and article 102(b) of TFEU. The CPC noted the importance of parallel imports for the EU’s common market and the position of EU competition law generally towards the prohibition of parallel imports[ii]. The CPC rejected Henkel’s argument that the conduct in question could not be caught by article 102 TFEU.
Finding of “joint and several liability” with Henkel AG & Co. KGaA
The CPC found Henkel AG & Co. KGaA (of Germany) jointly and severally liable because it considered that it exercised decisive influence over GPM Henkel and thus they both formed part of the same economic unit. The Statement of Objections was also issued against both entities. This was so despite the fact that the complaint itself was solely addressed to the Cypriot entity (GPM Henkel) and that the CPC had never taken a decision to initiate an investigation against Henkel AG & Co. KGaA specifically. The CPC held that this was not necessary as its liability resulted from the conduct of the Cyprus entity with which they form part of the same economic unit.
Written by Polyvios Panayides, advocate/partner at Chrysses Demetriades & Co. LLC (Limassol, Cyprus)
[i] CPC PRESS RELEASE dated 22/05/2020: “The Commission for the Protection of Competition has imposed on Henkel AG & Co. KGaA, jointly and severally with GPM-Henkel Ltd, a total administrative fine amounting to €3.302.000 (three million, three hundred and two thousand euro) for infringement of Section 6(1)(b) of the Law and the corresponding Article 102 (b) of the TFEU”. http://www.competition.gov.cy/
[ii] The CPC referred inter alia to the decision of the Greek competition authority of 19.11.2009 in case 441/V/2009 and the decision of the ECJ in case C- 44/01, Pippig Augenoptik GmbH & Co. KG v Hartlauer Handelsgesellschaft mbH