October 31, 2024   

Authority Fines Schneider, Rexel, Sonepar, Legrand Over $500m

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Companies deny allegations; plan to appeal the decision

 

The French Competition Authority has issued fines totaling €470 million (approximately $512.3 million) against four prominent companies in the electrical distribution sector. The companies involved — Rexel, Schneider Electric, Legrand, and Sonepar — are alleged to have participated in anti-competitive practices, specifically through mechanisms known as "special price agreements" or "dérogations." These agreements reportedly allowed manufacturers to influence the resale prices of distributors, an action the Authority deemed a violation of competition law.

The fine distribution is as follows:

  • Schneider Electric: €207 million ($225.6 million)
  • Rexel: €124 million ($135.2 million)
  • Sonepar: €96 million ($104.6 million)
  • Legrand: €43 million ($46.9 million)

The companies have announced plans to appeal the decision.

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Background of the Dérogations and Authority’s Case

The French Competition Authority’s investigation, which began in 2018, focused on the use of “dérogations” by several major players in the French electrical distribution market. This mechanism, while described by companies as a transparent and common discount agreement, has been scrutinized by regulators as a potential tool for price manipulation. Dérogations, or special price agreements, involve discounts negotiated between a supplier and distributor, allowing the distributor to benefit from a reduced purchase price. However, the French Competition Authority alleges that these agreements facilitated vertical price-fixing practices, whereby manufacturers retained influence over the resale prices distributors set for end customers, ultimately reducing competition within the market.

The investigation targeted two manufacturers, Schneider Electric and Legrand, as well as two distributors, Rexel and Sonepar. According to the Authority, the manufacturers allegedly leveraged these agreements to maintain control over resale prices, which compromised market competition and resulted in higher prices for consumers. While Schneider Electric and Legrand were implicated in allegedly orchestrating price constraints, Sonepar and Rexel were found to have enabled or cooperated in these arrangements. The Authority dismissed charges against Legrand and Sonepar for any alleged collusion but maintained that the dérogations system itself allowed undue influence over resale pricing.

 

Rexel's Statement: Mechanism Was Transparent

Rexel, fined €124 million, emphasized that the contested pricing mechanism is well-known and used transparently among industry participants. Rexel maintains that these agreements were standard discounts provided by suppliers, allowing distributors full discretion to set competitive resale prices. The company stated, “This dérogations mechanism…is a standard commercial discount…leaving it completely free to set its resale prices and offer its customers the most competitive offer.” Rexel also confirmed that it would be evaluating the French Competition Authority's decision and considering an appeal before the Paris Court of Appeal.

 

Legrand Denies Allegations, Cites Commitment to Compliance

Legrand, which faces a €43 million fine, categorically rejected the allegations of anti-competitive behavior. The company stated it will appeal the ruling. “Legrand reiterates its firm commitment to comply strictly with applicable law, in particular competition law,” it said. The company emphasized its full compliance with applicable regulations, including those related to competition.

 

Sonepar Challenges Authority’s Findings

Sonepar, fined €96 million, similarly plans to contest the decision. The company was specifically cited for allowing Schneider Electric, a supplier, to influence Sonepar’s resale prices to end customers. The Authority, however, dismissed any alleged collusion between Sonepar and Legrand. Sonepar stated it had always acted “in the interest of its customers and in strict compliance with competition rules” and expressed confidence in proving its compliance during the appeal.

Sonepar, which operates in over 40 countries and achieved €33.3 billion in sales in 2023, described the decision as “unfounded both in law and in facts” and committed to upholding its reputation as a customer-focused leader in electrical equipment distribution.

 

Schneider Electric's Response to €207 Million Fine

Schneider Electric, penalized with the largest fine of €207 million, responded that it strongly disagrees with the French Competition Authority’s conclusions. The company highlighted its extensive cooperation with authorities since the investigation began in 2018 and reaffirmed its commitment to compliance. Schneider Electric stated that its policies are structured to adhere to all regulations and confirmed that it intends to appeal the decision.

Next Steps

The fines, totaling nearly half a billion euros, highlight the French Competition Authority’s commitment to enforcing competitive practices in the electrical distribution industry. Each company has expressed intentions to appeal, potentially leading to a prolonged legal process to clarify compliance standards within the sector. The Paris Court of Appeal will serve as the next venue for these companies as they seek to overturn or reduce their fines.

 

 

 




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