Fragrance Industry Investigation Could Signal DOJ's Renewed Focus on Cross-Border Cartel Cases
The U.S. Department of Justice's (DOJ) Antitrust Division is investigating the fragrance industry for cartel violations in coordination with European antitrust authorities, potentially indicating the Division's renewed focus on cross-border cases. This is the first large-scale international investigation since the auto parts investigation concluded more than five years ago. As it appears that companies have become more reluctant to self-report violations under the Antitrust Division's leniency program, the Division has not had a significant global investigation in years and has had to focus on domestic and smaller-scale cartel investigations. The Antitrust Division's opening of a criminal grand jury investigation, in parallel with coordinated dawn raids by multiple European enforcers, could signal the start of the next big cross-border investigation for DOJ.
In March, U.S.-headquartered International Flavors & Fragrances Inc. (IFF), a major global fragrance manufacturer, received a subpoena from a federal grand jury investigating anticompetitive conduct in the fragrance industry, coinciding with a series of coordinated actions in Europe. On the same day, the European Commission (EC), the Swiss Competition Commission (COMCO), and U.K.'s Competition and Markets Authority (CMA) conducted raids of multiple leading fragrance manufacturers' facilities across Europe – IFF, Swiss-based Firmenich International SA and Givaudan SA, and German-based Symrise AG – and an unidentified fragrance industry trade association. According to COMCO, enforcers are investigating potential price fixing and market collusion among companies that supply scent additives to manufacturers of household products and manufacturers of high-end perfume. The enforcers simultaneously sent requests for information to several other unidentified fragrance manufacturers demanding information about potential collusion in the industry.
Information gleaned from the U.S. white collar cartel defense bar strongly suggests that the U.S. federal grand jury investigation has expanded beyond IFF, just as it has in Europe. The U.S. antitrust laws have broad extraterritorial jurisdiction, extending to collusive conduct that occurs abroad so long as there is a direct and substantial impact on the U.S. Foreign fragrance companies that manufacture products abroad are not immune from DOJ scrutiny if their products end up in the U.S.
It is not surprising that the EC has driven the cross-border fragrance cartel investigation. They have taken the lead on many recent major cartel investigations. In October 2021, the EC announced that it was resuming dawn raids that had been paused during the COVID-19 pandemic. Since the flurry of fragrance company raids in March, the EC has conducted cross-border inspections of an energy drink business, raided multiple companies (including Gucci) in the fashion sector, and launched an investigation into the synthetic turf industry.
In contrast, the U.S. has not generated a major cross-border cartel investigation since its nearly decade-long investigation into the global auto parts industry waned in the late 2010s. DOJ's significant international investigations have been driven by leniency applicants since the Antitrust Division's leniency program began in 1993. Those leads have largely dried up, leaving DOJ to focus on smaller, domestic investigations.
The Division's recent track record is dismal: DOJ lost a poultry price-fixing case in 2022 when a five-week trial resulted in the acquittal of all individual defendants. The acquittals came on the heels of three trials that resulted in hung juries. DOJ also lost four trials in a row in labor market collusion cases in 2022 and 2023. In need of a momentum-shifting win, it would make sense for the Division to revisit the source of its biggest successes – cross-border cartel investigations. The fragrance industry price-fixing investigation could be just what the DOJ needs to improve its reputation as a leading international cartel enforcer.
As this new investigation unfolds and potentially expands, it is imperative for companies to review their antitrust compliance programs to ensure they are structured to effectively to prevent and detect antitrust violations. Having a robust compliance program that is tailored to the needs of your company's industry serves both to prevent an antitrust violation and to demonstrate compliance in the event of a DOJ investigation.
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Summer associate Elissa Harwood assisted with this alert.
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