This Decision is addressed to:
Van den Bergh Foods Limited
Whitehall Road
Rathfarnham
Dublin 14
Ireland.
Done at Brussels, 11 March 1998.
For the Commission
Karel VAN MIERT
Member of the Commission
(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ 127, 20.8.1963, p. 2268/63.
(3) Case No IV/34.073.
(4) Masterfoods v. HB Ice Cream, [1992] 3 CMLR 830.
(5) Case No IV/34.395.
(6) Case No IV/35.436.
(7) Commission press release of 8 March 1995 IP/95/229.
(8) OJ C 211, 15.8.1995, p. 4; publication pursuant to Article 19(3) of Regulation No 17, which contained a summary of HB's distribution arrangements as revised, inviting the comments of interested third parties. Comments were received from Mars.
(9) Noel McEneaney, HB's Marketing Manager is quoted in the March 1996 issue of the Irish retail magazine 'Shelflife` as saying: 'There is a rule of thumb that for every three people who purchase an impulse product, only one entered the shop with the intention of buying an ice cream. We try to maximise this factor by ensuring that the first thing the customer sees when he or she enters the shop is an ice-cream cabinet, either inside the entrance or next to the cash register`.
(10) Source: AC Nielsen, a leading market-research company. The value figures are for retail sales, and are not the same as the GSV figures referred to elsewhere; GSV figures include neither the retailers' margin nor the VAT rate. The figures shown above include 'water ices`.
(11) According to HB, market information on this sector is not publicly available.
(12*) Business secret.
(13) Overnight, HB's share of the ice-cream market increased from 42 % to 80 %. In return, Premier Dairies acquired HB's milk business.
(14) These market-share figures are derived from AC Nielsen which, for the purpose of calculating those figures, uses the same market definition as in the present Decision, with the exception of the inclusion of 'water ices`, this inclusion does not, however, affect the proportional shares of the various market participants to any significant extent.
(15) AC Nielsen's impulse ice cream audit is the only regular reliable source of market data concerning the distribution of impulse ice cream in Ireland. The outlets included in Nielsen's 'Universe` are the same as those surveyed for its ambient confectionery audit and excludes some marginal ice cream outlets such as cinemas, theatres and ice-cream stands.
(16) The market survey carried out by Lansdowne in the summer of 1996, described in detail below, found that there was only minimal freezer movement to satisfy seasonal demand variation (see paragraph 97).
(17) The real figures for unweighted/numeric distribution are somewhat higher, because not all the outlets surveyed stock impulse ice cream. For example, only 93 % of all the outlets surveyed in this time period were selling impulse ice cream. In this instance, therefore, it is more accurate to adjust the figure of 79 % to 79/93 = 85 %. A similar adjustment can be made for all the time periods, but has not been for the purposes of this Decision. The same distortion does not exist for the weighted figure.
(18) The storage of HB's take-home ice-cream products is also permitted.
(19) HB has, however, indicated that it does not in practice, seek to enforce the requirement of two months' notice for retailers wishing to terminate on shorter notice or without notice.
(20) Some cabinets are kept in the rear of the outlet for storage purposes.
(21) HB has indicated, however, that, in practice, it does not always insist on strict compliance with these criteria as a necessary precondition for receipt of an HB freezer cabinet.
(22) It should be determined in accordance with objective criteria, for example, the Bank of Ireland lending rate to small businesses.
(23) The cost of maintenance was calculated as amounting to IEP [. . .] in 1995, and so the sum paid to hire-purchasers was IEP [. . .] p.a. in that year. HB was to be flexible in relation to payment of the bonus to those who chose to hire-purchase during the course of 1995.
(24) Only [. . .] were sold during 1995, and most of these in the later part of the year.
(25) The average lifetime of a cabinet is estimated by HB to be 10 years; cabinets are amortised by HB after eight years.
(26) HB states that it 'undertook a programme designed to maintain the image of the HB brand and the visibility of the HB product range by, inter alia, replacing ageing cabinets with more modern units`; Mars states that 'Unilever ran an exceptional freezer placement programme in 1994 and 1995; a comparison between the two Rosslyn surveys shows that the 1994/95 replacement rate was over 230 % of the 1990/91 replacement rate`. Mars goes on to say that 'the new Unilever freezers are all larger than the ones that they replace (save one type which has not been widely placed)`.
(27) 68 % of the sample were grocery/convenience stores, 21 % were TSNs, 11 % were garages. Multiples were not included. 92 % of the sample were independently owned; a further 6 % were part of a chain (symbol group).
(28) Includes cabinets owned by HB agents.
(29) Includes cabinets owned by Dale Farm agents.
(30) Includes 2 % (of all outlets) where cabinets are owned by HB agents.
(31) Includes 1 % (of all outlets) where cabinets are owned by Dale Farm agents.
(32) 15 % of the outlets refused to disclose their turnover.
(33) In the Statement of Objections, this figure was mistakenly quoted in the text as 65 % (a figure from the preliminary survey results); the survey was annexed in full to the Statement of Objections.
(34) Ibid. mistakenly quoted in the Statement of Objections as 37 %.
(35) Ibid. mistakenly quoted in the Statement of Objections as 28 %.
(36) Ibid. mistakenly quoted in the Statement of Objections as 22 %.
(37) Ibid. mistakenly quoted in the Statement of Objections as 16 %.
(38) Ibid. mistakenly quoted in the Statement of Objections as 6 %.
(39) An almost identical survey was carried out for Mars by the same company in December 1991/January 1992, the results of which were cited in the Commission's Statement of Objections of 29 July 1993. All but 40 were the same outlets as interviewed in 1991.
(40) 79 % in 1991.
(41) 20 % in 1991.
(42) 1 % in 1991.
(43) 1,22 in 1991.
(44) 89 % in 1991.
(45) 11 % in 1991.
(46) 71 % in 1991.
(47) 68 % of 'back of shop` freezers.
(48) 1 % in 1991.
(49) As no suppliers appear to supply cabinets on non-exclusive terms, it is most likely that the remaining 12 % were also subject to an exclusivity condition of which the retailer was unaware.
(50) 52 % in 1991.
(51) 44 % in 1991.
(52) The calculation is based on the fact that, in the 408 outlets sampled, no more than 45 cabinets were not supplier-provided (they were retailer-owned, 'other owner` or 'don't know`), if any outlet contained more than one such cabinet, the foreclosure level would be even higher.
(53) 234 outlets had only a supplier-provided cabinet, 87 had one HB cabinet and one other supplier-provided cabinet, 23 outlets had two HB cabinets: these 344 outlets represent 84 % of the total sample.
(54) This was the method of calculation used by William Bishop, an economist who analysed foreclosure levels on the basis of the 1991 Rosslyn survey: the method involves dividing the total number of outlets sampled by the mean number of freezers present in all these outlets, and then multiplying by the number of retailer- and 'other`-owned cabinets. This method assumes that retailer-owned cabinets are likely to be spread across outlets in the same proportion as any other cabinets.
(55) 20 % were TSNs; 63 % were grocery outlets, of which 10 % were 'symbol` stores; 10 % were garages; others 7 %. Multiples were excluded.
(56) Dale Farm acts as distributor for Mars in Northern Ireland.
(57) See Case 23/67 Haecht I [1967] ECR 407, at p. 415.
(58) Case 27/76 United Brands [1978] ECR 207, at paragraph 12.
(59) It is generally accepted that non-ice-cream products do not fall into the same product market/s as ice cream. See judgment of Irish High Court; see footnote 4.
(60) Owing to the insignificant quantities of 'artisan` ice cream sold in Ireland, the distinction between it and industrial ice cream does not need to be made for the purposes of this assessment. All ice cream referred to is industrial ice cream.
(61) Case C-234/89 Delimitis [1991] ECR I-935 paragraph 17; Cases T-7 Langnese, paragraph 63 and T-9/93 Schöller, paragraph 42, [1995] ECR II-1532.
(62) Single-wrapped items can also be used for catering purposes.
(63) Cases T-7 and T-9/93 Langnese & Schöller, paragraphs 64 and 65 and 43 and 44.
(64) Case 322/81 Michelin [1983] ECR 3461, paragraph 37.
(65) See Delimitis, paragraph 18 in relation to the German beer market; Case T-9/93 Schöller, paragraph 54 where the Court of First Instance (CFI) accepted that Germany was the correct geographic market for impulse ice cream.
(66) Case C-234/89 Delimitis at paragraphs 19 to 24, Cases T-7/93 and T-9/93 Langnese and Schöller, at paragraphs 129 to 131 and 95 to 99.
(67) The CFI in Langnese and Schöller stated at paragraphs 129 and 95 that '. . . where there is a network of similar agreements concluded by the same producer, the assessment of the effects of that network on competition applies to all the individual agreements making up the network`.
(68) In practice, given that all suppliers in the relevant market operate cabinet exclusivity, this means a cabinet owned by the retailer himself or on loan from a source other than an ice-cream supplier.
(69) That is following the disposal by HB of a portion of its fleet of cabinets (see paragraphs 72 and 73).
(70) That is before the disposal by HB of a portion of its fleet of cabinets (see paragraphs 72 and 73).
(71) The disposal of in situ cabinets by HB during the first half of 1996 will not have affected this assessment to any significant degree; apart from the fact that the cabinets disposed of have an average age of nine years (i.e. they are at least approaching the end of a cabinet's normal lifespan), the disposals took place primarily in low-turnover outlets (see paragraph 73).
(72) It can be seen from the foregoing that this is a conservative figure.
(73) Where an incumbent supplier-exclusive cabinet is replaced by a cabinet exclusive to a competitor of the incumbent supplier, the outlet becomes foreclosed to the (former) incumbent, provided it was his only cabinet in the outlet, and remains foreclosed to any third party suppliers not already present in the outlet.
(74) The return of the HB freezer cabinet may also have the consequence that a retailer will have to give up stocking HB's take-home ice-cream products, as these are sometimes kept in the same freezer cabinet as impulse products (paragraph 42); this additional consequence renders the option of replacing an HB freezer cabinet by that of another manufacturer even more unattractive.
(75) HB's apparent disregard of this requirement (see above) can only be considered a partially mitigating factor in this regard, given possible retailer ignorance or uncertainty about the practice.
(76) The B& A 'Qualitative study` finding that retailers generally operate on the basis of instinctive, rather than more precise, methods of calculating profit return potential (see paragraphs 122 and 123) does not undermine the validity of this assertion: their instinctive calculations will take the same basic considerations into account.
(77) See Commission Decision 78/172/EEC in Liebig (OJ L 53, 24.2.1978, p. 20, at paragraph 9).
(78) This is confirmed by the B& A 'Qualitative study`, which found that retailers favour frequent restocking of a freezer over the installation of an additional one (see paragraph 123).
(79) 7 % according to Lansdowne; 4 % according to Rosslyn; [. . .] % according to B& A, a survey weighted significantly toward larger outlets (see paragraph 86).
(80) Where an additional supplier-exclusive cabinet is installed, the outlet remains foreclosed to any third party suppliers not already present in the outlet.
(81) 56 % according to the Lansdowne survey at paragraph 92; at least 60 % according to the Rosslyn survey at paragraph 108. HB faces direct intra-outlet competition from other ice cream brands in [. . .] of the outlets surveyed by B& A in which HB products are sold (see paragraph 116).
(82) In June/July of 1995, Mars ran a special price promotion whereby it reduced the recommended retail prices (and hence also trade prices) of its bar products by over 20 %: this promotion was not responded to by HB - see Mars letter of 9 August 1996. Mars ran the same promotion again in the summer of 1996; again, it has not been responded to; nor did it appear to affect HB's market share, which increased during the period.
(83) See Langnese judgment at paragraphs 119 to 124.
(84) Case 234/89.
(85) HB has stated that 'the cabinet exclusivity provision is necessary to secure the full benefits of the system`, and goes on to say, inter alia, that it is not 'unreasonably restrictive` and so falls outside Article 85(1) as an ancillary restraint.
(86) This issue is further discussed in relation to Article 86.
(87) Case 44/79 Hauer v. Land Rheinland Pfalz [1979] ECR 3727, at paragraph 18.
(88) OJ L 173, 30.6.1983, p. 5.
(89) OJ L 31, 9.2.1996, p. 2.
(90) See also Commission Decision 88/491/EEC, Aalsmeer Bloemenveilingen (OJ L 262, 22.9.1988, p. 27).
(91) See Joined Cases 56 and 58/64 Consten/Grundig [1966] ECR 299, at p. 348; see also the Langnese judgment at paragraph 180.
(92) Case 27/76 United Brands and Case 85/76 Hoffmann-La Roche [1979] ECR 461.
(93) Case 85/76 Hoffmann-La Roche [1979] ECR 461, at paragraph 41.
(94) Case C-62/86 Akzo Chemie [1991] ECR I-3439, at paragraph 60.
(95) Case T-30/89 [1991] ECR II-1439, paragraph 92 (confirmed on appeal by the Court of Justice, Case C-53/92 P, judgment of 2 March 1994 [1994] ECR I-667).
(96) Case 27/76 United Brands.
(97) The price promotion introduced by Mars in the summer of 1995 (see footnote 83) was not responded to by any of its competitors.
(98) Case 85/76 Hoffmann-La Roche, at paragraph 41.
(99) Cases 85/76 Hoffmann-La Roche at paragraph 91.
(100) Cases 85/76 Hoffmann-La Roche; C-62/86 Azko; T-65/89 BPB and British Gypsum [1993] ECR II-389.
(101) Cases 85/76 Hoffmann-La Roche, at paragraph 91; 322/81 Michelin, at paragraph 70.
(102) Hoffmann-La Roche, at paragraph 89; BPB and BG, at paragraph 68; cited above.
(103) In T-65/89 BPB and British Gypsum, at paragraph 68, the Court said that '. . . the conclusion of exclusive supply contracts in respect of a substantial proportion of purchases constitutes an unacceptable obstacle to entry to that market . . .`.
(104) Cases 85/76 Hoffmann-La Roche, at paragraph 89; 322/81 Michelin, at paragraph 70; C-62/86 Akzo, at paragraph 149; T-65/89 BPB and British Gypsum cited above; C-393/92 NV Energiebedrijf Ijsselmij [1994] ECR I-1477, at paragraph 44.
(105) Cases 85/76 Hoffmann-La Roche, at paragraph 89; C-62/86 Akzo, at paragraph 149.
(106) Case 322/81 Michelin, at paragraph 57; T-65/89 BPB and British Gypsum, at paragraph 67.
(107) Case T-51/89 Tetra Pak, at paragraph 24.
(108) Case 247/86 Alcatel [1988] ECR 5987 at paragraph 10.
(109) See in this respect Commission Decision 88/589/EEC London European/Sabena (OJ L 317, 24.11.1988, p. 47); and the Commission's decision of 11 June 1992, B& I/Sealink, (not published), Competition Report 1992 No 219 and [1992] 5 C.M.L.R. 255.
(110) OJ C 39, 13.2.1993, p. 6.
(111) Report on the supply in the UK of ice cream for immediate consumption, April 1994.
(112) [1992] ECR II-2223.
(113) Decisions in Cases IV/31.533 and IV/34.072 Schöller and Langnese-Iglo.
