The French competition watchdog, Autorité de la concurrence, has imposed fines totaling €470 million on electrical equipment manufacturers Schneider Electric and Legrand, along with distributors Rexel and Sonepar, for engaging in vertical resale price-fixing practices in the low-voltage electrical equipment sector.
The penalty stems from two separate price-fixing agreements. The first involved Schneider Electric and its distributors, Rexel and Sonepar, and ran from December 2012 to September 2018. The second involved Legrand and Rexel, which lasted from May 2012 to September 2015. These agreements allowed the manufacturers to set resale prices for their products to end customers, enabling the distributors to maintain their profit margins.
Price Fixing Mechanism Uncovered
The practices were revealed following a judicial investigation prompted by the Paris Public Prosecutor, who initiated the probe based on a report from the Autorité’s General Rapporteur. This investigation, grounded in Article 40, paragraph 2 of the French Criminal Procedure Code, did not, however, prejudge the outcome of any criminal proceedings that might follow.
The agreements between the manufacturers and distributors were structured around a “derogation” system, allowing for significant price adjustments. End customers of low-voltage electrical equipment often sought lower prices than standard distributor rates, sometimes directly negotiating with suppliers. To meet these demands without incurring losses, distributors typically entered into annual contracts that provided mechanisms to adjust their purchase prices. These agreements enabled distributors to offer price reductions to end customers, thereby staying competitive.
However, in this case, the Autorité found that Schneider Electric, Legrand, and their distributors had agreed to effectively neutralize the ability to offer these lower prices. As a result, they set end-customer selling prices, restricting intra-brand competition between distributors and artificially maintaining high standard prices across France.
Serious Competition Concerns
The Autorité deemed these actions particularly serious due to the high concentration of the low-voltage electrical equipment sector, both at the manufacturer and distributor levels. The decision underscores the significant impact such practices have on competition, particularly in an industry where a few key players dominate the market.
The investigation continues, with the criminal components of the case still under review, as the Autorité works to enforce stricter measures against anti-competitive behavior.
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