InCompetition - exclusive dealing

ACCC seeking just-ice over alleged attempts to freeze out the competition via exclusive dealing

Published On 24/11/2020 | By Mark Giuseppini | Enforcement, Litigation

The ACCC has commenced proceedings in the Federal Court against Australasian Food Group Pty Ltd (trading as Peters Ice Cream) (Peters) in what is the first exclusive dealing action commenced by the ACCC in approximately two years.

Factual background

Peters is one of two major suppliers of single-wrapped ice cream and frozen confectionery products (Single Serve Ice Cream Products) in Australia, manufacturing a range of popular products under the Connoisseur, Drumstick, Maxibon, Frosty Fruits and Cadbury brands (among others).

During the relevant period, Peters distributed Single Serve Ice Cream Products to petrol and convenience store retailers, including Woolworths Petrol, Coles Express, BP, United and Caltex (P&C Retailers).  P&C Retailers are the largest customer for Single Serve Ice Cream Products in Australia.  Peters used its own frozen transport trucks to supply Single Serve Ice Cream Products to P&C Retailers in Melbourne, Sydney, Brisbane and parts of Queensland, and used PFD Food Services Pty Ltd (PFD) and a small number of other local distributors to supply P&C Retailers elsewhere in Australia.

Relevant law

 Section 47(1) of the Competition and Consumer Act 2010 (Cth) (CCA) prohibits a corporation from entering into arrangements that constitute “exclusive dealing”.  Exclusive dealing is a form of vertical restraint whereby one party imposes some type of exclusivity requirement on the counterparty.

Exclusivity is a common commercial practice in many industries in Australia and can often be pro-competitive (or competitively neutral).  The CCA provisions do not prohibit exclusive dealing, except where it has the purpose, effect or likely effect of substantially lessening competition.

 ACCC’s allegations

The ACCC alleges that in November 2014, Peters entered into a distribution agreement with PFD under which Peters would supply its ice cream products to PFD, and PFD would distribute Peters’ products to petrol and convenience store retailers outside of those areas where Peters used its own frozen transport trucks to supply P&C Retailers (by way of re-supply or through the provision of distribution services).

According to the ACCC, the distribution agreement included provisions prohibiting PFD from marketing, promoting, selling or distributing competing products in these areas without the prior consent of Peters.  Competing products included any ice cream product not supplied by Peters that competed with Peters ice cream products, and that were visually merchandised on display to consumers with the intention of creating the impulse to purchase.

The ACCC is alleging that Peters was seeking to protect its market share by restricting competitors from accessing PFD’s distribution services. The ACCC alleges the restrictions evidenced a purpose, and were likely to have the effect, of hindering or preventing these competitors from entry or expansion in the market for the supply of Single Serve Ice Cream Products to P&C Retailers in Australia.

According to the ACCC, PFD was the only commercially viable option for new entrants to distribute Single Serve Ice Cream Products to national P&C Retailers.

In its Concise Statement, the ACCC alleges that at one point, Bulla sought to have its products distributed by PFD to national P&C Retailers including Caltex and Woolworths Petrol.  However, Bulla was told by PFD that it was unable to distribute Bulla’s products due to exclusivity arrangements with Peters.  As a result, Bulla could not distribute its Single Serve Ice Cream Products to national P&C Retailers.

Next steps

The case will likely be scheduled for a case management hearing later this year or in early 2021.

The ACCC’s media release can be accessed here.

About The Author

is a Solicitor in the Melbourne office of King & Wood Mallesons.

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