Relaxing whilst doing Competition Law is not an Oxymoron

Archive for September 24th, 2013

Twilight of the Idols

with one comment


The Van den Bergh Foods case, aka the Ice Cream case, if often cited as one of the best Article 101 TFEU judgments ever handed down by the General Court.

Many praise its modern, unformalistic approach of vertical ties.

They like its focus on the economic magnitude of the foreclosure yielded by the freezer exclusivity clause.

I too have rallied this optimistic interpretation. In a case note published 10 years ago, I had laudated the General Court for its analysis.

As with novels, I should have applied the rule never read again.

Despite economic improvements in judicial reasoning, the Ice Cream judgment is fraught by several unfortunate logical shortcuts.

A quick reminder: the crux of the case was that Unilever, the largest player in the market (and the incumbent) had given freezer cabinets for free to retailers and forbidden them to store non-Unilever ice creams in those cabinets.

This, in the Commission’s view, yielded anticompetitive foreclosure, in particular in those shops where only one freezer cabinet could be stored because of space constraints.

Interestingly, the typical contract with retailers could be terminated flexibly, under a 2 months notice. Unilever thus made the rather convincing counter argument that as efficient rivals – those who could too offer cabinets for free – were not foreclosed from the market.

The GC and the Commission nonetheless based their case on the fact that despite open termination opportunities, there was a “reluctance” from retailers equipped with Unilever cabinets to terminate their contract.  As a result of retailers’ reluctance, rival ice cream producers were harmed.

On cursory analysis, the “reluctance” story was reasonably plausible. But the problem is that the evidence adduced by the Commission and the GC to prove reluctance was quite weak.

Let’s take a look: the reluctance argument seems wholly based on the unproven assumption that retailers who would terminate their Unilever contract would no longer be able to procure Unilever products. Hence, retailers just decided to stay with the contract, as Unilever products were “must store” goods.

But on the facts, the decision and judgment did not exclude that retailers remained free to use a rival freezer and still procure from Unilever without terminating the contract in the first place.  This, to me, is a major flaw of the decisions. Retailers could just have trashed the Unilever freezer or tell Unilever to recover it.

An alternative is that the Commission and the GC may have assumed that Unilever would have de facto stopped supplying it products to retailers using a rival freezer cabinet. But this would have been a stand-alone, separate infringement which would have deserved proof under the Brönner standard.

Surely, it may be that the Commission and the GC had in mind a “behavioral” reluctance theory, similar to those used in the Microsoft Media Player and Browser cases or in the ongoing Google investigation.

The idea would have been that retailers were content with their Unilever cabinet, and because of some statu quo bias or of hassle costs, they just reclined on changing freezers.

Again, however, no corroborating evidence of biases and retailers’ ineria appears in the decision and judgment.

A bit disappointing, for a judgment that has been elevated to the hall of fame of competition case-law. But overall, a good ruling.

Written by Nicolas Petit

24 September 2013 at 7:41 pm