CMA finds no grounds for action in preliminary investigations into single-wrapped impulse ice-creams
First published by Admin on October 20, 2017 in the following categories: Investigations and tagged with cma
The Competition and Markets Authority (CMA) has issued a ‘no grounds for action’ decision after initial investigations into a reportedly dominant company that supplied individually wrapped impulse ice-creams in the U.K.
Impulse ice-creams refer to individual ice-creams sold to be eaten immediately, rather than taken home.
Less than six months after investigations were first opened on 16th February 2017, the CMA are closing investigations into Unilever plc for suspected abuse of a dominant position.
About the investigation
The investigation was first opened when the U.K competition watchdog was alerted to deals and offers made by Unilever plc ice-creams. Under European and U.K competition law, deals and offers for products are allowed but must be carefully managed to ensure they’re not excessive and restrict competition.
Unilever’s promotional offers like ‘buy eight cases get four cases free‘ meant that retailers could take advantage of huge discounts and free products if they purchased a minimum number of units.
The CMA’s job was to examine: “whether the offers were likely to produce an exclusionary effect, by providing incentives to retailers to purchase a large proportion of their total requirements from Unilever… and so of restricting competition.”
The CMA’s concerns
The CMA was concerned that Ice-cream retailers only have a limited amount of freezer space. For example, if one retailer has space for 120 cases of ice-cream, he could buy 80 cases with the deal mentioned above and fill his entire freezer with those 80 purchased and the 40 provided free of charge.
With a freezer full of ice cream, he doesn’t need to go to any other supplier.
Offers that are ‘too good to be true‘ can verge on being classed as predatory pricing, which is where a company sells their products at very cheap prices, sometimes at a loss, to force smaller or poorer competitors who can’t afford to match their prices out of the market.
The results of the investigations
In this case, the CMA didn’t find any evidence of predatory pricing.
The CMA is particularly watchful of players who have a ‘dominant position‘ in the relevant market as being the companies with the most power through money and influence. They can easily restrict the market so that less influential and newer companies are excluded from competing and forced out and / or kept out of the market entirely.
In examining whether Unilever’s deals have an exclusionary effect, the CMA has to consider all the circumstances, including whether Unilever’s actions:
- Make it difficult or impossible for competitors to enter the market
- Make it difficult or impossible for retailers to choose between Unilever and other suppliers
After looking at the figures for sales by Unilever and its competitors, the CMA found there was no material change during the relevant period.
The authority also looked through a lot of Unilever’s ‘internal documents’ and found no evidence of intent to exclude competitors. On the 9th of September, the CMA came to a conclusion that the “structure and availability of Unilever’s Package Offers, taken together with the purchasing patterns of retailers, were such that Unilever’s promotional deals were unlikely to have had an exclusionary effect.”
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