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For five years the purveyor of Connoisseur and Drumstick ice creams had its peers dripping with envy over exclusive contracts with a nationwide foodservice distributor, but now it faces the wrath of Australia's competition regulator.
Federal Court proceedings have been kicked off by the Australian Competition and Consumer Commission (ACCC) against Peters Ice Cream alleging its conduct hindered or prevented competition for single-wrapped ice creams in petrol and convenience retailers.
The competition watchdog alleges Peters engaged in exclusive dealing from around November 2014 to December 2019 through a supply deal ith PFD Food Services that prohibited distributing any competing ice cream products in certain locations around the country.
PFD is Australia's largest family-owned foodservice distributor and is the target of a $552 million takeover from Woolworths Group (ASX: WOW); a deal that incidentally is also the subject of an ACCC review.
Exclusive dealings are not illegal per se, but they are against the law if they have the purpose, effect or likely effect of substantially lessening competition.
In an announcement today, the ACCC notes 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 alleges PFD was the only distributor capable of reaching the target market nationally on a commercially viable basis for new entrants, with other potential distributors lacking a national frozen food route to the retailers in question.
The regulator will also argue 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," says 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.
"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."
Sims adds the ACCC alleges this conduct of reduced competition may have deprived ice cream lovers of a variety of choice or the benefit of lower prices.
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.
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