Dirty laundry on the line as ACCC inspects alleged cartel

With the fireworks of New Year's Day still ringing in their ears, executives from United States consumer goods giant Colgate-Palmolive and Australia's biggest supermarket chain Woolworths met on a summer day in January to discuss the direction of the $500 million laundry detergent industry.

It was at this meeting in early 2008 that Colgate laid out its plans to cook up a cartel involving the three leading suppliers of laundry products in Australia, according to allegations made by the Australian Competition and Consumer Commission.

Indeed, it was this meeting, the ACCC claims, that would see itself and main rivals, Cussons and Unilever, move in lock-step to launch on the unsuspecting public a new "ultra concentrate" detergent category. The date of that first meeting is almost laughable because only three days later, on January 11 the federal government released a draft bill to criminalise cartel behaviour, seeking up to five years' jail for company executives who were caught in the act.

The fact all this was happening in the maelstrom of the sensational cartel case against the late Richard Pratt and his packaging empire Visy seems to have gone completely unnoticed by the executives at the laundry detergent companies because on they pressed into 2009 with their alleged plan to rip off shoppers.

Inner workings of the cartel came to light on Thursday when the ACCC claimed it had busted the conspiracy involving three leading detergent makers, who together control nearly 85 per cent of the market, along with a senior sales director for Colgate, Paul Ansell.

The alleged cartel takes in the biggest selling brands in the country such as Cold Power, Radiant and Omo. Woolworths is not being accused by the regulator as a main driver of the alleged cartel, however it was a front-and-centre witness to its foundation, and held a number of meetings at its corporate offices where the alleged cartel was discussed at length. Woolworths said it would vigorously defend the action brought against it by the competition regulator.

Again, despite Pratt making the headlines daily and the dirty world of cartels being constantly talked about within the business community, as well as out of Canberra, nobody thought it was suspect, unusual, illegal or downright silly for the three biggest competitors in the laundry sector to get together in a room and share secrets.

The ACCC's allegations, spread out across nearly 70 pages in a statement of claim filed with the Federal Court, details the running meetings, emails, overseas trips and cosy chats that began in early January 2008 with Colgate's lightbulb idea to nudge shoppers from "standard concentrate" laundry powder to a new whiz-bang "ultra concentrate" powder.

With the participation of Accord Australia, the national industry association for the hygiene, cosmetic and specialty products industries, by the end of that year Cussons and Unilever had allegedly signed up to the Colgate plan with March 2, 2009 set down as D-Day for the industry-wide launch of the "ultra concentrate" powder.

The documents claim the cartel conspirators believed that by moving in lock-step to a uniform packaging and innovation platform, that by mirroring each other's pack sizes and dimensions, the three companies would safeguard an estimated $146 million in value over four years. What they all feared was a staggered release of "ultra concentrate", a truly competitive market, whereby price reductions would likely occur as consumers first tested the innovation and would demand permanent discounts and promotions to support their brand loyalty.

How news of the alleged cartel first reached the ears of ACCC chairman Rod Sims is unclear. It seems that Unilever was asked by the New Zealand competition regulator in 2011 to make sure its "house was in order", along with other companies, and it was during this audit that Unilever discovered the truth about what was being cooked up in Australia.

Unilever was the first to race to the ACCC and ask for immunity in return for spilling the beans on Colgate, Cussons and Woolworths.

The message for corporates and their executives should be clear: if you enter a room full of your biggest rivals and you aren't discussing the latest football results, get out quick.