After four years of investigation, theAntitrust Authority has fined Unilever Italia Mkt. Operations S.r.l. a 60 million euro penalty for abuse of dominant position in the single-serving ice cream sector.
Unilever, abuse of dominant position
The Competition and Market Authority, so-called Antitrust Authority, has taken action against the Italian subsidiary of the Anglo-Dutch giant Unilever for abusing its dominant position in the single-serving industrial ice cream sector, in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU).
‘It is incompatible with the internal market and prohibited, insofar as it may be detrimental to trade between member states, for one or more undertakings to abuse a dominant position in the internal market or a substantial part thereof.
Such abusive practices may consist in particular:
(a) in directly or indirectly imposing unfair purchase, sale or other transaction prices or conditions;
(b) in restricting production, outlets or technical development, to the detriment of consumers;
(c) in applying dissimilar conditions for equivalent performance in business dealings with other contractors, thereby resulting in a competitive disadvantage for the latter;
(d) in making the conclusion of contracts subject to the acceptance by the other parties to the contracts of additional services, which, by their nature or according to commercial usage, have no connection with the subject matter of the contracts.” (TFEU, Article 102)
The investigation stems from reports submitted in 2013 and 2015 by an SME in Santarcangelo di Romagna, which produces popsicles mainly for beach establishments. ‘La Bomba’ – a name and a program, considering the outcome of the initiative (!) – is the brand name of the Romagna-based company’s popsicles.
‘The Bomb’ blew up the Algida – Magnum – Cornetto system. The system of business practices carried out by Unilever, owner of the above-mentioned brands, to consolidate dominance in the Ho.Re.Ca. channel. (1) through ‘corporate bullying‘ practices. Namely, the bullying of an economic giant-in this case, one of the 10 big global food sisters-against competitors, business stakeholders and consumers.
‘The Authority has ascertained Unilever’s adoption of an exclusionary strategy to the detriment of competitors (both small and larger ones), consisting of extensive use of merchandise exclusivity clauses and an articulated series of additional loyalty conditions, commercial policy instruments and conducts altogether aimed at maintaining, formally or substantially, the exclusivity of supplies to the outlets that constitute its customer base, thereby hindering competition in the market.’ (AGCM, press release 6.12.17).
‘Must-have brands’, between commercial politics and corporate bullying
No public merchant can give up offering certain products-the ‘must-have brands,’ such as Coca-Cola and Schweppes, Campari and Aperol, rather than Vivident or Tic Tacs-to their customers. At the risk, otherwise, of losing the trust of patrons who have unprecedented loyalty to such brands. Particularly when it comes to products typically intended for ‘impulse consumption,’ such as those just mentioned – but also the fateful Cornetto, Algida ice creams or Magnums – thanks in part to the substantial advertising investments made on them.
Commercial policies on must-have brands, in turn, express great generosity toward public merchants. Who, in proportion to their ability to ‘consume’ the products, are rewarded with gadgets of various types and values. From glasses to trays, items and supplies, displays and totems, vertical refrigerators, tables and chairs, umbrellas, and who knows what else. In some cases, an ‘eye is then ‘turned a blind eye’ to late payments – thus disguising real credit openings – with all due respect to the fateful ‘Article 62,’ which has always unfortunately been disapplied. (2)
Corporate bullying is triggered when the generous commercial policies mentioned above are supplemented by illicit mechanisms designed to make the merchant public exclude the purchase of competitors’ products. How to do it? With verbal agreements between area agents and customers, such as ‘I can provide you (for free, or at a realized price) with a refrigerator of ours (rather than the plastic chairs and tables), but it is understood that you will only buy our products.’ This is an effective method because it is difficult to ascertain by competition enforcement authorities.
The ‘impulse ice cream’ market, moreover, lends itself better to anti-competitive practices than others. Both because of its extraordinary catchment area, consisting of tens of thousands of public merchants with whom distributors and area agents define agreements that are difficult to reconstruct in their complexity, (3) and because of its concentration in the hands of a few large operators. Total annual sales reached 5.15 billion euros in 2015, according to the Antitrust Authority. (4)
The 2×1 harm, to competition and consumers
No wonder, then, that in recent years Unilever ice creams–Algida, Magnum, Cornetto, Carte d’Or–have taken absolute dominance. Over larger competitors, such as Sammontana, the only major Italian-owned Made in Italy ice cream industry, and Motta (Nestlé). As well as on the smaller ones, destined to succumb under the pressure of corporate bullying when even they make excellent products.
Unilever’s offerings have expanded in every direction to include vegan and gluten-free Cornetto. After, of course, eliminating palm oil. So as to cover even the narrowest crevices where competition might have peeped in.
Consumers are the ultimate, often unwitting victims of corporate bullying. They may enjoy the vegan Cornetto, but they are effectively deprived of the opportunity to choose ice creams from other brands. Ice cream that might be better or cheaper, but is nevertheless not available in cafes, diners, fast-food restaurants, sports centers and recreational clubs, not even in vending machines.
The more the bully dominates and reinforces his dominance with illicit practices, the more the consumer sees his options reduced. And he is placed on the single wagon of the platform where everything is decided for him, which brand to choose and how much to pay for the individual product, at the order of the bully. A conditioned impulse, in the interest of a few and the prejudice of many.
The text of the measure is available on the Authority’s website. (5) Unilever, according to script, ‘firmly rejects’ the Antitrust Authority’s findings, which it says resulted from ‘errors in judgment.’ Announcing the intention of an appeal at the appropriate venues, namely at the Lazio Regional Administrative Court. Ad maiora!
Dario Dongo
Notes
(1) Horeca, or HoReCa (Hotel, Restaurant, Café) is the abbreviation used to describe the catering, so-called food service industry (Eurostat, abbreviations and acronyms)
(2) Article 62 of Law 24.3.12 no. 27. See in this regard the ebook of the same name and other writings by the author, at http://www.ilfattoalimentare.it/?s=Articolo+62
(3) It is worth adding that the conditions of exclusivity established by the Antitrust Authority in the HoReCa channel would be unimaginable in the large-scale retail (GDO) channel. Against the legitimate expectation of consumers to receive as wide a range of products under different brands as possible, in every product category. If as well, careful investigations could reveal anomalies in the management of goods in forecourts, extradisplays, totems, promotional gondolas even temporary
(4) In contrast, sales of individually packaged single-serve ice cream alone are estimated at 780 million euros, in FY 2015
(5) The measure, which consists of no less than 132 pages, is published at http://www.agcm.it/component/joomdoc/allegati-news/A484_ch.%20istr.sanz._omi%20x%20pubbl.ne2.pdf/download.html
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
