The Secretary of Trade imposes hefty fine to Clorox for abuse of dominant position in the bleach market

On April 17, 2015, the Secretary of Trade, after a nine-year-long investigation conducted by the National Commission for Defense of Competition (CNDC), imposed a fine to Clorox Argentina S.A. (“Clorox”) worth AR$50 million (approximately US$5.5 million) for abusing of its dominant position in the domestic water bleach market by means of inducing wholesalers to implement a “price gap” scheme between Clorox’s premium water bleach Ayudín and lower-quality water bleaches offered by competitors, which resulted in a significant increase of the price of the bleach offered by Clorox’s competitors.

The Clorox case was initiated in 2006, following a claim filed with the CNDC by Clorox’s competitor Queruclor S.R.L. -manufacturer of water bleach Querubín-, which alleged that it was unable to effectively compete in the water bleach market due to Clorox’s anticompetitive practices. Claimant argued that Clorox provided wholesalers with economic incentives to increase the price at which they sold competing water bleaches, and thus reduce the price differential between Clorox’s premium water bleach and those of the competing brands, from almost 63% (in place prior to Clorox’s anticompetitive scheme) to  30% (in place during Clorox’s anticompetitive scheme).

According to the CNDC, through the scheme, Clorox forced wholesalers –under the pain of reducing or eliminating discounts and bonuses over its products- to set higher prices for competing lower-quality bleaches so that customers would choose (or have strong incentives) to purchase Clorox’s premium-quality water bleach in view of the artificially reduced price differential. As a result of Clorox’s conduct, when customers had to decide whether to buy Cloroxs water bleach Ayudín (the better known and positioned brand in the Argentine market) or a bleach from another brand, customers inclined to purchase Cloroxs water bleach given the absence of significant differences in price.

After analyzing the information submitted by the claimant as well as the evidence gathered in testimonial hearings (in which most of the wholesalers confirmed Clorox’s alleged anticompetitive practices), the CNDC concluded that Clorox, which held a 50% share in the water bleach market, abused its dominant position to the detriment of the general economic interest: (i) by limiting competition since non-premium products could not compete with Clorox’s Ayudín if they were offered at the same price; (ii) by artificially increasing the entry barriers in the water bleach market for new competitors; and (iii) for the damage that Cloroxs practices brought to customers since the prices of Clorox’s competitors increased by approximately 50%. 

For further information on this topic please contact Julián Peña