Investigators raided Swiss fragrance companies this week looking for evidence to support their suspicions that a few companies have colluded and created a price cartel.

International investigators conducted dawn raids at various Swiss perfume company offices this week as part of a global investigation into whether fragrance houses colluded, effectively creating a cartel to control prices, according to the Swiss Competition Commission (COMCO).

Suspicions of collusion

The European Commission, U.S. Department of Justice Antitrust Division and UK Competition and Markets Authority conducted unannounced searches at Geneva-based Givaudan and Firmenich International, as well as International Flavors & Fragrances in New York and Symrise in Germany.

These four companies control about two-thirds of all fragrance business around the world – about 15 billion Swiss francs worth of business in 2020. Their work goes into soap, laundry detergents, shampoos, deodorants, perfumes – nearly any product with a fragrance added, according to local newspaper NZZ.

The companies are accused of coordinating their pricing policies to create bigger prices margins and preventing other fragrance companies from working with certain customers. In addition to those accusations, Swiss companies Firmenich and Givaudan are being investigated for restricting certain fragrances to intentionally create a shortage of products.

Violations of cartel law

“There are suspicions that producers have colluded,” Comco said in its statement. “COMCO has indications that several undertakings active in the production of fragrances have violated cartel law. There are suspicions that these undertakings have coordinated their pricing policy, prohibited their competitors from supplying certain customers and limited the production of certain fragrances.”

“The Commission has concerns that companies and an association in the fragrance industry worldwide may have violated EU antitrust rules that prohibit cartels and restrictive business practices,” the European Commission said in a statement.

While the investigation could take months or even years, the companies could face hundreds of millions in fines. If found guilty of violating EU antitrust regulations, the companies could face fines as high as 10% of their global turnover.

Givaudan reported a 5% growth in business for 2022 and Symrise said this week it increased sales by 21% in 2022. Most fragrance manufacturers are benefiting that the personal care market continues to grow in both mature and emerging markets. Fragrance companies can charge high prices for their wares because when customers have disposable income, they often use it on personal care.

The Fallout

“I can confirm that we are part of an industry-wide investigation by European and Swiss authorities,” a Givaudan spokesman told Reuters, adding “As a good corporate citizen, Givaudan is fully cooperating with the authorities.”

For now, Givaudan’s stock prices are dropping sharply – 2.8% on Tuesday and another 1.4% on Wednesday.

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