ACCC takes Peters to court over supply chain conduct

Federal Court proceedings against Australasian Food Group Pty Ltd, trading as Peters Ice Cream, have been instituted by the Australian Competition & Consumer Commission (ACCC).

The ACCC alleges Peters engaged in conduct which hindered or prevented competition for the supply of single-wrapped ice creams to petrol and convenience retailers.

Peters, between November 2014 and December 2019, is alleged by the ACCC, to have engaged in exclusive dealing by entering into and giving effect to an agreement with PFD Food Services to distribute its single-wrapped ice cream and frozen confectionary products to petrol and convenience retailers nationally.

The agreement contained a condition that PFD could not distribute any competing ice cream products in certain locations around Australia.

During the term of the distribution agreement, PFD made requests to distribute competing ice cream products to petrol and convenience retailers nationally, but these requests were rejected by Peters.

The ACCC has alleged that, for new entrants, PFD was the only distributor capable of distributing single-wrapped ice cream products to national petrol and convenience retailers on a commercially viable basis.

Unlike PFD, other potential distributors did not have a national frozen food route to these retailers.

Exclusive dealing occurs when one person trading with another imposes some restrictions on the other’s freedom to choose with whom, in what, or where they deal.

This is considered a violation of the law only when it has the purpose or effect or likely effect of substantially lessening competition.

In a statement the ACCC said it will also argue that it was not commercially viable for new entrants to incur the cost of establishing their own distribution network to distribute single-wrapped ice creams nationally.

“We allege that, as a result of the agreement and Peters’ conduct, other ice cream suppliers had no commercially viable way of distributing their single serve ice creams to national petrol and convenience retailers,” said ACCC Chair Rod Sims.

“Our case is that the distribution agreement and Peters’ conduct effectively raised barriers of entry, which hindered or prevented potential new entry into the market to supply single serve ice cream products to petrol and convenience retailers,” he said.

“We also allege that a substantial purpose of Peters engaging in the conduct was to protect its market position from competitors, as one of only two major suppliers of single-wrapped ice creams, who together held a combined market share of over 95 per cent during the relevant time.

“We allege that this conduct reduced competition, and may have deprived ice cream lovers of a variety of choice or the benefit of lower prices when purchasing an ice cream at one of these stores.”

During the course of the ACCC’s investigation, Peters advised the ACCC, without admission, that it has recently entered into a new agreement with PFD which no longer includes a term restricting PFD from distributing ice cream products for other ice cream producers.

The ACCC is seeking declarations, pecuniary penalties, a compliance program order and costs.

During the five year period Peters directly distributed most of its ice creams to areas in Sydney, Melbourne and Brisbane, while PFD distributed or re-supplied Peters’ ice creams in the majority of other areas.

Peters is one of the largest suppliers of single serve ice cream products in Australia, which include brand names such as Drumstick, Maxibon, Connoisseur, Frosty Fruits and BillaBong.

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