PRESS RELEASE Nº 93/03
23 October 2003
Judgment of the Court of First Instance in Case T-65/98
Van den Bergh Foods Ltd v Commission of the European Communities
THE COURT OF FIRST INSTANCE CONFIRMS THE COMMISSION'S DECISION IN REGARD TO VAN
DEN BERGH FOODS
The provision by Van den Bergh Foods of freezer cabinets "without charge" to
ice cream retailers on condition that they use them exclusively for the stocking
of its ice creams is contrary to Community competition law.
In parallel to proceedings before the Irish courts (which are still pending), Mars
lodged a complaint against HB with the European Commission in September 1991. Its
complaint related to the provision by HB, to a large number of retailers,
of freezer cabinets which had to be used exclusively for HB products.
In its decision of March 1998, the Commission held that HB's distribution agreements
containing the exclusivity clause were incompatible with Community competition law. It found that
HB had a dominant position on the relevant market (the market for single-wrapped
items of impulse ice-creams in Ireland), illustrated by the degree of both numeric
(79%) and weighted (94%) distribution of HB products and by the strength of
the brand. Moreover, HB's position was reinforced by the strength of Unilever on
the other ice-cream markets in Ireland and on the international markets. The Commission
observed that the network of HB's agreements as a whole had the effect
of restricting the ability of retailers to sell products of HB's competitors. It
found that the restrictive effect was a consequence of the space constraints inevitably
experienced by retail outlets. According to the Commission, in some 40% of all
outlets in Ireland, the only freezer cabinet or cabinets for the storage of
impulse ice-cream was or had been provided by HB, and only 17% of
retailers had freezer cabinets which are not subject to an exclusivity clause. Consequently,
it was difficult for other suppliers to penetrate the market without first of
all overcoming substantial barriers, such as persuading the retailer to replace a freezer
cabinet or to install an additional cabinet. In its decision the Commission also
refused to grant an individual exemption to HB and found that HB had
abused its dominant position on the market.
HB brought an action for annulment of that decision before the Court of
First Instance of the European Communities.
The Court has dismissed the action.
First of all, the Court finds that, taking into account the specific conditions
of the market, the popularity of HB ice creams, HB's strength on the
market and the specific features of the products, the effect of the agreements
as a whole is to restrict competition on the market.
The provision of a freezer cabinet "without charge", the popularity of HB's ice
cream, the breadth of its range of products and the benefits associated with
their sale are very important considerations in the eyes of retailers when they
consider whether to install an additional freezer cabinet in order to sell a
second, possibly reduced, range of ice cream or to terminate their contract with
HB. In reality, retailers only very rarely opt to replace freezer cabinets supplied
by HB, particularly because of the position and popularity of HB on the
Irish market.
The effect of the exclusivity clause is to cause retailers to act differently
towards other brands and thus distorts competition in the market. The retailers are
prepared to stock ice creams from various manufacturers, provided that they may do
so in one and the same freezer. For example, after HB had insisted
on retailers' compliance with the exclusivity clause, the numeric distribution of Mars ice
creams fell from 42% to less than 20%. The Commission therefore rightly held
that the effect of the exclusivity clause was to restrict in practice the
commercial freedom of retailers to choose the products they wished to sell in
their outlets.
The Court finds that the ability to terminate the contract in no way
precludes the effective enforcement of the contract during the period in which that
option is not used. In view of the fact that the contracts are
terminated on average every eight years, the argument that it is always possible
to terminate the contracts is unsound.
The Court also finds that the provision to retailers of freezer cabinets and
the maintenance costs of those freezers represent a financial barrier to the entry
of new suppliers on the market and to the expansion of existing suppliers.
As retailers are not inclined to accept freezer cabinets that are not free,
the supplier must acquire a stock of cabinets, which represents a large investment
that could dissuade him from entering the market.
As regards the possibility of the grant of an individual exemption by the
Commission, the Court finds that the exclusivity clause does not display appreciable objective
advantages of such a character as to compensate for the disadvantages which they
cause in the field of competition. Thus, the exclusivity clause does not contribute
to improving the production or distribution of the goods in question and does
not satisfy the first condition for the grant of an individual exemption.
The Court notes that HB has a dominant position on the market and
that HB does not dispute the definition of the market. Although the provision
of freezer cabinets on a condition of exclusivity constitutes a standard practice on
the relevant market, that activity may restrict competition where it is entered into
by an undertaking with a dominant position. The exclusivity clause has the effect
of preventing the retailers concerned from selling other brands of ice cream and
of preventing competitors from gaining access to the market. Therefore, by inducing retailers,
by those means, to obtain supplies exclusively from HB, HB has abused its
dominant position on the market.
Moreover, the Commission's decision does not deprive HB of its rights of property
in its stock of freezer cabinets and does not prevent it from exploiting
those assets by renting them out on commercial terms. HB is merely forbidden
from making them available on the basis of an exclusivity clause so long
as it holds a dominant position on the relevant market.
Reminder: An appeal against the decision of the CFI, limited to points of
law, can be brought before the Court of Justice of the European Communities
within two months of delivery.
Unofficial document, for media use only, which does not bind the Court of First Instance. Available languages: FR, EN, NL, ES, IT, DE The full text of the judgment can be found on the internet (www.curia.eu.int ). In principle it will be available from midday CET on the day of delivery. For additional information please contact Christopher Fretwell Tel: (00352) 4303 3355 Fax: (00352) 4303 2731 |