98/531/EC: Commission Decision of 11 March 1998 relating to a proceeding under Articles 85 and 86 of the EC Treaty (Case Nos IV/34.073, IV/34.395 and IV/35.436 Van den Bergh Foods Limited) (notified under document number C(1998) 292) (Only the English text is authentic)
Date: 1998-03-11
Institutions: European Commission
Subjects: Ireland, dairy ice cream, dominant position, exclusive distribution agreement, food industry, restriction on competition

4.9.98

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L 246/1

II

(Acts  whose  publication  is  not  obligatory)

COMMISSION

COMMISSION  DECISION

of  11  March  1998

relating  to  a  proceeding  under  Articles  85  and  86  of  the  EC  Treaty

(Case  Nos  IV/34.073,  IV/34.395  and  IV/35.436  Van  den  Bergh  Foods  Limited)

(notified  under  document  number  C(1998)  292)

(Only  the  English  text  is  authentic)

(98/531/EC)

THE  COMMISSION  OF  THE  EUROPEAN  COMMUNTIES,

Having  regard  to  the  Treaty  establishing  the  European
Community,

to  Council  Regulation  No  17  of
Having  regard 
6  February  1962, 
implementing
Articles  85  and  86  of  the  Treaty (1),  as  last  amended  by
the Act of Accession of Austria, Finland and Sweden, and
in  particular  Article  3(1)  thereof,

first  Regulation 

Having  given  the  undertaking  concerned,  pursuant  to
Article  19(1)  of  Regulation  No  17  in  conjunction  with
Commission  Regulation  No  99/63/EEC  of  25  July  1963
on  the  hearings  provided  for  in  Article  19(1)  and  (2)  of
Council  Regulation  No  17 (2),  the  opportunity  of  being
heard on the matters to which the Commission has taken
objection,

Having  consulted  the  Advisory  Committee  on  Restrictive
Practices  and  Dominant  Positions,

to 

regard 

the  applications 

Having 
lodged  under
Article 3(2) of Regulation No 17 by Masterfoods Limited
and  Valley  Ice  Cream  (Ireland)  Limited  against  Van  den
Bergh  Foods  Limited,  formerly  HB  Ice  Cream  Limited,
alleging  that  they  are  being  hindered,  in  restraint  of
competition, 
in
Ireland,

ice-cream  products 

in  selling  their 

Having  regard  to  the  Commission  Decision  of  29  July
1993  to  initiate  proceedings  in  this  case,

to 

regard 

the  application 

Having 
for  negative
clearance/excemption  lodged  pursuant  to  Article  4(1)  of
Regulation  No  17  by  Van  den  Bergh  Foods  Ltd  on
9  March  1995  for  its  distribution  arrangements  for
impulse  ice-cream  products  in  Ireland,

Whereas:

I.

INTRODUCTION

(1) This  Decision  relates  to  the  arrangements  by  Van
den  Bergh  Foods  Limited,  formerly  known  as  HB
Ice  Cream  Limited,  (hereinafter  ‘HB’)  for  the
distribution  of  its  impulse  ice-cream  products  in
Ireland. HB pursues a policy under which it makes
freezer  cabinets  available  to  retail  outlets  stocking
its  ice-cream  products  on  the  basis  of  cabinet
exclusivity.

(1) OJ  13,  21.2.1962,  p.  204/62.

(2) OJ  127,  20.8.1963,  p.  2268/63.

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(2) On  18  September  1991,  Master  Foods  Limited,
trading  as  Mars  Ireland,  (hereinafter 
‘Mars’)
lodged with the Commission a complaint (3)  under
Article  3  of  Regulation  No  17  against  HB,  in
respect  of  the  latter’s  provision  to  a  large  number
of  retailers  of  freezer  cabinets  on  the  basis  of
cabinet  exclusivity.  Mars  claims  that  it  is  being
hindered, in restraint of competition, from gaining
access  to  retail  outlets  for  the  sale  of  its  impulse
ice-cream  products  in  Ireland  by  reason  of  this
practice.

(3) Mars  entered  the  Irish  ice-cream  market  in  1989.
In  April  1990,  the  Irish  High  Court  granted  an
interlocutory  injunction  to  HB  which  prevented
Mars  products  from  being  placed  in  HB  freezer
cabinets. In May 1992, the High Court (4) granted
HB  a  permanent  order  restraining  Mars  from
inducing retailers to store its ice-cream products in
HB’s  cabinets.  The  court  further  held  that  HB’s
policy of freezer exclusivity was not caught by the
prohibition  contained  in  Article  85(1).  It  also
found  that  Article  86  had  not  been  infringed,
either by HB’s exclusivity or by its pricing policies.
The  court  did,  however,  consider  that  HB  held
a  dominant  position  on 
impulse
ice-cream market. Mars has appealed against these
judgments  to  the  Irish  Supreme  Court.

Irish 

the 

(4) On  22  July  1992,  Valley  Ice  Cream  (Ireland)
Limited  (‘Valley’)  lodged  with  the  Commission  a
complaint (5),  against  HB  similar  in  terms  to  the
Mars complaint. Valley was a manufacturer of ice
cream  in  Ireland,  but  went  into  liquidation  in
1997. It had, until shortly before that, been acting
ice-cream
as  principal  distributor 
products  in  Ireland.

for  Mars 

(5) On  29  July  1993,  the  Commission  provisionally
concluded  that  the  system  of  distribution  at  that
time operated by HB infringed both Article 85 and
Article  86,  addressing  a  Statement  of  Objections
against  HB  to  that  effect.  HB  contested  the
its
Commission’s  view  of 
distribution  arrangements.

legality  of 

the 

(6)

In  its  Statement  of  Objections,  the  Commission
did  accept  that  HB’s  arrangements  bring  about
some  improvement  in  distribution,  but  found  that
this  was  outweighed  by  the  harmful  effects  of
restricted  competition.  It  was  none  the  less  made
clear  that  HB  remained  at  liberty  to  propose
an  alteration  to 
its  distribution  arrangements
for  impulse  ice  cream  in  Ireland  which  might  be

(3) Case  No  IV/34.073.
(4) Masterfoods  v.  HB  Ice  Cream,  [1992]  3  CMLR  830.
(5) Case  No  IV/34.395.

the 

legality  of 

capable  of  qualifying  for  an  exemption  pursuant
to  Article  85(3).  While  maintaining  its  view  as
to 
its  current  distribution
arrangements,  and  following  discussions  with  the
Commission,  HB  came 
such
proposals.  On  8  March  1995,  these  were  notified
to  the  Commission (6),  which  then 
issued  a
statement (7)  expressing  the  prima  facie  view  that
the  changes  would  merit  exemption.

forward  with 

(7) On the basis of these proposals and in the light of
HB’s  expressed  expctations  regarding  their  effects
the  market,  on  15  August  1995 (8) 
the
in 
Commission  announced  its  intention  to  take  a
favourable  view 
towards  HB’s  distribution
arrangements  as  notified.  The  changes  did  not,
however,  achieve  the  expected  results  in  terms  of
opened outlets. In view of this and of the situation
the
as 
Commission  has  revised  its  expressed  intention
(see  paragraph  247  et  seq.).  Accordingly,  on
22  January  1997  the  Commission  sent  a  new
Statement  of  Objections  to  HB.  HB  submitted  its
written  response  thereto  on  24  April  1997,  and
put  forward  its  arguments  at  an  oral  hearing  held
on  11  June  1997.

it  currently  stands 

the  market, 

in 

II. THE  FACTS

1. The  product

(i)

Ice  cream  generally

(8) The  essential  raw  materials  for  the  production  of
ice  cream  include  milk  (including  skimmed  milk),
fat  (milk  or  vegetable)  and  sugar.  Other  additions
may include, inter  alia,  emulsifying  and  stabilising
agents,  colouring  and  flavouring  substances,  nuts,
fruit  concentrate.  Legislation
chocolate,  and 
concerning  product  definition, 
labelling,  and
permitted  contents  (air  coefficient  etc.)  varies
somewhat  between  the  different  Member  States.
The  contents  of  frozen  yoghurt,  ‘water  ices’/‘ice

(6) Case  No  IV/35.436.
(7) Commission  press  release  of  8  March  1995  IP/95/229.
(8) OJ  C  211,  15.8.1995,  p.  4;  publication  pursuant  to
Article  19(3)  of  Regulation  No  17,  which  contained  a
summary  of  HB’s  distribution  arrangements  as  revised,
inviting  the  comments  of  interested  third  parties.  Comments
were  received  from  Mars.

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pops’  (water-based  products)  and  ‘soft’/‘whipped’
ice  cream  (which  is  made  with  vegetable  fat  and
has  no  dairy  content)  differ  substantially  from
ice-cream  products  generally.

(9)

Ice-cream  products  must  be  kept  at  a 
low
temperature  during  all  stages  of  production  and
distribution  before  ultimate  consumption.  An
exception  to  this  is  soft  ice  cream  which  is
delivered  to  a  retailer  in  the  form  of  an  ambient
soft  mix  (sold  to  retailers  either  as  a  ‘fresh’  or
‘sterile’  product),  and  is  only  transformed  into  a
final  product  by  being  processed  through  special
dispensing  equipment  on  the  retailer’s  premises.

(10)

Ice  cream  can  be  categorised  according  to  how  it
is  manufactured  and  distributed.  A  distinction  is
usually  made  between  ‘artisan’  ice  cream  on  the
one hand, which is generally produced, distributed
and  consumed  locally  on  a  small  scale,  and
industrial 
is
produced for wide-scale distribution. Almost all of
the  ice  cream  produced  and  sold  in  Ireland  is  of
the  industrial  kind.

ice  cream  on  the  other,  which 

(11)

Ice  cream  can  also  be  categorised  according
to  where  it  is  intended  to  be  consumed.  This
generally  includes  three  categories:

— ‘impulse’ 

ice  cream,  consisting  of  single-
wrapped  items  (often  stick  products),  and
individual  portions  of  ‘scooped’  ice  cream,
designed for immediate consumption at or near
the  place  of  purchase,

— ‘take-home’  ice  cream,  including  multipacks  of
single items, blocks, tubs, dessert products and
so  on,  intended  for  consumption  at  home,

— catering  ice  cream,  which  is  sold  in  bulk
to  hotels, 
for
consumption,  as  part  of  a  catering  service,
in  those  places.

restaurants, 

cafés, 

etc., 

are  important  factors  in  the  sale  of  impulse  ice
cream.  If  the  product  is  not  available  or  visible,
that 
is  a  sales  opportunity  which  may  be
permanently  lost (9),  consumers  of  impulse  ice
cream  will  in  general  not  travel  to  buy,  or
defer  a  purchasing  decision.  Access  to  wide-
scale  distribution  is  particularly  crucial  for  the
sampling  by  consumers  of  new  products,  thereby
stimulating  demand  for  those  products.  Single-
wrapped  impulse  ice-cream  products  are  almost
supported  by
invariably  branded  products, 
considerable  investment  in  advertising  and  other
promotional activity.

(13) Seasonal  factors  have  a  considerable  effect  on  the
consumption of impulse ice cream, with most sales
being  made  during  the  summer  months.  In  1992,
for  example,  approximately  two  thirds  of  HB’s
impulse sales were made in the four-month period
from  May  to  August.  Sales  also  depend  to  a
substantial  degree  on  the  weather.

(14) While  children  are  particularly 

important  as
purchasers  of  single  item  ice-cream  products,  the
trend  in  new  industrial  impulse  lines  is  towards
‘premium’  or 
(terms
‘super  premium’ 
generally  denoting  products  with  a  high  dairy  fat
content  and  a  low  proportion  of  air),  which
appeal  primarily  to  adult  consumers.  These  are
more  highly  priced  products  aimed  at  a  wider
market  which  includes  adults,  and  represent  the
fastest  growing  segment  of  the  impulse  market.

items 

(15) Scooping  ice  cream  is  delivered  in  bulk  form  to
the  retailer,  who  generally  stores 
in  a
specially-designed freezer cabinet and serves it to a
customer on a cone. In Ireland, scooping ice cream
is  of  only  marginal  importance  in  terms  of  sales.

it 

(16) Soft  ice  cream  is  delivered  in  the  form  of  an
ambient  soft  mix  to  the  retailer,  who  must  then
further  process  the  mix  by  the  addition  of  further
ingredients  and  by  the  use  of  special  dispensing
equipment  which  transforms  it  into  the  low-

(ii)

Impulse  ice  cream

(12) Single-wrapped  items  of  impulse  ice  cream  are
generally  stored  in  self-service  freezer  cabinets
installed  in  or  just  outside  the  retailer’s  premises.
The  cabinets  are  usually  prominently  positioned.
As with all products relying on impulse purchasing
decisions, availability and visibility at point of sale

(9) Noel  McEneaney,  HB’s  Marketing  Manager  is  quoted  in  the
March  1996  issue  of  the  Irish  retail  magazine  ‘Shelflife’  as
saying:  ‘There  is  a  rule  of  thumb  that  for  every  three  people
who purchase an impulse product, only one entered the shop
with  the  intention  of  buying  an  ice  cream.  We  try  to
maximise  this  factor  by  ensuring  that  the  first  thing  the
customer sees when he or she enters the shop is an ice-cream
cabinet,  either  inside  the  entrance  or  next  to  the  cash
register’.

L 246/4

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is  served  to  the
temperature  product  which 
customer.  Soft  ice  cream  is  usually  served  on  a
wafer  cone.

names.  There  is,  moreover,  a  considerable  volume
of  trade  between  Member  States  in  ice-cream
products.

(17) From the manufacturer’s point of view, large-scale
business  in  impulse  ice  cream  is  capital  intensive
and  involves  considerable  business  risks  due  to  its
dependence  on  unpredictable  weather  conditions.
It  requires  high  levels  of  working  capital  in  order
to  finance  manufacture  in  advance  of  the  season
and  to  hold  stocks.  Considerable  logistical  and
planning  demands  are  imposed  on  the  business
over  the  annual  cycle  in  order  to  support  the
relatively  short  campaign  season.

(21) The  practice  of  supplying  freezer  cabinets  to
retailers  subject  to  a  condition  of  exclusivity  is
widely  employed  by  ice-cream  manufacturers  and
distributors 
by
throughout  Europe, 
companies  of  the  Unilever  group  and  by  many  of
its  competitors.

both 

3. The  ice-cream  market  in  Ireland

2. The  ice-cream  market  in  the  Community

(i) General

(18) Within  the  Community,  Member  States’  ice-cream
markets  demonstrate  different  characteristics.  The
annual  consumption  of  ‘artisan’  ice  cream,  for
example,  ranges  from  over  six  litres  per  capita  in
Italy  to  less  than  half  a  litre  per  capita  in  Spain,
and even less in Ireland. Industrial supply accounts
for  most  of 
in  Europe.
Production of industrial ice cream is highest in the
UK  and,  in  descending  order,  in  Germany,  Italy
and  France.  Sales  of  impulse  ice  cream  as  a
proportion of the total ice-cream market also vary
considerably  between  Member  States.

the  products  sold 

(19) Companies  in  the  Unilever  group  are  the  largest
ice-cream  suppliers  in  most  Member  States.  In  the
impulse sector, Unilever companies are the market
leaders  in  every  Member  State  with  the  exception
of  Spain,  Greece  and  Finland.  The  Nestlé,
Artic/Beatrice,  Grand  Metropolitan  and  Schöller
groups all sell ice cream in more than one Member
State.  Some  of 
these  groups  of  companies.
Unilever and Nestlé for example, trade in different
Member  States  under  different  names.

(20) National  legislation  on  the  content  of  ice  cream
is  not  harmonised 
the  Community.  The
in 
differences  that  exist,  especially  those  relating  to
the permitted types of dairy and vegetable fat, may
give  rise  to  material  differences  in  the  products
available  in  different  Member  States  and  in  their
cost.  Average  retail  prices  for  similar  and  even
identical 
ice-cream  products  can  also  vary
significantly  from  one  Member  State  to  another.
An analysis, however, of the range of products on
offer  for  sale  by  suppliers  operating  in  several
markets  shows  that  similar  or  identical  products
are  often  sold  under  different  product  or  brand

(22) Per  capita  consumption  of  ice  cream  in  Ireland  is
one  of  the  highest  in  the  Community.  The  total
size,  in  volume  and  value  terms,  of  industrial  ice
cream  marketed  in  Ireland  is  outlined  in  the  table
below  for  1995  and  1996 (10):

1996
(volume)
(1 000
litres)

1996
(value)
(IEP
1 000)

1995
(volume)
(1 000
litres)

1995
(value)
(IEP
1 000)

Impulse

11 632

46 425

12 297

56 430

Multipacks

1 480

5 585

1 388

5 597

Take  home

14 065

28 832

15 542

31 281

Catering

4 718

11 175

4 756

10 954

Total

31 895

96 523

33 983

104 262

During the summer of 1995, sales (in particular of
impulse  products)  were  boosted  by  good  weather
conditions.  Comparatively 
poorer  weather
conditions during the summer of 1996 explain the
relative  decline  in  sales  for  that  year.  The  total
value of the soft ice-cream market (11) in Ireland is
estimated by HB as standing at approximately IEP
[. . .] (*)  annually.

(10) Source:  AC  Nielsen,  a  leading  market-research  company.
The value figures are for retail sales, and are not the same as
the  GSV  figures  referred  to  elsewhere;  GSV  figures  include
neither  the  retailers’  margin  nor  the  VAT  rate.  The  figures
shown  above  include  ‘water  ices’.

(11) According  to  HB,  market  information  on  this  sector  is  not

publicly available.

(*) Business  secret.

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(ii) HB

(23) HB 

is 

to 

Ireland  back 

Ireland’s  principal  manufacturer  and
distributor  of  ice-cream  products.  The  company
traces  its  position  as  the  predominant  supplier  of
ice-cream  products 
its
in 
acquisition in 1968 of the ice-cream business of its
principal  rival  at  the  time,  Premier  Dairies (12).  It
has, since 1974, been a part of the Unilever group
of companies. The company was reformed in 1993
as Van den Bergh Foods Ltd, following the merger
of HB Ice Cream Limited with other companies in
it  achieved  a
the  Unilever  group.  In  1996, 
turnover  of  some  IEP  [. . .].  The  corresponding
turnover  figure  for  1995  was  IEP  [. . .],  up  from
IEP  [. . .]  in  1994  and  IEP  [. . .]  in  1993.

two  parent 

(24) The  multinational  Unilever  group  of  companies
is  one  of  the  world’s  leading  consumer-goods
manufacturers.  The 
companies,
Unilever  NV  and  Unilever  plc,  achieved  a
worldwide  consolidated  turnover  in  1996  of  some
GBP  33,5  billion.  The  turnover  of  the  Unilever
group in Ireland for the same period amounted to
some IEP 231 million. Companies belonging to the
Unilever  group  produce  and  distribute  ice-cream
products  in  all  Member  States,  in  most  of  which
Unilever  is  the  market  leader.  Unilever’s  policy  in
the various national ice-cream markets has been to
acquire  local  ice-cream  companies  and  develop
brands  on  a  national  basis.  More  recently,
however, 
some  products
internationally,  notably 
the  highly-successful
‘Magnum’  stick  bar.

it  has  developed 

(25) HB  supplies  a  complete  range  of 

ice-cream
products,  including  a  full  range  of  impulse  items
(including  premium  products),  many  of  which
enjoy  very  great  popularity  with  consumers.  The
majority  of  the  products  are  manufactured  in
Ireland,  but  some 
items  are  made  by  other
Unilever  ice-cream  companies  and  imported  by
HB.  The  ice  cream  is  marketed  under  the  ‘HB’
brand,  consumer  awareness  of  which  is  very  high
in  Ireland.  HB  also  sells  ambient  soft  mix  to
retailers  for  transformation  by  them  into  soft  ice
cream.

1993

1994

1995

1996

Impulse

8 138

8 563

10 170

9 736

Multipacks

648

908

1 091

2 664

Take  Home

10 392

10 960

11 582

15 344

Catering

737

1 146

1 189

1 788

Total

19 915

21 577

24 032

23 398

(27)

In  1996,  HB  marketed  a  total  in  impulse  ice
cream,  in  value  terms,  of  IEP  [. . .]  at  GSV  (gross
sales  value),  compared  with  a  marketed  total  in
1995  of  some  IEP  [. . .],  and  in  1994  of  some  IEP
[. . .].

(28) HB  achieved  a  share  of  the  market (13),  by  value,
for  impulse  ice  cream  in  Ireland  of  about  85 %
during  the  four-month  period  from  June  to
September  of  1996,  up  from  83 %  for  the  same
period  in  1995,  from  77 %  for  the  summer  of
1994  and  from  76 %  for  the  summer  of  1993.  In
volume  terms,  HB’s  market  share  in  the  summer
of  1996  amounted  to  some  85 %,  up  from  83 %
for  the  same  period  in  1995,  and  from  80 %  in
1994  and  1993.  In  the  June/July  period  of  1997,
HB’s  volume  share  amounted  to  89 %  and  its
value  share  was  also  89 %.  HB  attributes  this
increase  in  its  market  share,  at  least  in  part,  to
the  financial  difficulties  experienced  by  Valley,
and  to  the  termination  of  the  joint-distribution
arrangement  between  Mars  and  Valley.  HB
estimates  its  share  of  the  soft  ice-cream  market  in
Ireland  as  standing  at  about  [. . .] %.

(iii) Other  manufacturers

(29) The  remainder  of  the  Irish  ice-cream  market  is
shared  principally  between  Mars,  Valley,  Nestlé,
Leadmore  (Ireland)  Ltd  (hereinafter  ‘Leadmore’),
Dale  Farm  Dairy  Group  Ltd  (hereinafter  ‘Dale
Farm’),  and  Häagen  Dazs.

(a) Mars

(26) The total volume of ice cream marketed by HB in
Ireland  is  outlined  in  the  table  below  (1 000
litres):

(30) Mars 

the 

is 

a  wholly-owned 

of
privately-owned  US-multinational  Mars

subsidiary 

(12) Overnight,  HB’s  share  of  the  ice-cream  market  increased
from  42 %  to  80 %.  In  return,  Premier  Dairies  acquired
HB’s  milk  business.

(13) These  market-share  figures  are  derived  from  AC  Nielsen
which,  for  the  purpose  of  calculating  those  figures,  uses  the
same  market  definition  as  in  the  present  Decision,  with  the
exception of the inclusion of ‘water ices’, this inclusion does
not,  however,  affect  the  proportional  shares  of  the  various
market  participants  to  any  significant  extent.

L 246/6

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it 

such, 

is  part  of  an
Incorporated.  As 
international  group  with  subsidiaries 
in  most
Member  States.  Mars  first  entered  the  ice-cream
market  when  it  purchased  Dove,  a  US  ice-cream
company.  Building  on  the  renown  of  its  ambient
confectionery  brands,  Mars  developed  ice-cream
versions  of  some  of 
thereby
extending  them  into  another  product  category.
Mars  manufactures  all  of  its  ice  cream  for  the
European  market  at  its  production  facilities  in
France (Doveurope SA) and uses the same product
names  in  each  Member  State.  It  first  launched  its
ice-cream  products  in  Europe  in  1988.

those  brands, 

(31) Mars  began  selling  its  ice  cream  in  Ireland,  in
single-item form as well as in multipacks, in 1989.
The  brands’  already  high  recognition  among
consumers  reduced  the  costs  of  market  launch.
The  range  of  ice-cream  products  offered  by  Mars
is  limited  to  a  relatively  small  number  of  items,
most  of  which  are  in  the  premium  (high-price)
segment  of  the  market  and  appeal  primarily  to
adult  consumers.

(32) Mars’  market  share  in  value  terms  for  impulse  ice
cream  in  Ireland  during  the  period  from  June  to
September  1996  was  about  6 %,  down  from  7 %
for  the  same  period  in  1995,  and  down  from
about 10 % for the summer of 1994 and 14 % for
1993. Mars’ shares in volume terms are somewhat
lower,  reflecting  the  premium  nature  of  the  range
of  products  which  it  offers.  In  the  summers  of
1995 and 1996, it achieved some 4 %, down from
about  6 %  in  summer  1994,  and  from  8 %  in
1993.  In  the  June/July  period  of  1997,  Mars’
volume share amounted to 4 % and its value share
was  5 %.

(b) Valley

impulse 

(33) Until  its  liquidation  in  October  1997,  Valley
supplied  a  wide  range  of 
ice-cream
products,  though  it  did  not  offer  products  in  the
premium  category.  Valley  had  a  history  of
financial  difficulty,  including  its  liquidation  and
subsequent reconstitution in 1985. It had a market
share (value) in the summer of 1996 of about 6 %,
compared with a share for 1994 and 1995 of 7 %,
and  for  1993  of  5 %.  Its  share  in  volume  terms
amounted to about 8 % in 1996, compared to 9 %
the previous year. In the June/July period of 1997,
Valley’s  volume  share  amounted  to  3 %  and  its
value share was 2 %. From 1989 until early 1997,
Valley  was  the  primary  distributor  of  Mars’
impulse  ice-cream  products.

(c) Nestlé

(34) Nestlé  is  a  multinational  company  with  ice-cream
subsidiaries in most Member States. Nestlé entered
the  Irish  market  in  1994,  and  achieved  a  market
share  by  value  and  volume  of  about  2 %  in  1995
and  1996,  up  from  about  1 %  in  1994.  In  the
June/July  period  of  1997,  Nestlé’s  volume  and
value  shares  both  amounted  to  2 %.

(d) Häagen  Dazs

(35) Häagen  Dazs  (part  of  the  Grand  Metropolitan
group  of  companies)  entered  the  Irish  impulse
ice-cream  market  in  1993  with  a  limited  range  of
premium-priced luxury ice creams. Its share of the
impulse  ice-cream  market  is  very  small  and  is  not
separately  calculated  by  Nielsen.

(e) Dale  Farm

(36) Dale Farm, a subsidiary of the UK dairy company
Northern  Foods,  is  a  company  primarily  based  in
Northern  Ireland  and  the  market  leader  there;  it
distributes  its  ice-cream  products  via  independent
franchisees  and  agents.  It  secured  a  1 %  volume
and  value  market  share  in  the  summers  of  1995
and 1996, up from 0,5 % in 1994. In the June/July
period  of  1997,  Dale  Farm’s  volume  and  value
shares  both  amounted  to  1,5 %.  Dale  Farm  also
distributes  Mars’  products,  though  these  are
supplied  to  it  by  the  UK,  rather  than  the  Irish,
Mars subsidiary.

(f) Leadmore

(37) Leadmore  is  a  regional  producer  of  ice-cream
products. In December 1994, Leadmore Ice Cream
Ltd  went  into  receivership.  It  was  purchased  as  a
going concern from the receiver in May 1995 and
(Ireland)  Ltd.
reconstituted 
Leadmore  achieved  a  value  market  share  of  about
0,5 % in the summers of 1995, 1996 and June/July
1997,  down  from  3 %  in  the  summer  of  1994.
Leadmore 
limited
geographic area.

largely  operates  within  a 

as  Leadmore 

(g) Soft-mix  suppliers

(38) Apart  from  HB  (see  above),  the  other  principal
suppliers  of  soft  mix  in  Ireland  are:  R&F  Martin
(trading  under  the  name  ‘Angelito’s’),  with  an
estimated  35 %  market  share;  Pritchards,  with  an
estimated  20 %  share;  other  suppliers  include
Leepatrick  Dairies  and  Dawn  Dairies,  with  even
smaller shares.

4.9.98

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4. Distribution channels for impulse ice cream in

Ireland

(i) General

(41) As  can  be  seen,  the  structure  has  changed  little
over  the  three-year  period,  except  for  a  decline  in
the  number  of  grocery  outlets.  Most  of  these
outlets  sell  impulse  ice  cream.  In  1994,  the
proportion was 95 %. HB estimates the number of
retail  outlets  selling  impulse  ice  cream  as  standing
(in 1997) at 9 454, on the basis of the AC Nielsen
figures.

(39)

Ireland, 

impulse 

industrial 

ice  cream 

tobacconists, 

is
In 
distributed  to  consumers  through  a  wide  array  of
retail  and  other  outlets  ranging  from  grocery
stores,  the  ‘traditional’  retail  trade  (often  referred
sweetshops,
to  as  TSNs  — 
newsagents),  garage  forecourts,  and  kiosks  to
places  of  entertainment  and  leisure.  By  far  the
most  important  outlets  for  impulse  sales  are  the
traditional  retail  trade,  grocery  stores  (including
symbol/franchise  groups)  and  garages.  This  is
illustrated  by  AC  Nielsen  surveys (14)  of  the
ice-cream  market  in  Ireland  for  the  summer  of
1992  and  April/May  1995  which  gave 
the
following  breakdown  (in  value  terms)  of  impulse
the  different  retail
ice  cream  sold 
channels:

through 

June/July
1992

August/
September
1992

April/May
1995

Multiples

Grocery

TSN/garages

3 %

60 %

37 %

4 %

59 %

37 %

2 %

55 %

43 %

(40) The AC Nielsen retail censuses for 1991 and 1994
show  the  following  retail  outlet  structure  for
the  food  and  confectionery  trade  (numbers  of
outlets):

Multiples

Symbol  groups

Grocery

TSNs

Garages

1991

1994

154

999

6 069

1 864

1 186

160

1 015

5 652

1 863

979

Total

10 272

9 669

(14) AC  Nielsen’s  impulse  ice  cream  audit  is  the  only  regular
reliable source of market data concerning the distribution of
impulse  ice  cream  in  Ireland.  The  outlets  included  in
Nielsen’s  ‘Universe’  are  the  same  as  those  surveyed  for  its
ambient confectionery audit and excludes some marginal ice
cream  outlets  such  as  cinemas,  theatres  and  ice-cream
stands.

(42) Multiples 

sell 

supermarkets) 

(a  category  of  outlets  essentially
comprising 
principally
take-home  ice  cream,  including  multipacks,  and
these  are  often  stored,  as  are  frozen  foods,  in  the
retailers’  own  freezer  cabinets.  It  should  also  be
noted  that  in  some  of  the  smaller  grocery  outlets
in  Ireland, 
ice-cream
products  can  be  sold  from  the  same  outlets  and
even  from  the  same  freezer  cabinet.

impulse  and  take-home 

(43) Normal retail outlets clearly have limited space for
the  siting  of  freezer  cabinets.  The  outlets  which
are  the  most  important  for  the  sale  of  impulse  ice
in  area,  and  are
cream  are  generally  small 
consequently  under  particular  space  constraints.
Impulse  ice  cream  is  a  marginal  product  for  most
retailers,  in  that  it  will  only  account  for  a  limited
percentage of an outlet’s turnover and profits, and
competes  for  sales  space  with  a  range  of  other
(impulse  and  non-impulse)  products,  many  of
which have the advantages that their sales are not
seasonally  variable  and  so  annually  may  provide
higher  sales  per  unit  of  area (15).  According  to
information  provided  by  HB,  ice  cream  amounts
to  only  8,5 %  in  value  of  total  sales  in  Ireland  of
‘impulse’  products  (confectionery,  soft  drinks,
savoury  snacks  and  ice  cream).  Moreover,  the
space  which  is  available  in  an  outlet  is  not  all  of
equal  value  for  the  sale  of  impulse  products:
prominence  of  display  is  crucial  (see  footnote  9).

cream, 

in  numeric 

terms,  where 

(44) Access  to  distribution  is  normally  measured  in
terms  of:  (a)  ‘unweighted  (numeric)  distribution’,
namely  the  percentage  of  outlets  offering  impulse
ice 
a
manufacturer’s  products  are  available;  and  (b)
‘weighted  distribution’,  namely  the  percentage  of
outlets  offering 
ice  cream  where  a
manufacturer’s  products  are  available,  weighted
for  turnover  in  impulse  ice  cream.  Although
weighted  distribution  is  generally  considered  the
more 
company’s
distribution levels, in the case of impulse products
numeric distribution is of particular importance: it
is  the  most  accurate  indication  of  the  widespread
availability  (and  visibility)  of  the  product  to
consumers.  The  importance  of  high  levels  of

important  measure  of  a 

impulse 

(15) The market survey carried out by Lansdowne in the summer
of  1996,  described  in  detail  below,  found  that  there  was
only  minimal  freezer  movement  to  satisfy  seasonal  demand
variation  (see  paragraph  97).

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numeric  distribution  is  most  pronounced  where
impulse products are being launched in the market
for  the  first  time,  thereby  increasing  the  chance
that  consumers  will  try  the  product  at  least  once.

(ii) HB

(45) HB  ice-cream  products  are  available  in  each
category  of  distribution  channel  referred  to  at
paragraph  38.  HB  sells  its  impulse  ice-cream
products  to  [. . .]  customers  in  total.  [. . .]  ([. . .]
%) of HB’s customers have an annual turnover in
HB  impulse  ice  cream  of  less  than  IEP  1 500.

(46) According  to  AC  Nielsen  surveys  conducted  in
Ireland over the last few years, HB achieved about
79 %  numeric  distribution  and  94 %  weighted
distribution  for  its  impulse  ice-cream  products  in
the  August/September  period  of  1995.  This  means
that  its  products  were  being  sold  from  79 %  of
outlets  by  number (16),  and  that  HB 
impulse
products  were  being  sold  from  outlets  accounting
for  94 %  of  total  impulse  ice-cream  sales  in
Ireland.  The  figures  were  almost  the  same  in  the
June/July  period  of  that  year,  when  the  weighted
share  was  95 %.  In  June/July  1994,  the  numeric
and  weighted  distribution  figures  for  HB  were
78 %  and  92 %  respectively.  In  August/September
of  that  year,  the  figures  were  79 %  and  93 %.  In
the  June/July  period  of  1996,  HB’s  numeric
distribution  was  82 %  and  its  weighted  share
in  August/September  1996,  the  figures
96 %; 
remained  unchanged,  but  in  June/July  1997,  HB’s
numeric  distribution  was  85 %  and  its  weighted
share  97 %.

(iii) Mars

(47) According  to  AC  Nielsen,  Mars  achieved  about
35 %  numeric  distribution  and  48 %  weighted
distribution  for  its  impulse  ice-cream  products  in
the  August/September  period  of  1995.  The  figures
were the same in the June/July period of that year.

(16) The  real  figures  for  unweighted/numeric  distribution  are
somewhat  higher,  because  not  all  the  outlets  surveyed  stock
impulse ice cream. For example, only 93 % of all the outlets
surveyed  in  this  time  period  were  selling  impulse  ice  cream.
In  this  instance,  therefore,  it  is  more  accurate  to  adjust  the
figure of 79 % to 79/93 = 85 %. A similar adjustment can be
made  for  all  the  time  periods,  but  has  not  been  for  the
purposes  of  this  Decision.  The  same  distortion  does  not
exist  for  the  weighted  figure.

In  June/July  1994,  the  numeric  and  weighted
distribution figures for Mars were 36 % and 56 %
respectively. In August/September of that year, the
figures  were  34 %  and  52 %.  In  the  June/July
period  of  1996,  Mars’  numeric  distribution  was
in
32 % 
August/September  1996,  the  numeric  figure  was
31 % and the weighted share remained unchanged.
In  June/July  1997,  its  numeric  distribution  was
30 %  and  the  weighted  share  40 %.

its  weighted 

share  43 %; 

and 

(48) Mars  estimates  (on  the  basis  of  a  survey  carried
out by its salesforce at the time) that, prior to the
granting  of  the  interlocutory  injunction  by  the
Irish  High  Court  in  1990  (subsequently  made
permanent,  see  paragraph  3),  preventing  Mars
from  inducing  retailers  to  stock  Mars  ice-cream
products in HB cabinets, it had attained a level of
some  42 %  numeric  distribution  in  the  impulse
ice-cream  market 
level  was
reached  within  the  first  few  months  of  the  launch
of  its  products  in  the  Irish  market  and  was
achieved,  in  large  part,  by  the  placing  of  Mars
products  in  HB  freezer  cabinets.  Following  the
injunction,  Mars  estimates 
level  of
distribution  fell  to  below  20 %.

in  Ireland.  This 

that 

its 

(iv) Other  manufacturers

(49) Valley  achieved  numeric  distribution  in  August/
September  1995  of  29 % 
and  weighted
distribution  of  36 %  in  the  same  period.  In
June/July  1995  the  figures  were  30 %  and  37 %
respectively.  In  June/July  1994,  they  were  28 %
and  39 %  respectively;  in  August/September  1994,
they  were  29 %  and  39 %  respectively.  In  the
June/July  period  of  1996,  Valley’s  numeric
distribution  was  26 %  and  its  weighted  share
31 %;  in  August/September  1996,  the  weighted
figure  was  30 %  and  the  numeric  share  remained
unchanged. 
its  numeric
distribution  fell  to  20 %  and  its  weighted  share  to
19 %.

June/July  1997, 

In 

(50) Nestlé  achieved  numeric  distribution  in  August/
September  1995  of  20 %, 
and  weighted
distribution  of  25 %  in  the  same  period.  In
June/July  1995  the  figures  were  20 %  and  26 %
respectively.  In  June/July  1994,  they  were  19 %
and  18 %  respectively;  in  August/September  1994,
they  were  20 %  and  19 %  respectively.  Most  of
Nestlé’s  distribution 
in  1994  were
accounted  for  by  sales  of  just  one  of  its  range  of
products,  ‘Fruit  Pastilles’.  In  the  June/July  period
of  1996,  Nestlés  numeric  distribution  was  19 %
and its weighted share 24 %; in August/September
1996,  the  numeric  figure  was  18 %  and  the

figures 

4.9.98

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its
weighted  share  25 %.  In  June/July  1997, 
numeric  distribution  increased  to  20 %  and  its
weighted  share  declined  to  21 %.

independent  intermediaries;  wholesale  business  in
ice  cream  is  small-scale  in  Ireland.

(51) Dale  Farm  achieved  numeric  distribution 

in
August/September  1995  of  11 %,  and  weighted
distribution  of  12 %  in  the  same  period.  In
June/July  1995  the  figures  were  11 %  and  11 %
respectively. In June/July 1994, they were 5 % and
6 %  respectively;  in  August/September  1994,  they
were  4 %  and  6 %  respectively.  In  the  June/July
period  of  1996,  Dale  Farm’s  numeric  distribution
was  9 %  and 
in
August/September  1996,  the  numeric  figure  was
8 %  and  the  weighted  share  7 %.  In  June/July
1997,  the  numeric  share  was  11 %  and  the
weighted  share  11 %.

its  weighted  share  8 %; 

(52) Prior  to  going  into  receivership  at  the  end  of
1994,  Leadmore  had  secured  in  June/July  1994  a
17 %  numeric  distribution  and  a  15 %  weighted
figure.  Its  numeric  distribution  figure  in  the  same
period  of  1995  was  some  10 %.  In  the  June/July
period  of  1996,  Leadmore’s  numeric  distribution
was  7 %  and  its  weighted  share  6 %.  In  June/July
1997,  the  numeric  share  was  at  4 %  and  the
weighted  share  7 %.

5. Distribution  arrangements  for  impulse  ice

cream  in  Ireland  generally

(53) The  wide-scale  distribution  of  industrial  ice  cream
requires,  among  other  things,  frequent  delivery
using refrigerated transport from the factory to the
sales  outlet  or  catering  establishment,  which  must
in  turn  have  cold-storage  facilities  (usually  freezer
cabinets)  on  the  premises.  A  manufacturer  of  ice
to  build  up  his  own
cream  needs  either 
distribution  network  for  frozen  products,  or  to
conclude  an  agreement  allowing  him  access  to  the
distribution  network  of 
ice-cream
manufacturer or wholesaler. A distributor needs to
be  able  to  ensure  frequent  ‘drops’  and  to  respond
to  orders  at  short  notice,  particularly  in  summer.

another 

to 

impulse 

ice  cream  to 

(54) The custom in Ireland has been for manufacturers
lend  freezer
supplying 
cabinets  to  the  retailer  free  on  loan  (i.e.  with  no
direct  charge)  and  subject 
freezer-cabinet
agreements,  under  which  the  retailer  undertakes
that  freezers  are  to  be  used  exclusively  for  the
(cabinet
the 
storage  of 
exclusivity);  this 
in  the  market
research  detailed  below  (see  paragraphs  90  and
91).  The  supplier  usually  provides  a  maintenance
service for the freezer cabinets, also free of charge
(with  no  direct  charge).  Manufacturers  often
supply  most  of  their  products  to  retailers  direct,
to
including 

supplier’s  products 
is 

agents,  without 

illustrated 

selling 

via 

(55) Until  the  disposal  by  HB  of  a  portion  of  its
cabinet  fleet  in  1996  (see  paragraphs  72  and  73),
there appear to have been very few retailer-owned
cabinets in place in Ireland for the storage and sale
of  impulse  ice-cream  products,  as  is  illustrated  by
the  market  research  outlined  at  paragraph  85  et
seq.

6. HB’s  distribution  arrangements  for  impulse

ice  cream  in  Ireland

(i) General

(56) HB  operates  a  direct  distribution  system  to  80 %
of its ice-cream outlets in Ireland. Delivery is made
direct  to  the  cabinet,  whether  it  is  owned  by  HB
or otherwise. HB has regional depots, from which
local  delivery  in  its  own  fleet  of  refrigerated  vans
is  carried  out.  The  remaining  20 %  of  its  outlets
receive  deliveries  from  eight  different  local  agents
who  distribute  on  behalf  of  HB;  the  arrangements
with  these  distributors  are  long-standing  and  stem
from  logistical  difficulties  for  HB  in  otherwise
achieving 
coverage  by  direct
distribution to all outlets. Within the Irish market,
HB  alone  has  a  nationwide,  vertically  integrated
distribution  network.

geographical 

(57) HB  provideds 

turnover-related  discounts 

for
purchases  of  its  ice  cream  (not  applicable  to
soft-mix ice cream). These are given in accordance
with  a  graduated  scale  ranging  from  (for  1997)  a
2 %  discount  for  purchases  of  IEP  1 350  to  IEP
2 750  to  an  11 %  discount  for  purchases  of  IEP
26 601 or more. The discounts are made available
to  all  retailers  of  HB  ice  cream  irrespective  of  the
question  of  cabinet  ownership.

(ii) Cabinet  provision

(a) HB-exclusive  cabinets

(58) HB has for many years made available to retailers
freezer  cabinets  for  the  storage  and  display  of
impulse  ice  cream  at  the  point  of  sale (17).  The
cabinet  is  either  loaned  to  the  retailer  with  no
direct  charge  (see  paragraphs  76  to  79)  or  leased
for  a  nominal  annual  rent  (IEP  1)  which  is  not
collected.  The  maintenance  and  repair  of  the
cabinets  is  also  performed  by  HB.  HB  does  not

(17) The  storage  of  HB’s  take-home  ice-cream  products  is  also

permitted.

L 246/10

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provide  dispensing  machinery  to  retailers  for  the
processing  of  soft  ice  cream.

(59) The  cabinet  is  supplied  in  accordance  with  a
standard  form  contract  concluded  between  HB  on
the  one  hand  and  the  retailer  on  the  other;  the
main  provisions  of  the  cabinet  agreement  are
that:

(61) HB has at present (in 1997) [. . .] cabinets installed
in outlets in Ireland as ‘front-of-shop’ (19) cabinets.
In  1995,  HB  marketed  IEP  [. . .]  in  outlets  with
HB  freezer-cabinet  agreements,  representing  [. . .
more  than  95 %  . . .]  of  the  total  impulse  ice
cream marketed by HB in Ireland in that year (see
paragraph 27). In 1994, HB marketed IEP [. . .] in
outlets with HB freezer-cabinet agreements, which
also  represented  [. . .  more  than  95 %  . . .]  of  the
total impulse ice cream marketed by HB in Ireland
in  that  year.

— HB  agrees  to  make  a  freezer  cabinet  available
to  the  retailer;  the  ownership  and  property  in
the  cabinet  remains  that  of  HB,  and  HB
undertakes  to  maintain  it  at  its  own  cost  and
expense  (save  where  damage  is  due  to  the
retailer’s  misuse  or  neglect  of  the  cabinet),

(62)

— the cabinet is to be used exclusively for storing
products  for  sale  which  are  supplied  by  HB;
accordingly  no  product  manufactured  or
supplied  by  a  third  party  is  to  be  sold  or
offered  for  sale  from  the  freezer  cabinet,  or
stored  therein,

— the  agreement  is  terminable  at  any  time  by
either  party  giving  two  months’  notice (18),

— the retailer undertakes to keep the cabinet in a
prominent  position  on  his  premises.  Only  HB
advertising  material  may  be  displayed  on  top
of  or  on  the  sides  of  the  cabinet.

(60) The number of retailers which whom HB has such
cabinet  agreements  (those  supplied  subject  to  a
condition  as  to  exclusivity)  amounts  (in  1997)  to
its
7 907.  HB  has  given  a  breakdown  of 
freezer-cabinet  agreements  as  follows:

Grocers

TSNs

Filling stations

Other  outlets

1995

1996 (1)

1997

10 224

8 420

8 315

1 749

1 440

1 410

1 170

323

951

487

925

500

Total

13 453 11 298 11 150

(1) These figures reflect the position in September 1996, and take
into account the cabinets disposed of by HB during 1995 and
1996  (see  paragraphs  72  and  73).

financial  and 

Instead,  both 

It  has  not  been  HB’s  official  policy  to  provide  a
cabinet  to  any  outlet  which  offers  to  stock  ice
cream. 
trading
criteria (20)  are  applied.  The  financial  criteria  are
based  on  the  marginal  cost  to  HB  involved  in
taking  on  a  new  outlet,  coupled  with  an
acceptable return on that investment. This includes
an  assessment  therefore  of  (a)  the  net  cost  to  HB
of  the  cabinet,  and  (b)  its  variable  margin  on  the
associated  ice-cream  sales  through  the  outlet.  The
trading  criteria  are  expressed  as  an  annual  sales
target, based on a minimum estimated turnover in
the  outlet  in  question.

(63) Substantial  overall  economies  are  achieved  where
HB,  as  opposed  to  individual  retailers  or  even
large  buying  groups,  bears  the  cost  of  purchasing
and  maintaining  freezer  cabinets.  As  part  of  the
Unilever  Group  (which  buys  a  very  large  number
of  cabinets  per  year)  HB  obtains  significant
discounts  for  such  scale  purchases.  By  means  of
illustration,  HB  estimates  that  the  capital  cost
(including  delivery,  storage,  handling  and  so  on)
to  a  retailer  of  purchasing  a  standard  1  m  freezer
cabinet  would  be  very  considerably  higher  than
the  capital  cost  to  HB  of  providing  the  same
cabinet.  HB  employs 
refrigeration
engineers  for  cabinet  maintenance  and  repair,  and
also  uses 
local  refrigeration
companies.  During  1994,  1995  and  1996,  HB’s
(including
expenditure  on 
purchase, 
cabinet
‘control’  and  depreciation)  amounted  to  [. . .] %,
[. . .] %  and  [. . .] %  of  its  turnover  in  impulse  ice
cream,  respectively,  for  each  of  the  three  years.

installation,  maintenance, 

the  services  of 

its  own 

cabinets 

freezer 

(18) HB has, however, indicated that it does not in practice, seek
to  enforce  the  requirement  of  two  months’  notice  for
retailers  wishing  to  terminate  on  shorter  notice  or  without
notice.

(20) HB  has  indicated,  however,  that,  in  practice,  it  does  not
always  insist  on  strict  compliance  with  these  criteria  as  a
necessary  precondition  for  receipt  of  an  HB  freezer
cabinet.

(19) Some  cabinets  are  kept  in  the  rear  of  the  outlet  for  storage

purposes.

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(64) The  importance  attributed  by  the  Unilever  group
of  companies  to  the  policy  of  supplying  freezer
cabinets  subject  to  exclusivity  became  particularly
evident  following  the  entry  of  Mars  on  the
European market in the late 1980s. The following
extracts  (paragraphs  65  to  68)  from  company
documents  are  an  illustration  of  how  crucial
Unilever 
freezer
exclusivity  at  that  time.

the  maintenance  of 

saw 

‘Exlusivity’ it is stated: ‘We are all too aware that
in  many  countries  one  of  the  foundations  of  our
success,  EXCLUSIVITY,  is  now  under  threat:

— Exclusivity  at  concessionaire  and  distributor

level,

— Exclusivity  in  the  outlets  and  cabinets’.

(65)

In  a  Unilever  group  document  dated  3  September
1990  and  entitled  ‘Mars’  position  in  Europe  and
the FPC (21) response’, under the heading ‘Strategic
approach’, one of the points made is ‘. . . to make
every  effort  to  maintain  cabinet  exclusivity’.

(b) Revision  of  cabinet  policy

(69)

(66)

In  another  FPC  document  dated  April  1989  and
entitled  ‘European  ice  cream  marketing  strategy’,
reference  is  made  to  the  importance  of  freezer
exclusivity  retaining  ownership  of  the  freezer
cabinet: ‘We must retain ownership of the cabinet,
particularly  where  distribution  is  performed  by
third  parties,  in  order  to  retain,  as  far  as  possible
through exclusivity contracts, sole brand supply to
the  fridge,  and  de  facto,  to  the  outlet’.

in  Rotterdam 

(an  FPC  document) 

(67) The  ‘Minutes  of  the  marketing  managers  meeting’
held 
in
November  1989  contain  the  following  statements:
‘HB  has  driven  Mars  down  to  400  HB  outlets
(4,2 %)  from  their  August  peak  of  1 920  cabinets
(29,7 %)  by  establishing  a  Special  Task  Force  . . .
In  certain  cases,  they  [HB]  have  been  able  to  buy
Mars  out  of  outlets.  Diversion 
to  other
refrigeration  in  store  and  very  selective  cabinet
withdrawal  is  also  being  used  . . .’;  under  the
heading  ‘Mars,  What  next?’,  it  is  stated  that,  ‘To
achieve  their  economies  of  scale  in  production
significant  volume
Mars  needs 
the
to  break  down 
increases.  They  need 
distribution 
. . . .  Denying  Mars
distribution is the key immediate response to their
entry  . . .’.

to  achieve 

barrier 

(68)

In  a  Unilever  internal  strategy  document  entitled
‘Frozen  products  coordination,  Sales  Directors
Conference,  June  1990,  Vienna,  highlights  and
follow-up  action’, 
freezer
is  underlined.  Under  the  heading
exclusivity 

importance  of 

the 

In  the  light  of  the  Commission’s  Statement  of
Objections of 29 July 1993 (see paragraph 5), and
following discussion with the Commission, HB has
revised  its  distribution  arrangements.  These  have
been notified to the Commission, as an application
for  negative  clearance  or,  failing  that,  exemption
(see  paragraph  6).  The  revised  arrangements
include  the  standard-form  agreement  under  which
HB  continues,  on  request,  to  supply  HB-exclusive
freezer  cabinets  to  retailers  as  just  described
(paragraphs  58  and  59),  as  well  as  HB’s  standard
conditions  of  sale  and  discount  schedule  (see
paragraph  57);  these  now  include  a  new  pricing
scheme 
(see
paragraphs  76  to  79)  and  the  introduction  of  a
hire-purchase  scheme  (see  paragraphs  70  and  71)
designed  to  facilitate  the  acquisition  of  freezer
cabinets  by  retailers.

ice-cream 

products 

for 

its 

(70) HB  has  introduced,  as  an  optional  alternative  to
the  acceptance  of  an  HB  cabinet  under  the
standard-cabinet  agreement,  a 
freezer  cabinet
hire-purchase  scheme  designed  to  enable  retainers
to  buy  their  own  new  cabinet.  The  cabinets  are
offered  at  the  wholesale  price  at  which  HB
purchased  them,  as  is  evidenced  by  an  invoice
from  the  independent  cabinet  supplier.  Under  the
scheme,  retailers  are  offered  a  1  m  ‘visi-top’
cabinet,  available  in  respect  of  one  cabinet  per
outlet  at  any  time.  Details  of  the  scheme  are
published  on  HB  price 
relevant
promotional  material.  Repayment  is  made  over  a
maximum period of five years; the terms for early
repayment  without  penalty  are  made  clear  to  the
retailer.  The  credit  rate  should  be  the  prevailing
hire-purchase  rate  in  Ireland (22).  The  cabinet  is

lists  and 

(21) Frozen  products  coordination.

(22) It  should  be  determined  in  accordance  with  objective
criteria,  for  example,  the  Bank  of  Ireland  lending  rate  to
small businesses.

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4.9.98

to  be  exclusively  used  for  the  stocking  of  HB
products  during  the  period  of  repayment  only.
Maintenance is performed by Unilever  throughout
the  repayment  period,  during  which  period  hire-
purchasers  will  qualify  for  the  differential  pricing
lump  sum  (see  paragraphs  76  to  79),  minus  the
maintenance  element (23).

(73)

In  accordance  with  this  undertaking,  HB  has
disposed of [. . .] cabinets in [. . .] outlets since the
beginning  of  1995;  almost  all  of  these  disposals
were  carried  out  during  the  first  half  of  1996 (24)
and [. . .]. According to HB, 1 750 of the disposals
comply with the conditions cited in paragraph 72.
Almost all of the cabinets disposed of were models
and  types  of  cabinet  which  have  not  been  newly
installed  by  HB  in  outlets  over  at  least  the  last
[. . .]  years.  The  average  age  of  the  cabinets
disposed of is just under [. . .] years (25). Not all of
the  cabinets  disposed  of  had  been  installed  in
retail  outlets;  some  ([. . .],  according  to  HB)  were
installed  in  schools,  staff  canteens,  swimming
pools  and  the  like.  Over  [. . .]  customers  acquired
more  than  one  cabinet  under  the  disposal  scheme.
HB  concentrated  its  disposals  in  what  it  describes
as  the  ‘small-shop  sector’.  According  to  HB,  the
total  turnover  in  impulse  ice  cream  of  all  those
outlets which have acquired cabinets in this way is
approximately  IEP  [. . .].

(c) Recent 

cabinet 

instalation  and  product

proliferation

(74)

In  1994,  HB  intensified  its  modernisation  of  its
freezer-cabinet  stock,  replacing  many  of  the  older
cabinet  models (26).  In  1993,  [. . .]  new  cabinets
were  installed  in  outlets;  in  1994,  [. . .];  in  1995,
[. . .]; in 1996 to August, [. . .]. In general, the new
cabinets  take  up  more  floor  space  in  retail  outlets
(though  they  are,  in  some  instances,  smaller  in
volume),  not  only  in  that  they  are  larger  in  area
but  also  in  that  many  are  ‘island-type’  cabinets
which should not adjoin other store fixtures or the
wall of the store. HB talks of changing patterns in
its  cabinet 
the
‘increasing  popularity  of  the  island  cabinet  model,
largely  at  the  expense  of  visitop  and  closed  top
models’,  ‘a  gradual  increase  in  the  proportion  of
cabinets  with  a  length  in  excess  of  1  m’,  and  ‘a

identifies  as 

fleet,  which 

it 

(24) Only [. . .]  were  sold  during  1995,  and  most  of  these  in  the

later  part  of  the  year.

(25) The  average  lifetime  of  a  cabinet  is  estimated  by  HB  to  be
10  years;  cabinets  are  amortised  by  HB  after  eight  years.
(26) HB  states  that  it  ‘undertook  a  programme  designed  to
maintain the image of the HB brand and the visibility of the
HB  product  range  by,  inter  alia,  replacing  ageing  cabinets
with  more  modern  units’;  Mars  states  that  ‘Unilever  ran  an
exceptional  freezer  placement  programme  in  1994  and
1995; a comparison between the two Rosslyn surveys shows
that  the  1994/95  replacement  rate  was  over  230 %  of  the
1990/91  replacement  rate’.  Mars  goes  on  to  say  that  ‘the
new  Unilever  freezers  are  all  larger  than  the  ones  that  they
replace  (save  one  type  which  has  not  been  widely  placed)’.

(71) Unilever informed the Commission that it believed
that the scheme would ‘prove attractive to retailers
and  incentivise  them  to  buy  their  own  cabinets’.
Since the introduction of the hire-purchase scheme
in  Ireland  in  early  1995,  not  a  single  retailer  has
availed  himself  of  the  offer.

(72) As a means of achieving a substantial freeing up of
outlets  in  the  short  term,  Unilever  undertook  to
the  Commission  to  ensure  the  sale  of  an  in  situ
‘front-of-shop’  freezer  cabinet  with 
‘a  useful
remaining  life’  to  retailers  in  a  significant  number
(some  20 %)  of  the  outlets  in  which  its  cabinets
were  then  (December  1994)  installed;  in  total,
1 750 cabinets were to be sold. No more than 400
of such cabinets were to be sold in outlets with an
annual turnover in HB impulse ice cream of below
IEP  650,  and  none  were  to  be  in  outlets  with  a
turnover  of  less  than  IEP  400  p.a.  in  those
products. From the moment of sale, a retailer was
to  be  eligible  for  an  annual  lump  sum  under  the
differential  pricing  scheme  (see  paragraphs  76  to
79).  Sale  was  to  be  made  to  retailers  with  current
possession  of  a  sole  HB  cabinet.  The  price  was
to  be  pitched  at  a  level  which  would  ensure
achievement of these results. Sale was to be carried
out  on  a  ‘one-off’  basis  during  1995  and  1996;
sale  was  to  take  place  equally  in  1995  and  1996,
and  a  reasonable  geographic  spread  was  to  be
ensured.  The  disposal  of  cabinets  was  intended  to
‘kick  start’  a  movement  towards  freezer  cabinet
ownership  by  retailers.  Unilever  stated  that  the
effect of the measure would be ‘to provide, for the
1995  season,  a  visible  and  material  change  to  the
relevant  market.  This  (would)  provide  a  ‘kick
start’  to  the  process,  the  future  development  of
which  is  underwritten  by  the  dual  price  structure
and  the  hire-purchase  scheme’.

(23) The cost of maintenance was calculated as amounting to IEP
[. . .]  in  1995,  and  so  the  sum  paid  to  hire-purchasers  was
IEP [. . .] p.a. in that year. HB was to be flexible in relation
to  payment  of 
to
hire-purchase  during  the  course  of  1995.

those  who  chose 

the  bonus 

to 

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(77)

gradual  reduction  in  the  overall  size  of  cabinets
taking  into  account  length,  breadth  and  height’.
According  to  HB,  these  patterns  are  explained  by
‘two  principal  factors’:  ‘(i)  the  decline  in  the
proportion  of  total  outlets  represented  by  TSNs
and  small  independent  grocers  means  that  the
proportion of the total cabinet fleet represented by
the 1 m visitop typical of such outlets has shown a
corresponding  decrease;  and  (ii)  the  introduction
by  manufacturers  of  new  cabinets  designed  to  be
more  user  friendly  for  the  self-serving  customer
and,  to  that  end,  longer  and  shallower’.

for 

In  view  of  the  Commission’s  objection,  HB
abandoned  the  policy  of  ‘inclusive  pricing’  in
1995,  and  introduced  a  ‘differential’  or  ‘dual’
pricing  scheme.  The  scheme  allows 
the
payment  of  a  lump  sum  to  retailers  stocking  HB
ice  cream  but  not  taking  an  HB  freezer  cabinet,
provided  that  retailer  achieves  a  minimum  annual
turnover in HB ice cream (sales from the outlet) of
IEP 650 GSV (gross sales value). This lump sum is
currently  set  at  IEP  78  p.a.  and  reflects  the
purchase  and  maintenance  cost  savings  to  HB  in
not  supplying  and  servicing  a  standard  1  m
cabinet 
turnover
threshold is set at a level which, according to HB,
allows  it  to  secure  a  minimum  return  on  the  sale
of  ice  cream  to  a  retailer.

the  retailer.  The  retail 

to 

(75) Mars  points  out  that  ‘Unilever’s  general  product
proliferation,  and  range  expansion  has  the  aim  of
filling  these  freezers  . . .  so  that  retailers  can  be
persuaded  that  they  have  a 
‘full  range’  of
ice-cream  products  and  therefore  have  no  need  to
sell  competing  manufacturers’  products’.

(d) Pricing arrangements

that 

(76) Until  March  1995,  HB  supplied  its  ice-cream
products  and  freezer  cabinets  at  an  ‘inclusive’
price.  This  price  included  the  capital  costs  of  the
cabinet, its maintenance costs and the value of the
ice-cream  products.  All  retailers  were  charged  the
same  price  irrespective  of  the  ownership  of  the
cabinets  in  which  the  products  are  stocked.  Thus,
a retail outlet with its own freezer cabinet paid the
same price for HB ice cream as a retailer accepting
the  offer  of  an  HB  freezer.  In  the  1993  Statement
of  Objections  (see  paragraph  5),  the  Commission
this
the  provisional  conclusion 
reached 
pricing  policy  infringed  Article  86  of  the  EC
Treaty  in  that  it  discriminated  against  retailers
who  had  not  taken  an  HB  freezer  cabinet,  but
who  none  the  less  purchased  HB  ice  cream.  The
the
Commission  provisionally  concluded  that 
inclusive  pricing  policy  not  only  served  as  an
inducement  to  grant  exclusivity,  to  the  detriment
of  competing  suppliers  of  impulse  ice  cream,  but
that  it  also  gave  rise  to  discrimination  between
trading  partners,  by  treating  dissimilar  situations
in  a  similar  fashion.  Retailers  with  their  own
freezer cabinets effectively paid for a service which
they  did  not  receive  and,  in  so  doing,  were  forced
to  subsidise  cabinet  provision  to  those  taking  HB
cabinets; 
thereby  placed
former  retailers 
themselves  at  a  competitive  disadvantage  vis-à-vis
the  latter  ones.

the 

(78) Unilever stated that the new scheme was ‘designed
to  remove  any  economic  incentive  on  the  retailer
to  take  the  HB  cabinet’.  Unilever  went  on  to  say
that the scheme would ‘have a significant effect on
the  alleged  foreclosure  of  the  market,  as  more
retailers  realise  that  the  bonus  can  fund  the
purchase  of  their  own  freezer’.

(79) The  scheme  has  been  operational  since  the
beginning  of  1995  and  its  terms  are  published  on
HB  price  lists;  for  1995,  retailers  holding  their
own cabinets for a part year were to receive a part
bonus. The lump sum can be periodically adjusted
to reflect any changes in HB’s costs. Similarly, the
turnover  threshold  may  also  be  varied  from  time
to  time.  All  variations  are  to  be  carried  out  in  a
transparent  manner.  In  March/April  1996,  [. . .]
retailers  qualified  for,  and  received,  the  dual
pricing  bonus  relating  to  1995  purchases  of
impulse 
ice  cream  from  HB.  In  1997,  [. . .]
retailers  qualified  for,  and  received,  the  dual
pricing  bonus  relating  to  1996  purchases  of
impulse  ice  cream  from  HB.

7. Other  manufacturers’  distribution  arrangements

for  impulse  ice  cream  in  Ireland

(i) Mars  and  Valley

(80)

In  1989,  Mars  appointed  Valley  to  distribute  its
newly  developed  ice-cream  products.  Prior  to  the
granting of an injunction against Mars by the Irish
High  Court  in  1991  (see  paragraph  3),  Mars

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4.9.98

products had also been placed by some retailers in
HB-owned cabinets. Initially, Mars supplied Valley
who  then  supplied  the  Mars  products  into  Valley
or  Mars-owned  freezer  cabinets,  as  well  as  into
cabinets  jointly  purchased  by  Mars  and  Valley.
Mars  has,  however,  been  doing  some  direct
distribution  since  1993.  Following  the  1992  High
Court 
the
injunction  against  Mars,  Mars  and  Valley
amended  their  cabinet  agreements  to  make  them
‘total
supplier-exclusive.  Mars  states  that 
expenditure on freezers alone in 1994 was 22 % of
its  turnover  in  impulse  ice  cream’  in  that  year.  In
March  1997,  Mars  terminated  its  distribution
arrangement  with  Valley.

rendering  permanent 

judgment 

its 

(ii) Nestlé

(81) Since  Nestlé  entered  the  Irish  impulse  ice-cream
market  in  1994,  it  has  been  installing  freezer
cabinets  in  retail  outlets  subject  to  a  condition  of
exclusivity.  Nestlé  distributes  its  ice  cream  in
Ireland  solely  through  distributors.  On  entering
the  ice-cream  market  in  1994,  Nestlé  entered  into
cooperation  arrangement  with  Leadmore
a 
regarding  distribution;  this  was  not  continued
beyond  the  first  ice-cream  season.

(iii) Dale  Farm

(82) Dale  Farm  provides  freezer  cabinets  to  retail
outlets  on  free-on-loan  terms,  for  the  exclusive
storage  of  Dale  Farm  ice  cream,  Mars  ice  cream
and  other  Northern  Foods  frozen  food  products.

(iv) Häagen  Dazs

(83) Häagen  Dazs  installs  freezer  cabinets  in  retail
outlets  for  the  storage  of  its  impulse  and  other
ice-cream  products;  the  cabinets  are  mainly  small
and  are  subject  to  a  condition  of  exclusivity.  All
of 
through
ice-cream  products  are  sold 
its 
distributors.

(v) Leadmore

8. Market 

research  and  quantification  of

foreclosure

(85) A general point should first be made in relation to
market  research:  there  is  always  a  certain  margin
of error when data are obtained by surveying only
a  sample,  however  carefully  chosen 
its
representativeness, of the total market in question.
It  is,  however,  the  only  effective  and  affordable
means  of  obtaining  many  kinds  of  market
information.  The  reliability  of  such  data  can,
moreover,  be  significantly  enhanced  where  more
than  one  survey  of  a  particular  market  tend
substantially  to  corroborate  each  other’s  findings,
as  is  the  case  with  the  three  market  research
surveys  described  below.

for 

(86) While  HB  acknowledges  a  broad  correlation
between  the  results  of  the  Lansdowne  and  B&A
surveys,  it  criticises  the  representativeness  of  the
Rosslyn  survey  for  being  ‘based  on  revisiting
outlets  surveyed  some  five  years  previously’  in  a
similar survey, which original survey was allegedly
‘based  on  a  random  sample  with  no  attempt  at
stratification’  according  to  outlet  type  and  size.
is
survey,  according 
The  Rosslyn 
‘disproportionately  tilted  towards  TSNs  at  the
expense  of  independent  grocers’,  in  contrast  with
the  Lansdowne  and  B&A  surveys,  which  are
stratified  in  accordance  with  the  Nielsen  Universe
of  outlets.  It  is  also  the  only  one  of  the  three
surveys 
the
disposal  by  HB  of  some  of  its  freezer  cabinets
under  the  ‘kick-start’  scheme.  The  Commission
has  taken  due  note  of  these  criticisms  in  any
reliance  which  it  has  placed  on  that  survey.  The
Commission  has  also  noted  that  the  B&A  survey
is weighted significantly more toward large outlets
than  the  other  two  surveys.

to  have  been  conducted  before 

to  HB, 

(i) The  Lansdowne  survey

(84) Leadmore supplies freezer cabinets to retail outlets

subject  to  a  condition  of  exclusivity.

(87) The  survey  was  carried  out  on  behalf  of  the
Commission  by  Lansdowne  Market  Research
Limited  in  July/August  1996,  the  height  of  the

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ice-cream season. A random sample of 501 outlets
was chosen, and it was ensured that this would be
representative  of  the  relevant  retail  trade (27).  A
geographical  spread,  including  a  clear  urban/rural
divide  was  ensured.  The  data  was  acquired  by
face-to-face  interviews  with  owners/managers  in
all  outlets.  The  survey’s  principal  findings  are
detailed below.

(88) Of  all  cabinets  in  the  outlets  surveyed  84 %  were
owned  by  an  ice-cream  manufacturer/supplier:
61 %  of  all  supplier-provided  cabinets  were
HB-owned (28);  11 %  of  them  were  Mars-owned;
9 %  were  Valley-owned;  8 %  were  Nestlé-owned;
4 %  Dale  Farm-owned (29);  2 %  Leadmore-owned;
1 %  Häagen  Dazs-owned.

in  a  position  to  sell  the
consequently  only 
ice-cream  products  of  that  single  manufacturer/
supplier); 27 %  had  cabinets  owned  by  more  than
one  manufacturer/supplier  (and  no  retailer-owned
cabinets):  consequently,  83 %  of  all  outlets  have
cabinets;
only  manufacturer/supplier-provided 
17 % of all outlets had at least one cabinet owned
by  the  retailer  himself,  this  17 %  being  composed
of  12 %  of  all  outlets  which  only  have  a  retailer-
owned  cabinet  and  5 %  of  all  outlets  which  have
cabinet/s,  as  well  as  a
a 
manufacturer/supplier-owned  cabinet/s.

retailer-owned 

(89) Of  all  cabinets  12 %  were 

to  be
retailer-owned;  2 %  were  on  hire  purchase  from
an  ice-cream  manufacturer;  1 %  were  owned  by  a
retail group. 38 % of retailer-owned cabinets were
purchased  from  HB  or  HB  agents.

found 

(90) The  proportion  of  outlets  with  only  one  freezer
cabinet  for  impulse  ice  cream  was  58 %;  the
proportion  with  two  such  freezers  was  35 %;  the
proportion  with  three  or  more  was  7 %.  The
average  (mean)  number  of  cabinets  per  outlet  was
1,50.

(91) Of  all  outlets  selling  impulse  ice  cream  85 %  had
at  least  one  supplier-provided  cabinet;  72 % (30)
had at least one HB cabinet; 14 % had at least one
Mars  cabinet;  10 %  Nestlé;  10 %  Valley;  5 % (31)
Dale Farm; 2 % Leadmore; 1 % Häagen Dazs; 5 %
other  suppliers.  Of  all  outlets  17 %  had  at  least
one  cabinet  owned  by  the  retailer  himself.

(92) Of  all  outlets  56 %  had  a  cabinet,  or  cabinets,
from  one  manufacturer/supplier  only  (and  are

(27) 68 %  of  the  sample  were  grocery/convenience  stores,  21 %
were TSNs, 11 % were garages. Multiples were not included.
92 %  of  the  sample  were  independently  owned;  a  further
6 %  were  part  of  a  chain  (symbol  group).

(28) Includes  cabinets  owned  by  HB  agents.
(29) Includes  cabinets  owned  by  Dale  Farm  agents.
(30) Includes  2 %  (of  all  outlets)  where  cabinets  are  owned  by

HB  agents.

(31) Includes  1 %  (of  all  outlets)  where  cabinets  are  owned  by

(93) This information was also broken down according
to the turnover of each outlet surveyed in impulse
ice  cream.  There  were  three  categories:  (i)  outlets
with  a  turnover  of  under  IEP  1 000  (22 %  of  the
outlets),  (ii)  outlets  with  a  turnover  of  between
IEP  1 000  and  IEP  2 000  (23 %  of  the  outlets),
and  (iii)  outlets  with  a  turnover  of  IEP  2 000  or
more  (40 %  of  the  outlets) (32).  28 %  of  outlets  in
category (i) had at least one cabinet owned by the
retailer  himself  (22 %  only  had  a  retailer-owned
cabinet/s,  6 %  had  a  retailer-owned  cabinet/s  as
well  as  a  manufacturer-supplier-owned  cabinet/s);
19 %  of  outlets  in  category  (ii)  had  at  least  one
cabinet  owned  by  the  retailer  himself  (15 %  only
had a retailer-owned cabinet/s, 4 % had a retailer-
owned  cabinet/s  as  well  as  a  manufacturer/
supplier-owned  cabinet/s);  however,  only  10 %  of
outlets  in  category  (iii)  had  at  least  one  cabinet
owned  by  the  retailer  himself  (4 %  only  had  a
retailer-owned cabinet/s, 6 % had a retailer-owned
cabinet/s as well as a manufacturer/supplier-owned
cabinet/s). 58 % of outlets in categories (i) and (ii)
had  a  cabinet/s  from  one  manufacturer/supplier
only  (and  are  consequently  only  in  a  position  to
single
sell 
ice-cream  products  of 
manufacturer/supplier);  53 %  of  outlets 
in
category  (iii)  are  only  in  a  position  to  sell  the
ice-cream  products  of  that  single  manufacturer/
supplier.

that 

the 

Dale  Farm  agents.

(32) 15 %  of  the  outlets  refused  to  disclose  their  turnover.

L 246/16

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Official  Journal  of  the  European  Communities

4.9.98

(94) 95 %  of  HB  cabinets  are  set  up  in  outlets  which
have  only  got  manufacturer-supplied  cabinets;
58 %  of  HB’s  cabinets  are  in  outlets  where  only
HB’s  cabinets  are  in  place.  The  level  of  sales  of
impulse  ice  cream  in  outlets  in  the  latter  category
of  outlet  is  almost  identical  to  that  in  any  outlets
with  HB  cabinets.

cabinets  in  the  store  in  order  to  cope  with  the
increased  demand  during  the  summer;  6 %  said
they sometimes did; a further 6 % said they always
did.

(95) 47 % of all outlets are only in a position to sell the
ice-cream  products  of  a  single  manufacturer/
supplier,  with  a  single  cabinet  only  in  each  outlet;
8 %  are  only  in  a  position  to  sell  the  ice-cream
products  of  a  single  manufacturer/supplier,  with
only two cabinets. 41 % of all outlets are only in a
position  to  sell  the  ice-cream  products  of  HB,
35 % of all outlets are only in a position to sell the
ice-cream  products  of  HB,  with  one  HB  cabinet
only,  6 %  with  two  or  more  HB  cabinets  only.
15 %  of  outlets  are  only  in  a  position  to  sell  the
ice-cream  products  of  a  single  manufacturer/
supplier  other  than  HB.  None  of  these  other
brands  is  significant  in  terms  of  the  number  of
outlets  tied  to  the  sale  of  its  products  alone.

(99) Of all cabinets surveyed 90 % are used exclusively
for  ice-cream  storage  (50 %  are  only  used  for
storing  impulse  products,  40 %  for  storing  both
impulse  and  non-impulse  products);  94 %  of  all
manufacturer-owned  cabinets  surveyed  are  used
exclusively  for  ice-cream  storage  (54 %  are  only
used  for  storing 
impulse  products,  40 %  for
storing  both  impulse  and  non-impulse  products);
however  only  67 %  of  all  retailer-owned  cabinets
surveyed are used exclusively for ice-cream storage
(26 %  are  only  used  for  storing  impulse  products,
41 %  for  storing  both  impulse  and  non-impulse
products,  34 %  for  storing  both  ice  cream  and
non-ice-cream  products).

(96) The average age of the cabinets surveyed was 3,02
years;  for  retailer-owned  cabinets,  the  average  age
was  4,59  years;  for  HB  cabinets,  it  was  2,92;  for
Mars  cabinets,  2,06;  for  Valley  cabinets,  3,53;  for
Nestlé  cabinets,  1,65.  Retailers  were  unable  to
date  one  in  six  of  the  cabinets  surveyed.

(100) Those  retailers  who  did  not  own  a  freezer  cabinet
were  asked  for  their  reasons  for  not  owning  such
cabinets:  54 %  indicated  that  it  did  not  make
commercial  sense;  25 % 
the  cost  was
prohibitive;  9 %  said  they  only  had  demand
for  one  brand  of  ice  cream;  4 %  said  it  was
inconvenient.

that 

(97) When  retailers  were  asked  if  it  would  be  a  ‘viable
option’  for  them  to  use  up  further  space  to  install
another  freezer  cabinet  for  impulse  ice  cream,
87 %  of  all  outlets  said  that  it  would  not;  11 %
said  that  it  would.  Of  all  outlets  53 %  considered
that  one  freezer  cabinet  would  be  the  optimal
number of cabinets to have in the store during the
summer  (ice  cream)  season;  36 %  said  two  would
be optimal; 8 % said three; 1 % four or more. The
average  optimal  number  was  1,57.  Lansdowne
have  commented  that  ‘it  is  evident  that  the
number of ice-cream cabinets currently in place in
retail  outlets  around  the  country  is  perceived  as
approaching  the  maximum  viable’.

(101) All  retailers  who  did  not  own  a  frezeer  cabinet  or
were  not  hire  purchasing  a  freezer  from  HB  were
asked  if  HB’s  hire  purchase  offer  interested  them.
8 % said it did, while 78 % were not interested by
it.  54 %  said  they  were  not  at  all  interested;  24 %
said  they  were  not  very  interested;  5 %  were
indifferent;  6 %  were  quite  interested;  2 %  very
interested.  The  overwhelming  reason  cited  for  this
lack  of  interest  was  contentment  with  current
freezer  cabinet  arrangements.

(98) Of  the  cabinets  surveyed  97 %  were  permanently
in  place  in  the  store  (i.e.  they  had  not  just  been
brought  in  for  the  summer  season).  Of  all  outlets
87 %  said  that  they  never  placed  additional

(102) All  outlets  only  in  a  position  to  sell  the  ice-cream
products  of  HB  were  asked  if  there  was  demand
for  brands  other  than  HB:  53 %  responded  that
there  was  no  demand;  40 %  that  there  was
demand (31 % reported a little demand, 9 % a big
demand). The same category of outlets was further
asked  if  they  were  interested  in  stocking  brands

4.9.98

EN

Official  Journal  of  the  European  Communities

L 246/17

other  than  HB:  62 % (33)  said  they  were  not
interested  (32 % (34)  not  at  all  interested,  30 % (35)
not very interested); 9 % were indifferent; 25 % (36)
were  interested  (17 % (37)  quite  interested,  8 % (38)
very  interested).

(ii) The  Rosslyn  survey

(103) Of  those  interested  in  stocking  brands  other  than
HB (25 % of 41 % of all outlets, hence 10 % of all
outlets),  53 %  said  they  would  not  be  prepared  to
install  an  additional  cabinet  for  the  storage  of
such  brands;  40 %  said  they  would  be  prepared
to  do  so.  Almost  all  of  those  not  prepared  cited
space  constraints  as  the  main  reason.  A  majority
of  those  prepared  to  install  a  further  cabinet
expressed  a  preference  for  a  supplier-exclusive
one.

(104) Those interested in stocking brands other than HB
were  also  asked  if  they  would  be  prepared  to
replace  or  exchange  (‘swap’)  one  of  their  existing
HB  cabinets  with  one  from  another  ice-cream
supplier:  82 %  said  they  were  not  prepared  to  do
so;  11 %  said  they  were.  The  principal  reasons
cited for this unwillingness to replace HB cabinets
were the popularity and leadership position of HB
and  contentment  with  the  present  arrangement.
The  same  group  were  further  asked  if  they  would
be  prepared  to  replace  or  exchange  one  of  their
existing  HB  cabinets  with  a  cabinet  hired  or
purchased  by  the  retailer  himself:  76 %  said  they
would  not  be  prepared  to  do  so;  18 %  said  they
would.  Happiness  with  the  current  arrangement
and cost considerations were the principal reasons
given  for  the  lack  of  preparedness.  Finally,  the
same  group  was  asked  if  they  would  be  prepared
to  exchange  an  HB  cabinet  for  two  smaller  ones,
one  not  owned  by  HB:  49 %  said  no;  44 %  yes.

survey 

(105) Mars  also  commissioned  a  survey  of  the  Irish
impulse  ice-cream  market.  The  survey  was  carried
out  by  the  London-based  firm  Rosslyn  Research
Ltd (39),  though  the  fieldwork  was  done  by
the  locally-based  Irish  Marketing  Surveys.  The
Rosslyn 
spread
geographcially  throughout  Ireland,  and  with  a
spread  of  outlet  size  and  type.  Some  of  the
Rosslyn survey’s main findings are outlined below,
together  with  some  comparative  figures  from  the
Rosslyn  survey  of  1991.  On  the  basis  of  the
results  yielded  by  this  survey,  Mars  further
commissioned  an  economic  analysis  to  be  carried
out,  also  discussed  below.

covers  408  outlets 

(106) The  proportion  of  outlets  with  only  one  ‘front-of
store’  freezer  cabinet  for  impulse  ice  cream  was
64 % (40);  the  proportion  with  two  such  freezers
was  31 % (41);  the  proportion  with  three  or  more
was  4 % (42).  The  average  (mean)  number  of
cabinets  per  outlet  was  1,42 (43).

(107) Of  the  freezer  cabinets  92 % (44)  were  owned  by
the  manufacturer  of  the  product  stocked  in  it.
6 % (45) of the cabinets were owned by the retailer
himself.  64 % (46)  of  cabinets  were  owned  by
HB (47),  14 % (48)  by  Mars,  4 %  by  Valley,  2 %  by
Dale  Farm,  1 %  by  Leadmore.

(108) 50 % of outlets had one HB freezer only; 5 % had
two  HB  freezers  only;  2 %  had  one  Mars  freezer
only;  1 %  each  had  one  Valley,  Dale  Farm  and
Leadmore freezer only; 14 % had one HB and one

(33) In  the  Statement  of  Objections,  this  figure  was  mistakenly
quoted  in  the  text  as  65 %  (a  figure  from  the  preliminary
survey  results);  the  survey  was  annexed  in  full  to  the
Statement  of  Objections.

(34) Ibid.  mistakenly  quoted  in  the  Statement  of  Objections  as

(39) An  almost  identical  survey  was  carried  out  for  Mars  by  the
same  company  in  December  1991/January  1992,  the  results
of  which  were  cited  in  the  Commission’s  Statement  of
Objections  of  29  July  1993.  All  but  40  were  the  same
outlets  as  interviewed  in  1991.

37 %.

(35) Ibid.  mistakenly  quoted  in  the  Statement  of  Objections  as

28 %.

(36) Ibid.  mistakenly  quoted  in  the  Statement  of  Objections  as

22 %.

(37) Ibid.  mistakenly  quoted  in  the  Statement  of  Objections  as

16 %.

(38) Ibid.  mistakenly  quoted  in  the  Statement  of  Objections  as

6 %.

(40) 79 %  in  1991.
(41) 20 %  in  1991.
(42) 1 %  in  1991.
(43) 1,22  in  1991.
(44) 89 %  in  1991.
(45) 11 %  in  1991.
(46) 71 %  in  1991.
(47) 68 %  of  ‘back  of  shop’  freezers.
(48) 1 %  in  1991.

L 246/18

EN

Official  Journal  of  the  European  Communities

4.9.98

Mars  freezer;  7 %  had  an  HB  freezer  and  one
from  any  other  manufacturer  except  Mars.

(109) Of  the  manufacturer-supplied  freezers  97 %  were
on  loan  from  that  manufacturer;  of  these,  99 %
were  provided  free  of  charge,  and  88 %  were
provided  subject  to  an  exclusivity  condition (49).
Of 
by
supplied  with 
manufacturers  27 % (50)  said  they  would  like  to
stock other manufacturers’ products in the freezers
(68 % (51)  were  not  interested).

retailers 

freezers 

(110) Of  retailers  with  manufacturer-exclusive  cabinets
87 %  would  have  to  install  another  freezer  if  they
wished  to  sell  another  brand  of  ice  cream;  of
these,  67 %  said  they  did  not  ‘have  room’  to  do
so.  Of  those  who  said  they  did  have  room,  15 %
said  they  had  chosen  not  to  install  one  because  it
‘would  not  be  economical  in  terms  of  running
costs’  and  13 %  because  they  had  ‘better  use  for
the  space’;  43 %  of  those  with  room  said  they
would  be  prepared  to  install  another  cabinet  ‘if
the  demand  was  high  for  another  product’.

(111) Of  those  freezer  cabinets  replaced  (returned,
exchanged  or  changed)  by  another  freezer  from
the  same  or  different  ice-cream  manufacturer  over
the  previous  five  years,  78 %  of  them  belonged  to
HB; 55 % of the freezers were returned, exchanged
or  changed  in  order  to  be  replaced  by  a  more
modern  freezer;  a  further  25 %  of  them  were
returned,  exchanged  or  changed  in  order  to  be
replaced  by  a  larger  freezer;  74 %  of  the  new
freezers  belong 
returned,
to  HB; 
exchanged  or  changed  were  almost  invariably
replaced  by  freezers  from  the  same  manufacturer
—  214  of  the  234  freezers  replaced  were  HB
freezers  replacing  HB  freezers.

freezers 

freezer;  of  those  who  would  be  prepared  to  do  so
(26 %  of  the  total  sample),  82 %  would  not  be
prepared  to  buy  a  cabinet  themselves;  94 %  of
them  would  not  be  prepared  to  take  a  cabinet
subject to exclusivity on a loan reflecting the costs
of  cabinet  provision;  80 %  would  not  take  a
non-exclusive  cabinet  on  rent;  84 %  would,
however,  be  prepared  to  take  a  free  on  loan
cabinet  on  supplier-exclusive  terms.  When  the
same 26 % of the sample were asked if they could
install  a  further  cabinet  (in  addition  to  another
supplier-exclusive  one),  77 %  said  they  could  not;
of these, 51 % cited lack of space and better use of
space  as  reasons,  while  a  further  22 %  said  it
would  not  be  economical  in  terms  of  running
costs.  Of  those  who  said  they  could  (20 %  of
26 % of total sample), only 17 % were prepared to
do  so.

(113) The  survey  was  carried  out  in  mid-April  1996.
Only  5 %  of  retailers  had  been  offered  a  freezer
under  the  ‘kick-start’  disposal  (see  paragraphs  72
and 73). Only 13 % of retailers were aware of the
existence  of  the  HB  hire-purchase  scheme.

the 

from 

(114) The economic analysis was carried out by the firm
of  economists,  Case  Associates,  and  is  entitled
‘Estimating foreclosure levels in the Irish ice-cream
market’.  This  analysis  has  drawn  a  number  of
conclusions 
survey.  The  analysis
purports,  inter  alia,  to  calculate  what  proportion
of  all  outlets  are  ‘foreclosed’  in  the  sense  that  a
new  cabinet  would  have  to  be  installed  in  order
for  a  new  entrant  to  be  able  to  sell  its  ice  cream
there.  It  concludes,  by  one  means  of  calculation,
that  at  least  89 % (52)  of  all  outlets  selling  impulse
ice  cream  are  foreclosed  in  this  way.  Using  an
alternative  means  of  calculation,  the  analysis
arrives  at  a  foreclosure  level  (in  the  sense  just
described)  of  84 % (53).  Yet  another  means  of

(112) Of  all  outlets  72 %  said  they  would  not  be
prepared  to  install  a  replacement  or  additional

(49) As  no  suppliers  appear  to  supply  cabinets  on  non-exclusive
terms,  it  is  most  likely  that  the  remaining  12 %  were  also
subject to an exclusivity condition of which the retailer was
unaware.
(50) 52 %  in  1991.
(51) 44 %  in  1991.

(52) The  calculation  is  based  on  the  fact  that,  in  the  408  outlets
sampled,  no  more  than  45  cabinets  were  not  supplier-
provided  (they  were  retailer-owned,  ‘other  owner’  or  ‘don’t
know’), if any outlet contained more than one such cabinet,
the  foreclosure  level  would  be  even  higher.

(53) 234  outlets  had  only  a  supplier-provided  cabinet,  87  had
one HB cabinet and one other supplier-provided cabinet, 23
outlets  had  two  HB  cabinets:  these  344  outlets  represent
84 %  of  the  total  sample.

4.9.98

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Official  Journal  of  the  European  Communities

L 246/19

calculation  puts  foreclosure  at  the  higher  level  of
93 % (54).

retailer cabinet. [. . .] % of all outlets surveyed had
a  single  HB  cabinet  alone  in  front  of  store.

(iii) The  B&A  surveys

(115) HB  also  commissioned  a  market  survey,  which
was  conducted  in  August/September  1996  by
Behaviour & Attitudes Limited, a market research
firm.  The  results  of  this  survey  were  contained
in  HB’s  written  response  to  the  Statement  of
Objections.  The  sample  for  the  survey  comprised
geographically
507 
throughout  Ireland,  and  with  a  spread  of  outlet
size  and  type (55).  The  survey’s  principal  findings
are  outlined  below.

outlets, 

spread 

retail 

(116)

[. . .] %  of  outlets  surveyed  had  one  cabinet  in
front  of  the  store,  [. . .] %  two  cabinets,  and
[. . .] %  three  or  more.  HB  products  were  sold
from  [. . .] %  of  the  outlets  surveyed,  Mars  from
[. . .] %,  Valley  from  [. . .] %,  Nestlé  from  [. . .] %,
and  Häagen  Dazs  from  [. . .] %.  [. . .] %  of  all  the
outlets  surveyed  stocked  HB  ice-cream  products
together  with  the  products  of  no  other  ice-cream
manufacturer.  HB  faces  direct  competition  from
other  ice-cream  brands  in  [. . .] %  of  the  outlets
surveyed,  less  than[. . .] %  of  the  outlets  in  which
its  products  are  sold.

(117) Of  those  outlets  with  only  one  cabinet,  [. . .] %  of
these  were  HB  cabinets,  [. . .] %  were  Mars
cabinets,  [. . .] %  Valley  cabinets,  [. . .] %  Nestlé
cabinets  and  were  [. . .] %  retailer  cabinets.  Of
those  with  two  or  more  cabinets,  [. . .] %  had  at
least  one  HB  cabinet,  [. . .] %  a  Mars  cabinet,
[. . .] %  a  Valley  cabinet,  [. . .] %  a  Nestlé  cabinet,
[. . .] %  a  Häagen  Dazs  cabinet,  and  [. . .] %  a

(54) This was the method of calculation used by William Bishop,
an economist who analysed foreclosure levels on the basis of
the  1991  Rosslyn  survey:  the  method  involves  dividing  the
total  number  of  outlets  sampled  by  the  mean  number  of
freezers  present  in  all  these  outlets,  and  then  multiplying  by
the  number  of  retailer-  and  ‘other’-owned  cabinets.  This
method assumes that retailer-owned cabinets are likely to be
spread  across  outlets  in  the  same  proportion  as  any  other
cabinets.

(55) 20 % were TSNs; 63 % were grocery outlets, of which 10 %
were  ‘symbol’  stores;  10 %  were  garages;  others  7 %.
Multiples  were  excluded.

(118) B&A  asked  retailers  how  often  they  were  asked
for  brands  not  currently  stocked.  [. . .] %  replied
that  they  were  never  asked,  [. . .] %  said  rarely,
[. . .] %  occasionally  and  [. . .] %  frequently.  Of
those  who  were  at  some  stage  asked  for  non-
stocked  brands,  [. . .] %  took  no  action,  [. . .] %
‘changed
‘added  a  manufacturer’,  and  none 
manufacturer’.  The  survey  found  that,  over  the
previous seven years, [. . .] %  of  the  outlets  had  at
some  stage  stocked  new  brands  of  ice  cream,  and
that  [. . .] %  of  outlets  had  at  some  stage  de-
stocked  brands  of  ice  cream;  the  principal  reasons
cited  for  such  de-stocking  were  lack  of  customer
demand 
standards
([. . .] %),  poor  delivery 
([. . .] %), and poor cabinet maintenance ([. . .] %).

(119) Retailers with only one cabinet in their outlet were
asked  if  they  were  prepared  to  install  a  second
cabinet,  [. . .] %  were  not,  [. . .] %  were,  and  the
remainder  did  not  know.  The  main  reason  cited
for this absence of preparedness was lack of space.
The  same  outlets  were  also  asked  about  their
preparedness  to  replace  the  existing  cabinet,
[. . .] %  were  not  prepared,  [. . .] %  were  and
the remainder did not know. The principal reasons
given 
lack  of  preparedness  were
satisfaction  with  the  current  supplier’s  product
range and cabinet. The same retailers were further
asked  if  they  would  be  prepared  to  replace  the
existing  freezer  with  two  smaller  ones,  [. . .] %
were  not,  [. . .] %  were  and  the  remainder  did  not
know.

such 

for 

(120) Retailers  were  asked  whether, 

in 

the  event
that  manufacturers  no  longer  imposed  freezer
exclusivity  and  instead  charged  a  separate  cabinet
rental, they would stock a wider range as a result.
[. . .] %  said  they  would  stock  a  wider  range;
[. . .] %  said  they  would  not;  [. . .] %  said  they
would  stock  the  same  range;  [. . .] %  said  they
would  cease  stocking  altogether.  The  [. . .] %  who
expected  to  stock  a  wider  range  were  further
asked  if  they  would  expect  to  buy/lease  a  cabinet
rather  than  paying  the  rental,  [. . .] %  said  they
would,  [. . .] %  that  they  would  not.  Finally,  the
B&A  survey  registered  very  high  levels  of  retailer

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satisfaction  with  the  product  range,  delivery
arrangements  and  maintenance  service  of  all
ice-cream  suppliers  to  the  outlets  surveyed.

(iv) Other  sources

(121) HB  also  submitted,  together  with  its  response  to
the Statement of Objections, another B&A survey,
conducted 
‘New  HB
in  1994,  and  entitled 
cabinets:  the  views  of  retailers’.  This  survey  was
conducted  with  the  purpose  of  obtaining  retailers’
and  consumers’  views  on  newly-installed  HB
cabinets.  The  survey  was  accordingly  targeted
towards  larger  outlets  and,  as  such,  its  usefulness
for  the  purposes  of  this  Decision  is  somewhat
limited. The survey found, inter alia, that  HB  was
rated more highly by retailers than other ice-cream
suppliers  in  terms  of  its  performance  under  a
number  of  different  headings.  It  also  found  that
retailers  were  more  likely  than  not  to  dislike  the
idea  of  accepting  the  installation  of  two  HB
cabinets in an outlet, the principal reasons for this
being  lack  of  space  and  cost.

(122) HB  furthermore  submitted,  together  with 

to 

its
the  Statement  of  Objections,  a
response 
‘Qualitative  study’  entitled  ‘Retailers’  stocking
policy’,  carried  out  by  B&A 
in
March/April  1997  on  the  basis  of  25  interviews.
The  purpose  of  the  research  was  ‘to  gain  some
qualitative  insight  into  how  retailers  manage  their
stores’,  though  accepting  that  the  findings  could
only  be  viewed  as 
indicators’.  These
‘broad 
findings  include  the  following.

for  HB 

(123) Most of the interviewed retailers ‘do not go so far
as to work out profit per square foot calculations’;
rather, ‘they work to their own instinctive estimate
of  that  calculation’.  There  was  also  some  concern
expressed  about  the  fact  that  nothing  can  be
stocked  above  ice-cream  cabinets;  this  means  that
‘they tend to be placed in the middle of the floor’,
which  ‘obviously  leads  to  some  concern  about
underutilisation  of  space’.  Retailers  also  indicated
that  re-stocking  a  freezer  ‘more  frequently  to
maximise  throughput  during  the  summer  months’
was  preferable  to  ‘putting  in  extra  fridges  to  cope
with  peak  summer  demands  for  ice  cream’.  The
study  also  found  that  ‘space  reallocation’  in  order
to meet ‘changing consumer demands’ was ‘not on
a major scale because the stores themselves are, in
the main, relatively small’.

(124) HB estimates (1997) that [. . .] outlets are supplied
with  one  ‘front-of-store’  freezer  cabinet  only  by
HB,  that  almost  [. . .]  outlets  are  supplied  with
more than one such cabinet and that, of that total
of  [. . .],  approximately  [. . .]  stock  exclusively  HB
impulse  products.  On  the  basis  of  HB’s  estimate
of  [. . .]  for  the  total  number  of  outlets  (see
paragraph  41),  [. . .  more  than  14 % . . .]  of  all
retail  outlets  in  Ireland  are  in  a  position  to  sell
only  HB’s  impulse  ice-cream  products.

(125)

to 

In  a  paper  entitled  ‘Sales  of  cabinets  in  situ’
the  Commission  by  HB  on
presented 
29  November  1994,  HB  stated  that  it  ‘has  [. . .]
outlets including agents outlets. Of these, [. . .] (or
[. . .] %)  are  shared  with  other  suppliers.  Total
Universe (Nielsen) is 9 669  outlets’.  On  this  basis,
[. . .]  outlets  (or  [. . .] %  of  HB’s  outlets)  were
HB-only  outlets  at  that  time;  the  [. . .]  HB-only
outlets amounts to [. . . more than 60 % . . .] of all
outlets  (on  the  basis  of  the  Nielsen  Universe).

9. The  ice-cream  market  in  Northern  Ireland

(126) The  structure  of 

is 

in 

the 

the 

industry 

ice-cream 

traditional 

in  Northern 

Ireland.  Whereas  HB 

in
Northern  Ireland  is  substantially  different  from
that 
the  only
Unilever-owned  ice-cream  producer  operating  in
Ireland, 
Ireland  both  HB  and
Unilever’s  United  Kingdom  ice-cream  subsidiary,
Walls  Ice  cream  Ltd,  are  both  engaged  in  the
supply  of  ice  cream.  Walls  handles  the  multiple
is  now
trade,  while 
principally  handled  by  HB.  Dale  Farm  was  until
recently the leading supplier of ice-cream products
in  Northern  Ireland (56)  but,  since  1996,  HB/
Walls  have  assumed  that 
leadership  position.
Nevertheless,  consumer  brand  awareness  varies
considerably  between 
Ireland  and  Northern
Ireland,  as  is  demonstrated  by  the  fact  that  Dale
Farm  continues  to  hold  a  market  share  of  some
40 % in value terms (in contrast with its negligible
share  of  the  Irish  market,  see  paragraph  36);
prices  for  similar  products  also  differ  to  some
extent.

trade 

(56) Dale  Farm  acts  as  distributor  for  Mars  in  Northern

Ireland.

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it  only  uses  agents  to  distribute 

(127) Whereas  in  Ireland  HB  usually  distributes  its
ice-cream  products  direct  to  retailers,  in  Northern
its
Ireland 
products.  With 
cabinet
arrangements  in  Northern  Ireland,  HB  charges
retailers  an  annual  rent  for  the  loan  of  its  freezer
cabinets, and applies a price reduction to products
which  it  supplies  to  retailers  with  their  own
cabinets.

freezer 

regard 

to 

(128) Regulations governing the permitted content of ice
cream  differ  between 
Ireland  and  Northern
Ireland. In Ireland, ice cream is required to have a
minimum  butterfat  content  of  5 %  whereas  UK
legislation  contains  no  such  requirement.  VAT
rates  also  vary  somewhat.

III. LEGAL  ASSESSMENT

(129) The object of this legal assessment is to determine
whether  the  arrangements  made  by  HB  for  the
distribution  of  its  impulse  ice-cream  products  in
Ireland,  whereby  it  pursues  a  policy  under  which
it  makes  available  to  outlets  stocking  its  products
freezer cabinets on the basis of cabinet exclusivity,
are  compatible  with  Articles  85  and  86  of  the  EC
Treaty.  The  assessment  of  the  compatibility  with
in
Article  85  of 
question  is  made  in  the  context  of  the  legal
and  economic  circumstances  in  which  they  are
found (57).

the  exclusivity  agreements 

A. ARTICLE  85(1)

1. The  relevant  market

(i) The  relevant  product  market

manufactured  and  distributed,  between  industrial
and  ‘artisan’  ice  cream  (see  paragraph  10);  only
industrial  ice  cream  is  found  to  any  significant
extent in Ireland. Secondly, a distinction should be
made  between  the  following  three  ice-cream (59)
product  categories (60),  determined  in  accordance
with the place of consumption: impulse ice cream,
take-home  ice  cream,  and  catering  ice  cream  (see
paragraph  11).

(131)

Ice cream which is offered to the consumer as part
of  catering  services  forms  a  distinct  product
market (61).  This  market  is  essentially (62)  made  up
of  industrial  ice  cream  for  bulk-buying  customers,
which  they  may  serve,  for  example,  as  desserts;
value  is  often  added  to  the  ice  cream  by  the
caterer.

(132) The  inherent  nature  of  the  product  dictates  that
the  place  of  consumption 
is  crucial  to  the
determination  of  the  relevant  market.  Owing  to
the  need  for  ice  cream  to  be  maintained  at  a  low
temperature,  a  consumer  purchasing  such  a
product  in  a  retail  outlet  has  in  essence  two
options  for  consumption  of  the  product:  the  ice
cream  purchased  by  the  consumer  may  either  be
consumed immediately at or near the place of sale
in order to satisfy an impulse, or be stored as soon
as  possible  in  a  freezer  cabinet,  probably  in  the
consumer’s  own  home,  for  consumption  at  a  later
time.  This  distinction  on 
the
consumer’s intended purpose in purchasing the ice
cream 
in
characteristics  and  price  between  impulse  and
take-home  products.  Take-home  products  usually
take  the  form  of  blocks  or  cakes  of  ice  cream,  as
items,  whereas
well  as  multipacks  of  single 
impulse  products  are  invariably  offered  as  single
items.  It  is  clear,  therefore,  that  impulse  and
take-home  ice  cream  form  separate  and  distinct
product  markets (63).

in  turn  determines  the  differences 

the  basis  of 

(130) The relevant product market includes, in principle,
all  goods  which  are  perceived  by  the  consumer,
on  the  grounds  of  their  characteristics,  price
reasonably
or 
interchangeable  with  each  other (58).  Using  these
criteria, a distinction should in the first instance be
drawn,  in  accordance  with  how  ice  cream  is

intended  purpose,  as  being 

(57) See  Case  23/67  Haecht  I  [1967]  ECR  407,  at  p.  415.
(58) Case  27/76  United  Brands 

[1978]  ECR  207,  at

paragraph 12.

(59) It  is  generally  accepted  that  non-ice-cream  products  do  not
fall  into  the  same  product  market/s  as  ice  cream.  See
judgment  of  Irish  High  Court;  see  footnote  4.

(60) Owing  to  the  insignificant  quantities  of  ‘artisan’  ice  cream
sold  in  Ireland,  the  distinction  between  it  and  industrial  ice
cream  does  not  need  to  be  made  for  the  purposes  of  this
assessment.  All  ice  cream  referred  to  is  industrial  ice
cream.

(61) Case  C-234/89  Delimitis  [1991]  ECR  I-935  paragraph  17;
Cases  T-7  Langnese,  paragraph  63  and  T-9/93  Schöller,
paragraph  42,  [1995]  ECR  II-1532.

(62) Single-wrapped 
purposes.

items  can  also  be  used 

for  catering

(63) Cases  T-7  and  T-9/93  Langnese  &  Schöller,  paragraphs  64

and  65  and  43  and  44.

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in 

the 

sole 

instance 

criterion 

limited  only 

(133) From the consumer’s point of view single wrapped
items  may  be  perceived  as  being  reasonably
interchangeable  with 
individual  portions  of
scooping ice cream and with soft ice cream. In the
case  of  soft  ice  cream,  this  may  be  a  matter  of
dispute, given the non-dairy nature of its contents.
The  consumer’s  point  of  view  is,  however,  not  in
every 
the
determination  of  a  product  market;  nor  is  an
examination 
the  objective
in  question
characteristics  of 
sufficient.  The  competitive  conditions  and  the
structure  of  supply  and  demand  on  the  market
must  also  be  taken  into  consideration (64).  In  the
case  of  impulse  ice  cream,  a  further  distinction  is
the  different
therefore  necessary  because  of 
conditions  applying 
the  production  and
to 
distribution  of  these  categories  of  impulse  ice
cream.  On  account  of  the  marginal  importance  of
scooping  ice  cream  in  Ireland,  its  inclusion  in  the
relevant  product  market  does  not  need  to  be
considered.  Soft  ice  cream,  on  the  other  hand,  is
quite  widely  sold  in  Ireland.

the  products 

to 

for 

self-service 

(134) Single  wrapped  items  of  ice  cream  are  purchased
by  the  retail  trade  in  the  form  in  which  they  are
resold  to  the  consumer.  They  are  specifically
designed 
(see
consumer 
paragraph 12). In the case of soft ice cream, value
is  added  by  the  retailer  who  must  further  process
the  ambient  soft  ice  cream  mix  before  the  final
product  can  be  served  to  the  consumer.  The
added-value thus created by the retailer is reflected
in  generally  higher  trading  margins  for  soft  ice
cream  than  in  the  case  of  single  wrapped  items  of
ice  cream.  Moreover,  soft  ice  cream  requires
installations  which  are  different  from  the  freezer
cabinets  in  which  single  wrapped  items  of  ice
cream  are  stored.  For  soft  ice  cream,  special
processing  machinery  must  be  installed  in  the
outlet  for  the  processing  and  dispensing  of  the
product.  The  allocation  of  particular  staff  (for
customer  service  and  maintenance)  and  space
resources  are  also  involved.

are,  moreover,  characterised  by  a  high  level  of
branding  whereas,  in  general,  soft  ice  cream
carries no brand. These supply-side differences are
illustrated  by  the  fact  that  the  producers  of  the
two  categories  of  ice  cream  differ  (see  paragraph
38):  only  HB  produces  both  types,  and  even  then
its  share  of  the  market  for  soft  ice  cream  is  much
smaller than for wrapped items (see paragraphs 27
and  38).  They  therefore  form  separate  product
markets.

(136) Even  if  the  two  categories  just  described  were
regarded  as  forming  a  single  product  market,  this
would  not  affect  the  present  assessment  in  any
material  way.  The  reason  for  this  is  that  soft  ice
cream  is  of  relatively  minor  importance  compared
to  the  value  of  the  impulse  ice  cream  market  as  a
whole.  As  a  result,  the  positions  of  the  various
producers  on 
the  market  would  not  be
substantially  affected.  Indeed,  of  the  producers  of
wrapped  items,  HB’s  position  would  be  the  least
weakened  by  the  addition  of  its  share  of  the  soft
market  (see  paragraph  38).

(137) The  competitive  conditions  in  non-retail  channels
(such  as  schools,  company  canteens,  sports  and
leisure venues) often have characteristics which are
distinct  from  those  in  normal  retail  outlets,  most
particularly the fact that the products are in many
instances  not  being  sold  to  the  general  public
but  rather  to  a  captive  pool  of  consumers.
Considerations  such  as  space  management  may
often  be  quite  different  in  such  venues,  and  price
levels  can  also  vary.  Impulse  sales  via  such
relatively
are, 
non-retail 
insignificant,  and  it  is  therefore  not  necessary  to
decide  whether 
ice  cream  sold  through  such
outlets  should  be  excluded  from  the  relevant
market.  Only  4 %,  for  example,  of  HB’s  cabinet
agreements relate to cabinets installed in non-retail
outlets  of  this  kind  (see  paragraph  60).

however, 

venues 

items  of 

(135) As  a  result  of  the  foregoing  differences  in  the
conditions  of  distribution  for  soft  and  wrapped
single 
the  competitive
ice  cream, 
conditions  under  which  they  are  offered  to  the
retail  trade  are  different  and  distinct.  As  regards
production,  the  differing  characteristics  of  the
products  (soft  ice-cream  mix  as  opposed  to  ice
cream)  and  hence  of  the  technology  used  in  their
manufacture  provide  a  further  impediment  to
substitution  on  the  supply  side.  Wrapped  items

(138) The product market that is relevant to the present
proceeding  therefore  comprises  single  wrapped
items  of 
ice  cream.  Hereafter,  all
references to ‘impulse ice cream’ shall only include
such  single  wrapped  items.

impulse 

(ii) The  relevant  geographic  market

(64) Case  322/81  Michelin  [1983]  ECR  3461,  paragraph  37.

(139) The objective competitive conditions of supply and
demand for impulse ice cream vary considerably in
the  different  parts  of  the  Community.  Although

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and 

clear 

trend 

towards 

level;  this 

agreements 

arrangements, 

the  production  of  industrial  ice  cream  has  shown
a 
internationalisation,
distribution  is  still  largely  organised  on  a  national
including
basis.  Distribution 
freezer-cabinet 
analogous
contracts  granting  exclusivity,  are  concluded  at
national 
is  also  true  for  Ireland.
National  peculiarities  are  reflected  in  varying
market  structures,  product  ranges  and  prices.
Consumer  preferences  for  product  types  and
brands can also vary; this is partly due to the fact
that  some  ice-cream  manufacturers  operating  in
several  Member  States  have  a  policy  of  using
different  brand  names 
in  different  countries
(paragraph  20),  a  clear  illustration  of  the  national
character  of  markets.  Moreover,  the  regulations
governing  the  manufacture  of  ice  cream  are  not
harmonised  at  European  level.

2. Restriction  of  competition

standard 

(142) HB  supplies  freezer  cabinets  to  retailers  on  the
basis  of 
form  cabinet  agreements
containing  provisions  requiring  the  cabinets  to  be
used  exclusively  for  the  storing  of  products  for
sale which are supplied by HB (see paragraph 56);
accordingly, no product manufactured or supplied
by  a  third  party  is  to  be  sold  or  offered  for  sale
from  those  freezer  cabinets,  or  stored  therein.
individual
These  contracts  between  HB  and 
retailers 
between
agreements 
undertakings  within  the  meaning  of  Article  85(1).
HB  has  concluded  a  network  of  such  freezer-
cabinet agreements, relating to cabinets installed in
outlets 
relevant  geographic
the 
market.

throughout 

constitute 

(140)

In  particular,  the  impulse  ice  cream  market  in
Ireland  differs  from  that  in  Northern  Ireland  in
several  important  respects,  as  has  been  described
in  paragraphs  126,  127  and  128.  The  conditions
of  competition  are 
therefore  not  sufficiently
homogeneous  for  manufacturers  and  suppliers  to
treat  Ireland  and  Northern  Ireland  as  constituting
a single market. The relevant geographic market is
consequently  Ireland (65).

(iii) The  position  of  HB  on  the  relevant  market

(141) The  position  of  HB  on  the  market  for  single
wrapped  items  of  impulse  ice  cream  in  Ireland  is
one  of  particular  strength,  as  is  exhibited,  inter
alia,  by  its  market  share  over  many  years  (see
paragraphs  28  and  255  et  seq.).  This  position  of
strength is further illustrated by the degree of both
numeric  and  weighted  distribution  enjoyed  by
HB’s impulse products (see paragraph 46), as well
as  by  the  strength  of  the  brand  and  the  breadth
and  popularity  of  its  range  of  products  (see
paragraphs  24  and  25).  HB’s  position  on  the
is  further  reinforced  by  the
impulse  market 
strength  of  Unilever’s  position,  not  only  on  the
other ice cream markets in Ireland (take-home and
catering),  but  also  in  international  ice  cream
markets  and  in  the  markets  for  frozen  foods  and
consumer  products  generally.

(143) These  contractual  provisions  have  as  their  effect
the  restriction  of  the  ability  of  the  contracting
retailers to stock and offer for sale in their outlets
impulse  products  from  competing  suppliers,  in
circumstances  where  the  only  freezer  cabinet,  or
cabinets,  for  the  storage  of  impulse  ice  cream  in
place  in  the  outlet  has,  or  have,  been  provided  by
HB,  where  the  incumbent  HB  freezer  cabinet/s
is/are  unlikely  to  be  replaced  by  a  retailer-owned
or  by  a  competitor’s  freezer  cabinet/s,  and  where
it  is  not  economically  viable  to  allocate  space  to
the  installation  of  an  additional  cabinet.  This
restriction  has 
those
competing  suppliers  are  precluded  from  selling
their  products  to  those  outlets,  thereby  restricting
competition  between  suppliers  in  the  relevant
market.

the  consequence 

that 

(144) Having  identified  the  origin  of  the  restriction  of
competition  brought  about  by  the  network  of
HB’s cabinet agreements (paragraph 142), and the
circumstances  in  which  it  produces  restrictive
effects  on  retailers  and  suppliers  in  the  relevant
market  within  the  meaning  of  Article  85(1)
(paragraph  143), 
these
the 
circumstances  falls  to  be  demonstrated.  In  so
doing,  consideration  has  not  been  given  to  the
restrictive  effect  of  each 
individual  cabinet
agreement,  but  rather  to  the  effect  produced  by
the  category  of  agreements  fulfilling  the  stated
conditions  and  constituting  an  identifiable  part  of
the  network  of  HB’s  cabinet  agreements  as  a
whole (66);  the  assessment  of  the  restrictive  effect

existence  of 

(65) See  Delimitis,  paragraph  18  in  relation  to  the  German  beer
market;  Case  T-9/93  Schöller,  paragraph  54  where  the
Court of First Instance (CFI) accepted that Germany was the
correct  geographic  market  for  impulse  ice  cream.

(66) Case  C-234/89  Delimitis  at  paragraphs  19  to  24,  Cases
T-7/93  and  T-9/93  Langnese  and  Schöller,  at  paragraphs
129  to  131  and  95  to  99.

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of  that  part  of  HB’s  network  then  applies  equally
to  each  of 
that
part (67).

the  agreements  comprising 

(145) The  assessment  of  this  restrictive  effect  has  been
made  against  the  background  of  the  effect  of  all
similar  networks  of  freezer-cabinet  agreements
operated  by  the  other  ice-cream  suppliers  in  the
relevant  market,  as  well  as  in  the  light  of  any
further  relevant  market  conditions.  The  restrictive
effect  has  moreover  been  quantified  so  as  to
demonstrate  its  appreciable  nature.

3. Outlet  profile

(146)

the  precise  extent 

In  determining 
to  which
Article  85(1)  applies  to  HB’s  cabinet  agreements,
it  is  first  necessary  to  analyse  the  outlet  profile  in
order  to  identify  those  outlets  in  which  only  an
HB  cabinet/s  is/are  found.

the 

from 

(147) Networks of supplier-exclusive cabinet agreements
(that is, agreements whereby a cabinet is provided
by  a  supplier  on  condition  that  only  products
supplied  by  him  may  be  stored  therein)  clearly
have the effect of restricting the ability of retailers
to stock and sell the impulse ice-cream products of
a  number  of  competing  suppliers.  This  restriction
inevitable  space  constraints
results 
experienced  by  retail  outlets  (see  paragraph  43).
The average number of cabinets in place in outlets
has  been  calculated  at  1,5  by  the  Lansdowne
survey  and  at  1,42  according  to  the  Rosslyn
survey,  clear  illustration  of  these  constraints  (see
paragraphs  89  and  105).  Retailers  are,  moreover,
conscious of these constraints, as can be seen from
their  perception  of  the  optimal  number  of  freezer
cabinets to have in place in an outlet at the height
of  the  season:  1,57  (see  paragraph  97).

referred  to  as  ‘open’  outlets,  in  the  sense  that
retailers are free to stock the impulse ice cream of
any supplier. The Lansdowne survey, conducted in
July  1996 (69),  found  (see  paragraph  92)  that  only
17 %  of  all  outlets  had  retailer-owned  cabinets
and thus could be described as ‘open’ in this way,
and  that  the  remaining  83 %  had  only  supplier-
provided  cabinets.  In  April  1996 (70),  the  Rosslyn
survey  found  (see  paragraph  114)  that  no  more
than  11 %  of  outlets  could  have  in  place  at  least
one cabinet which was not supplier-exclusive; only
6 %  of  all  cabinets  in  the  outlets  surveyed  were
retailer-owned. These are the only outlets to which
impulse ice-cream suppliers can have direct access,
without  offering  the  retailer  a  freezer  cabinet  for
the  storage  of  the  new  supplier’s  products,  and
without  persuading  the  retailer  to  accept  that
offer.

(149) The  remaining  outlets,  without  non-exclusive
cabinets,  contain  one  or  more  supplier-exclusive
cabinets.  The  Lansdowne  survey  found  that  83 %
of  all  outlets  in  the  relevant  market  fell  into  this
category  (see  paragraph  92).  The  Rosslyn  survey
found  (see  paragraphs  108  and  114)  that  a  total
of  84 %  of  all  outlets  offering  impulse  ice  cream
contain only supplier-exclusive cabinets. These are
the  outlets  to  which  suppliers  whose  cabinets  are
not  already  set  up  therein  cannot  have  direct
access  for  the  sale  of  their  products  without  first
overcoming 
to  entry
described  below.  In  this  way,  such  newcomers  to
the  outlet  are  foreclosed  therefrom.  Although  this
foreclosure  is  not  absolute,  in  the  sense  that  the
retailer  is  not  contractually  precluded  from  selling
other  suppliers’  products,  the  outlet  can  be  said
to  be  foreclosed  in  so  far  as  entry  thereto  by
competing  suppliers  is  rendered  very  difficult.

the  substantial  barriers 

(148) Only a small proportion of retail outlets in Ireland
contains  non-exclusive  cabinets (68):  these  can  be

(67) The  CFI  in  Langnese  and  Schöller  stated  at  paragraphs  129
and  95  that  ‘. . .  where  there  is  a  network  of  similar
agreements concluded by the same producer, the assessment
of  the  effects  of  that  network  on  competition  applies  to  all
the  individual  agreements  making  up  the  network’.

(68) In  practice,  given  that  all  suppliers  in  the  relevant  market
operate  cabinet  exclusivity,  this  means  a  cabinet  owned  by
the  retailer  himself  or  on  loan  from  a  source  other  than  an
ice-cream  supplier.

(150)

It is also clear that most sales of impulse ice cream
through  outlets  which  have  only
are  made 
supplier-exclusive  cabinets.  This  is  illustrated,  not
only  by  the  sheer  numerical  superiority  of  such
outlets  in  the  relevant  market,  but  also  by  the

(69) That is following the disposal by HB of a portion of its fleet

of  cabinets  (see  paragraphs  72  and  73).

(70) That is before the disposal by HB of a portion of its fleet of

cabinets  (see  paragraphs  72  and  73).

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much  lower  proportion  of  high  turnover  (in
impulse  ice  cream)  outlets  which  are  open  in  the
manner described at paragraph 148: only 10 %  of
the higher turnover category of outlets are open in
this  way,  in  contrast  to  28 %  of  the  lower
turnover  category  of  outlets  (see  paragraph  93).

(151) A  majority  of 

these 

foreclosed  outlets  are,
moreover,  only  in  a  position  to  sell  the  impulse
ice-cream  products  of  just  one  supplier,  in  the
sense  that  they  only  have  an  exclusive  cabinet/s
provided  by  one  ice-cream  supplier:  according  to
Lansdowne, 56 % of all outlets are in this position
(see  paragraph  92).

(152) The  majority  of  the  supplier-provided  cabinets  in
the  relevant  market  have  been  provided  by  HB:
61 %  of  them,  according  to  Lansdowne  (see
paragraph  88);  64 %  of  all  cabinets,  according  to
to
Rosslyn 
Lansdowne,  72 %  of  all  outlets  have  at  least  one
HB  cabinet  (76 %,  according  to  Rosslyn,  see
paragraph  108).  HB’s  own 
(see
paragraph  124)  is  that  [. . .] %  of  all  retail  outlets
in  the  relevant  market  have  at  least  one  HB
cabinet.

(see  paragraph  107).  According 

estimate 

(153) The Lansdowne survey also found that 41 % of all
outlets  are  only  in  a  position  to  sell  the  impulse
ice-cream products of HB, in that they only have a
freezer cabinet, or cabinets, provided by HB, 35 %
of  all  outlets  having  only  a  single  HB  cabinet  and
a further 6 % having more than one. According to
Rosslyn,  in  50 %  (see  paragraph  108)  of  all
outlets, an HB cabinet is the only cabinet set up in
the  outlet;  in  a  further  5 %  of  all  outlets,  there  is
more  than  one  HB  cabinet  and  these  are  the  only
cabinets in the outlet: this means that 55 % of the
sample  of  outlets  were  only  in  a  position  to  sell
the  impulse  ice-cream  products  of  HB  (solus  HB
stockists)  in  the  sense  just  described.  According
to  B&A,  in  [. . .] %  ([. . .] %  of  [. . .] %,  see
paragraphs  116  and  117)  of  all  outlets,  an  HB
cabinet  is  the  only  cabinet  in  place  in  the  outlet;
[. . .] %  of  the  sample  of  outlets  were  solus  HB
stockists 
(see
paragraph  116).  [. . .  more  than  40 % . . .]  of  all
outlets, according to HB’s own estimate, are solus
HB  stockists  in  this  sense  (see  HB’s  estimate  in
November  1994  of  [. . .  more  than  60 % . . .]  see
paragraph  125).

the  sense  described  above 

in 

have 

through 

outlets  which 

(154) Almost  all  of  HB’s  sales  of  impulse  ice  cream  are
made 
only
supplier-exclusive  cabinets.  This  can  be  seen  from
the fact that [. . . more than 95 % . . .] of HB’s ice
cream sales are made through outlets in which HB
cabinets  are  in  place  (see  paragraph  61).  Given
that only 5 % of all outlets are open and also have
a  supplier-exclusive  cabinet/s  (see  paragraph  92),
and  that  95 %  of  HB  cabinets  are  in  place  in
outlets  which  have  only  such  supplier-exclusive
cabinets  (see  paragraph  94),  the  conclusion  that
almost  all  of  HB’s  sales  are  made  through  such
outlets  is  unavoidable (71).

(155) The Lansdowne survey demonstrates that the level
of  HB’s  sales  through  outlets  with  only  an  HB
cabinet/s, that is to say, those which are solus  HB
stockists  in  the  manner  described  above,  is  almost
identical  to  the  level  of  impulse  ice-cream  sales
made  through  other  outlets  in  which  HB  has
provided  a  freezer  cabinet  for  installation  (see
paragraph  94).  Moreover,  HB’s  levels  of  numeric
and  weighted  distribution  illustrate  that  the  level
of  sales  in  the  outlets  where  it  is  present  is
generally  higher  than  in  those  where  it  is  not  (see
paragraph  46).  The  level  of  HB’s  sales  through
outlets  with  only  an  HB  cabinet/s  is  therefore  at
least as high as that made through all other outlets
in  the  relevant  market.

(156)

It  can  thus  be  concluded  that  in  some  40 % (72)  of
all  outlets  in  the  relevant  market,  the  only  freezer
cabinet/s  for  the  storage  of  impulse  ice  cream  in
place  in  the  outlet  has/have  been  provided  by  HB
(see paragraph 153). HB has expressly stated in its
response  to  the  Statement  of  Objections  that  it
does  not  dispute  this  conclusion.  It  has  further
been  demonstrated  that  some  40 %  of  all  impulse
ice  cream  sales  in  the  relevant  market  are  made
through  this  category  of  outlets  (see  paragraph
155).  These  outlets  are  solus  HB  stockists  in  the
sense  described  above.  The  agreements  relating  to
the  cabinets  installed  in  this  category  of  outlets
constitute  an  identifiable  part  of  HB’s  network  of
cabinet agreements.

(71) The  disposal  of  in  situ  cabinets  by  HB  during  the  first  half
of  1996  will  not  have  affected  this  assessment  to  any
significant  degree;  apart  from  the  fact  that  the  cabinets
disposed  of  have  an  average  age  of  nine  years  (i.e.  they  are
at least approaching the end of a cabinet’s normal lifespan),
the  disposals  took  place  primarily  in  low-turnover  outlets
(see  paragraph  73).

(72) It  can  be  seen  from  the  foregoing  that  this  is  a  conservative

figure.

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4. Conditions for finding that the identified part
of HB’s network of freezer-cabinet agreements
produces  a  restrictive  effect  on  the  relevant
market

(157) A  supplier  who  wishes  to  gain  access  for  the  sale
of his impulse ice-cream products to a retail outlet
(that  is,  a  new  entrant  to  the  outlet)  in  which  at
least  one  supplier-exclusive  freezer  cabinet  is  in
place  can  only  do  so  if  that  outlet  has  a  non-
exclusive  cabinet/s  (and  thus  is  an  open  outlet  in
the sense described at paragraph 148) or if he can
persuade  the  retailer  either  to  replace  an  in  situ
supplier-exclusive  freezer  cabinet  or  to  install  an
additional  freezer  cabinet  alongside  the  in  situ
supplier-exclusive cabinet/s. These two alternatives
are discussed at points (i) and (ii) below in relation
to  the  category  of  outlets  identified  in  paragraph
156.

(i) Likelihood  of  persuading  a  retailer  to  replace

an  HB  freezer  cabinet

(158)

If a competing supplier wishes to gain access to an
outlet  in  which  the  only  freezer  cabinet  for  the
storage of impulse ice cream in place in the outlet
has  been  provided  by  HB,  he  may  attempt  to
persuade  the  retailer  to  replace  one  of  the  HB
cabinets  with  either  a  cabinet  purchased  or  leased
by the retailer himself from a source other than an
ice-cream  supplier  or  with  a  cabinet  supplied  by
the  competing  supplier  (the  new  entrant  to  the
outlet).

(a) Replacement  by  retailer’s  own  cabinet

(159) A  retailer  contemplating  the  replacement  of  a
supplier-exclusive  cabinet  will  only  do  so  if  he
expects  to  increase  his  profits  as  a  result.  In
making  such  a  calculation,  he  must  take  into
account  the  strength  of  the  position  of  the
incumbent, or incumbents, on the relevant market.
A retailer contemplating the replacement of an HB
cabinet  must  therefore  take  into  account  the
overwhelming  strength  of  HB’s  position  on  the
relevant  market  (see  paragraph  141).  This  is
particularly  so  where  the  HB  cabinet  is  the  only
one  in  the  outlet:  where  the  retailer  envisages
replacing this one HB cabinet with his own freezer
cabinet,  it  can  be  expected  that  the  ice-cream

products  stocked  in  the  retailer-owned  freezer
cabinet will in general reflect the respective market
shares  of  the  various  different  manufacturers  in
the  relevant  market.  Given  the  strength  of  HB’s
position,  the  range  of  products  offered  in  the
outlet  following  the  replacement  is  not  likely  to
change  to  any  great  extent.  The  retailer  is  not
therefore  likely  to  envisage  that  his  profits  will  be
much  enhanced  by  the  possibility  of  offering  a
combination  of  manufacturers’  products.

(160) Nor  should  the  risk-aversion  of  retailers  be
discounted  as  a  factor  rendering  it  unlikely  that  a
retailer  will  choose  to  acquire  his  own  cabinet:
uncertainty  about  future  profits,  as  well  as  the
general  inconvenience  of  having  to  acquire  and
maintain  one’s  own  cabinet,  amount  to  not
insignificant  disincentives,  particularly  to  small
retailers. 
that
uncertainty  concerning  future  profits  is  likely  to
particularly  discourage  small  retailers  for  whom
the risk inherent in such an investment (see below)
could  have  serious  consequences  and  so  would  be
less  attractive.

It  should  be  borne 

in  mind 

for 

(161) The  investment  necessary  for  the  purchase  of  a
retailer-owned  freezer  cabinet,  as  well  as  the  cost
of  its  maintenance,  amounts  to  a  disincentive  to
retailers  who  would  thereby  forego  the  provision
of  a  cabinet  which  is  provided  on  ‘free  on  loan’
terms,  with  maintenance  assured  by  the  supplier,
HB: even though the retailer pays indirectly for the
service  (see  paragraphs  76  to  79),  the  economies
of  scale  in  purchasing,  installing  and  maintaining
cabinets  which  are  possible 
large-scale
ice-cream suppliers such as HB are not available to
small  retailers  and 
to  an
incentive  to  accept  supplier-provision.  Before  the
introduction  of  dual  pricing  in  1995,  HB’s  policy
of  inclusive  pricing  (see  above)  meant  that  this
disincentive was even more marked. As a result of
the inclusion of this element in the ice-cream price
charged  across  the  board,  a  retailer  with  his  own
cabinet  was  indirectly  financing  HB’s  cabinet  fleet
without benefiting from the provision of a cabinet.
Such  an  investment  is  moreover  a  ‘sunk’  cost  for
the  retailer  if  he  cannot  easily  resell  the  cabinet.
Such  cost  considerations  are  particularly  pertinent
in  relation  to  retailers  with  cash  or  credit
constraints,  for  whatever  reason,  and  so  will  be
to  smaller  outlets.  The
particularly  relevant 

therefore  amount 

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Lansdowne  survey  found  that  these  commercial/
cost  concerns  for  retailers  were  unmistakable
disincentives  to  cabinet  purchase  by  them:  see
paragraphs  100  and  104.

replace  HB  cabinets,  it  is  likely  to  at  least  in  part
be  on  account  of  the  disincentives  to  cabinet
acquisition  just  described.

(162) The  need  to  rupture  relations  with  the  supplier
providing  the  cabinet  to  be  replaced  is  a  further
impediment,  particularly  where 
that  supplier
enjoys a market position as strong as that held by
HB.  The  very  fact  that  there  are  so  few  retailers
who  have  elected  to  purchase  or  lease  freezer
cabinets  for  the  stocking  of  impulse  ice  cream  in
Ireland  tends  to  confirm  this  analysis.  Prior  to
HB’s cabinet disposal in 1996, very few retailers in
Ireland  had  opted  to  purchase  their  own  cabinets
(see  Rosslyn  survey  at  paragraph  107,  carried  out
in  April  1996,  prior  to  the  disposal).  Most  of  the
cabinet  disposals  to  retailers  by  HB  in  1996  were
made  [. . .],  and  account  for  a  large  proportion  of
the retailer-owned cabinets in the relevant market.
HB’s  cabinet  hire-purchase  scheme,  introduced  in
1995, has not attracted the interest of any retailers
(see  paragraphs  70  and  71)  in  spite  of  HB’s
expressed  conviction  that  its  terms  would  prove
attractive  to  them;  only  11 %  of  those  retailers
interviewed  by  Lansdowne  who  did  not  already
own  a  cabinet  or  have  one  on  hire-purchase
expressed  interest  in  the  HB  scheme.  The  market
research carried out by Rosslyn found that, of the
26 %  of  all  outlets  interviewed  who  said  they
would  be  prepared  to  install  a  replacement  or
additional freezer, 82 % would not be prepared to
buy a cabinet themselves and 80 % would not take
a  non-exclusive  cabinet  on  rent.

there 

freezer  cabinet, 

(163) HB  have  argued  that  in  outlets  with  more  than
one  HB 
is  a  greater
likelihood  of  the  retailer  replacing  one  of  them
with  his  own  cabinet  while  retaining  the  other,  or
others.  It  should  be  pointed  out  that  most  of  the
outlets in the relevant category (i.e. those in which
there are only HB cabinets) have only a single HB
freezer  cabinet  for  the  sale  of  impulse  ice  cream
(see  paragraph  153);  in  most  of  the  remainder
there  are  only  two  freezer  cabinets.  For  those
outlets  with  two  or  more  HB  freezer  cabinets,  a
retailer  is  likely  to  replace  one  or  more  of  them
only  if  he  anticipates  that  the  newly  installed
freezer cabinet will yield at least the same turnover
in  impulse  ice  cream  as  achieved  through  that,  or
those,  displaced.  While  he  may  reach  such  a
conclusion,  the  evidence  indicates  that  retailers
very  rarely  choose  to  take  this  course  of  action
(see  below);  although  the  market  strength  of  HB
must be the principal reason for this reluctance to

to 

the 

that 

(164) The  market  research  relied  on  by  the  Commission
testifies 
replacement  of
fact 
supplier-provided cabinets by either retailer-owned
cabinets  or  by  the  supplier-provided  cabinets  of
the  incumbent’s  competitors  is  very  unusual  (see
paragraph  111),  and  that  retailer  unwillingness  to
do  so  is  particularly  marked  (see  paragraphs  104,
112  and  119).  The  market  research  moreover
replacement  of  HB-provided
indicates 
cabinets  by  cabinets  not  provided  by  HB  is  very
rare:  over  the  last  five  years,  78 %  of  all  the
cabinets replaced in outlets were HB cabinets, and
74 % of the ones being put in their place were also
HB  cabinets  (see  paragraph  111)  and,  in  most
cases,  larger  ones  (see  paragraph  74).

that 

(165) The  research  also  indicates  that  retailers  are
generally  uninterested  in  the  possibility  of  such
replacement.  The  Lansdowne  survey  specially
asked  certain  questions  of  retailers  who  had  only
an  HB  cabinet,  and  who  were  consequently  in  a
position  to  offer  for  sale  only  HB 
impulse
ice-cream  products.  These  retailers  were  further
asked  if  they  were  interested  in  stocking  brands
other than HB. Only 25 % of them were. Of those
retailers  (those  with  only  HB  cabinets  and  an
interest  in  stocking  other  brands)  76 %  said  they
would  not  consider  replacing  the  HB  cabinet  (or
one of them) with a cabinet hired or purchased by
themselves  (see  paragraphs  102,  103  and  104).

(b) Replacement  by  a  supplier-provided  cabinet

(166) A  retailer  contemplating  the  replacement  of  a
supplier-provided  freezer  cabinet  with  a  cabinet
supplied  by  another  ice-cream  supplier  will  only
do  so  if  he  forecasts  that  higher  profits  are  likely
to  result  from  such  a  substitution (73):  he  must
in  general  be  satisfied  that  there  is  more  demand
for  the  new  entrant’s  products  and  that  the

(73) Where  an  incumbent  supplier-exclusive  cabinet  is  replaced
by  a  cabinet  exclusive  to  a  competitor  of  the  incumbent
supplier,  the  outlet  becomes  foreclosed  to  the  (former)
incumbent,  provided  it  was  his  only  cabinet  in  the  outlet,
and  remains  foreclosed  to  any  third  party  suppliers  not
already  present  in  the  outlet.

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newcomer’s  cabinet  will  therefore  prove  to  be  a
better  profit-earner  than  the  incumbent’s.  If  the
entrant  to  the  outlet  is  a  less  well-known  ice-
cream  producer  than  the  supplier,  or  suppliers,
already  present,  if  he  has  a  less  extensive  or  less
popular  product  range,  if  the  cabinet  provided  is
smaller or the terms less attractive, the retailer will
have no incentive to make the replacement. Where
the  supplier-exclusive  cabinet  is  the  only  one  in
the outlet, those retailers would effectively give up
the  option  of  offering  the  displaced  supplier’s
impulse 
as
manufacturers  appear  almost  invariably  to  supply
freezer  cabinets 
to  a  condition  of
exclusivity.

ice-cream  products 

altogether, 

subject 

(167) For  those  retailers  contemplating  the  replacement
of  an  HB  freezer  cabinet  by  a  cabinet  supplied  by
another  ice-cream  supplier,  the  strength  of  HB’s
position  on  the  relevant  market  amounts  to  an
even  greater  disincentive  than  in  the  case  of
replacement  by  the  retailer’s  own  cabinet.  This  is
particularly  so  where  the  HB  cabinet  is  the  only
one  in  the  outlet:  those  retailers  would  effectively
give  up  the  option  of  offering  HB 
impulse
ice-cream  products  altogether (74).  The  retailer  will
only  choose  this  option  if  he  forecasts  that  higher
profits are likely to result from such a substitution
and  so  is  almost  certain  not  to  do  so  where  the
HB  cabinet  is  the  only  one  in  the  outlet.  None  of
HB’s  competitors’  products  are  as  well  known  or
as  comprehensive  in  range.  As  a  result,  they  do
not  in  general  provide  a  satisfactory  alternative,
from  a  retailer’s  point  of  view,  to  HB’s  products.

(168) The risk aversion of many retailers, inconvenience,
and  established  relations  with  current  supplies  are
also  factors  tending  to  make  it  more  unlikely  that
a  retailer  will  choose  to  replace  one  supplier’s
cabinet  with  another’s.  Where  an  existing,
supplier’s  cabinet  is  replaced,  not  by  the  retailer’s
own  cabinet  but  by  the  cabinet  of  another
supplier,  this  amounts  almost  invariably  to  an
effective 
the
to  deal 
incumbent.  These  considerations  are  all  the  more
pertinent  in  relation  to  the  replacement  of  an  HB
that  company’s  market
cabinet, 

further  with 

in  view  of 

refusal 

strength.  Even  where  an  outlet  has  two  or  more
HB  cabinets  only  (meaning  that  it  is  a  solus  HB
stockist),  the  replacement  of  one  or  other  of  these
HB  cabinets  is  unlikely,  given  the  market  strength
enjoyed  by  HB:  the  likelihood  of  replacement  is
conditioned  by  the  retailer’s  expectation  of  a
higher  return  from  the  new  cabinet.  The  market
research 
the
described 
unlikelihood  of  such  replacement.

confirms 

above 

(169) The  question  of  whether  an  HB  freezer  cabinet  is
likely  to  be  replaced  by  a  freezer  cabinet  supplied
by  a  competitor  has  also  to  be  considered  from
the  point  of  view  of  that  other  supplier.  As
mentioned  above,  such  a  supplier  can  only  be
expected  to  make  the  investment  necessary  if  he
forecasts  a  satisfactory  return  on  that  investment
in the form of increased sales. Given HB’s strength
in the relevant market, an ice-cream supplier other
than  HB  is  likely  to  have  a  lower  return  on  such
investment.  This  competitive  disadvantage
an 
vis-à-vis  the  leading  supplier  in  the  market  makes
it  in  some  instances  less  likely  that  a  retailer  will
be  offered  a  cabinet  by  such  a  competitor.

(170)

It  should  be  recalled  that  the  empirical  evidence,
in  the  form  of  the  market  research  relied  on  by
the  Commission,  indicates  that  replacement  of
supplier-provided  cabinets  generally,  and  of  HB
cabinets  in  particular,  almost  invariably  results  in
the  installation  of  new  cabinets  coming  from  the
same supplier (see paragraph 111). Of the retailers
surveyed  by  Lansdowne  who  had  only  an  HB
cabinet/s  and  expressed  an  interest  in  stocking
other  brands  82 %  said  they  would  not  consider
replacing  the  HB  cabinet  (or  one  of  them)  with  a
cabinet supplied by another ice-cream supplier (see
paragraph  104),  the 
leadership  position  and
popularity  of  HB’s  products  being  cited  by  many
retailers  as  the  principal  reasons.

(171) The  HB  freezer-cabinet  agreements  are  concluded
for  an 
indefinite  period  of  time.  Each  such
agreement  continues  in  force  until  either  HB  or
the  retailer  gives  the  other  two  calendar  months’
notice in writing of its desire to terminate it (75). In
spite  of  the  fact  that  retailers  are  generally  aware

(74) The  return  of  the  HB  freezer  cabinet  may  also  have  the
consequence  that  a  retailer  will  have  to  give  up  stocking
HB’s  take-home  ice-cream  products,  as  these  are  sometimes
kept  in  the  same  freezer  cabinet  as  impulse  products
(paragraph  42);  this  additional  consequence  renders  the
option of replacing an HB freezer cabinet by that of another
manufacturer  even  more  unattractive.

(75) HB’s apparent disregard of this requirement (see above) can
only  be  considered  a  partially  mitigating  factor  in  this
regard, given possible retailer ignorance or uncertainty about
the  practice.

4.9.98

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that  the  agreemeents  can  be  terminated  at  short
notice,  the  indefinite  nature  of  the  agreements  is
none  the  less  another  factor  which  may  render
retailers reluctant to take the initiative of bringing
them  to  an  end,  whether  with  a  view  to
replacement  of  an  HB  cabinet  by  a  retailer-owned
cabinet  or  by  that  of  another  supplier.

(ii) Likelihood  of  persuading  a  retailer  to  install

an  additional  freezer  cabinet

(172) Alternatively, a competing supplier wishing to gain
access  to  an  outlet  in  which  the  only  freezer
cabinet/s  for  the  storage  of  impulse  ice  cream  in
place in the outlet has/have been provided by HB,
may  attempt  to  persuade  the  retailer  to  install
alongside  the  in  situ  HB  cabinet/s,  either  an
additional  cabinet  purchased  or  leased  by  the
retailer  himself  from  a  source  other  than  an
ice-cream  supplier  or  a  cabinet  supplied  by  the
competing  supplier  (the  new  entrant  to  the
outlet).

(173)

In  deciding  whether  to 
install  an  additional
cabinet  in  his  outlet,  a  retailer  must  take  into
account  the  constraints  on  space  which  are
inherent  in  any  outlet,  and  in  outlets  in  the
relevant  market  in  particular  (see  paragraph  43).
The  retailer  must  be  convinced  of  the  economic
viability  of  such  a  decision.  In  general,  a  retailer
in  accordance  with  his
allocates  sales  space 
perception of the return potential of that space (76).
In particular, he will take a variety of factors into
account,  some  of  which  are  detailed  below.  The
Lansdowne  survey  found  that  87 %  of  the  outlets
surveyed  did  not  consider  that  it  would  be  a
‘viable  option’  for  them  to  attribute  additional
space  to  the  installation  of  a  further  ice-cream
cabinet  (see  paragraph  96).  The  market  research
overwhelming
moreover 
reluctance  of  most 
the
installation of additional cabinets: (see Lansdowne
survey,  paragraphs  97  to  100  and  103;  Rosslyn

the 
retailers 

demonstrates 

to  allow 

112; 

B&A 

paragraph 

survey,
survey, 
paragraph  119).  The  Lansdowne  survey,  for
example,  found  that  only  40 %  of  the  25 %  of
those  retailers  who  are  only  in  a  position  to  offer
HB  ice  cream,  and  who  expressed  an  interest  in
stocking other brands, were prepared to accept the
installation  of  an  additional  cabinet;  the  B&A
survey  found  that  only  [. . .] %  of  retailers  with
only  one  cabinet  in  their  outlet  were  prepared  to
contemplate  the 
installation  of  an  additional
cabinet.

(174) For  the  sale  of  impulse  ice  cream,  the  accessibility
and  visibility  of  the  freezer  cabinet  are  essential.
Not  all  sales  space  in  an  outlet  is  therefore
suitable (77)  (see  paragraphs  10  and  43).  At  the
same  time,  the  space  which  is  suitable  must  also
be  available  for  the  display  of  other  products,  in
particular  impulse  products.  Sales  of  these  other
products are not in general seasonally variable and
may  provide  higher  annual  returns  on  the  space
used. The allocation of retail space to cabinets for
the sale of impulse ice cream will in general bear a
direct  relation  to  their  contribution  to  sales.

(175) The  installation  of  an  additional  retailer-owned
freezer  cabinet  or  of  one 
supplied  by  a
manufacturer  other  than  HB  has  as  its  immediate
result the availability of a wider range of products.
This  extension  of  product  range,  however,  does
not  automatically  generate  a  higher  turnover  in
impulse  ice  cream  in  that  outlet.  In  fact,  while
overall sales of impulse ice cream from that outlet
may  well 
increase,  they  will  not  necessarily
increase to the level which a retailer would expect
from such additional allocation of space. Not only
will  the  newly-installed  cabinet  not  be  likely  to
generate  the  same  level  of  sales  as  the  incumbent
cabinet/s  did  until  the  new  installation,  but  the
incumbent cabinet/s, will not be likely to continue
generating  the  same  level  of  sales  as  previous  to
the new installation. It is only if all sales resulting
from  the  new  cabinet  are  entirely  attributable  to
specific  demand  for  the  newcomer’s  products,  to
the  exclusion  of  demand  for  any  other  impulse
ice-cream  products  available  in  the  outlet,  that
sales  from  the  incumbent  cabinet/s  will  not  suffer

(76) The  B&A  ‘Qualitative  study’  finding  that  retailers  generally
operate on the basis of instinctive, rather than more precise,
(see
methods  of  calculating  profit 
paragraphs 122 and 123) does not undermine the validity of
this  assertion:  their  instinctive  calculations  will  take  the
same  basic  considerations  into  account.

return  potential 

(77) See  Commission  Decision  78/172/EEC  in  Liebig  (OJ  L  53,

24.2.1978,  p.  20,  at  paragraph  9).

L 246/30

EN

Official  Journal  of  the  European  Communities

4.9.98

as  a  result  of  the  new  installation.  From  the
retailer’s  point  of  view,  the  additional  installation
will  only  be  viable  where  he  forecasts  that  the
additional demand created by the new cabinet will
compensate  for  the  lost  opportunity  of  using  the
retail  space  in  another  way.  The  substantial  level
of  de-stocking  of  brands  recorded  by  the  B&A
survey  (paragraph  118)  is  consistent  with  these
space  viability  considerations,  the  retailers 
in
question  may  have  considered  that  the  sales  of  a
supplier’s ice cream did not justify the use of space
which  that  supplier’s  cabinet  required.

(176) The  strength  of  HB’s  position  on  the  relevant
market  means  that  a  retailer  is  therefore  very
unlikely  to  install  an  additional  retailer-owned
cabinet in an outlet which already contains one or
more  of  HB’s  network  of  cabinets.  Because  of  the
range  and  popularity  of  the  products  offered  by
HB, the additional profits likely to result from the
installation  of  a  retailer-owned  cabinet  alongside
the  HB  cabinet  are  reduced.  The  likely  resulting
inefficiencies  described  more  generally  above  will
therefore  be  all  the  more  pronounced  in  this
instance.

(177) Furthermore,  the  most  efficient  way  of  increasing
retailer  capacity  so  as  to  satisfy  an  increase  in
consumer  demand,  is  by  more  frequent  deliveries
to  a  minimum  number  of  freezer  cabinets  rather
than  by  the  installation  of  additional  cabinets (78).
Having  to  install  additional  cabinets  in  order  to
cater for each supplier’s products leads to obvious
inefficiencies  for  the  retailer.

(178) A 

space 

factor 

further 

rendering 

such  additional
placement  all  the  more  unlikely  is  the  increasing
floor 
by  HB’s
recently-installed cabinets (see paragraph 74). This
naturally  reduces  the  likelihood  of  a  retailer
allocating  yet  more  space  to  the  sale  of  impulse
ice-cream  products.

taken 

being 

up 

(179) The  possibility  of  replacing  an  incumbent  HB
freezer  cabinet  by  two  (or  more)  smaller  ones

should  also  be  considered.  While  this  option  may
not  have  the  effect  of  increasing  the  amount  of
retail space taken up by the storage of impulse ice
cream,  and  appears  to  appeal  to  some  retailers
(see  Lansdowne  survey,  paragraph  104),  it  is
constrained  by  the  fact  that  suppliers  seem  to
provide  cabinets  designed  to  accommodate  their
entire  range:  these  are  tending  to  increase  in  area
for  the  full  range  supplies,  in  particular  HB  (see
paragraphs  74  and  75  regarding  HB  cabinets).  It
will  in  any  event  not  normally  be  possible  for  a
retailer  to  obtain  cabinets  from  suppliers  which
cater  for  the  exact  range  and  amount  of  products
he may wish to display. Installing a larger number
of  smaller  cabinets  may  moreover  complicate  a
retailer’s  attempt  to  offer  to  his  customers  a
complete  range  of  all  types  of  impulse  ice-cream
products.  From  a  supplier’s  point  of  view,  very
small  freezer  cabinets  have  the  disadvantage  of
the
limiting  opportunities 
relevant  market.  In  addition,  it  should  be  noted
that  the  purchase,  installation,  maintenance  and
running  costs  of  two  cabinets  are  considerably
higher  than  for  one  cabinet  of  twice  their  size.

for  expansion 

in 

(180) HB  has  argued  that  the  average  number  of
cabinets  per  outlet  might  continue  to  increase,  as
appears  to  have  occurred  over  the  past  five  years:
the  Rosslyn  survey  showed  an  increase  in  the
average  number  of  cabinets  from  1,22  in  1991  to
1,42  in  1996;  the  Lansdowne  survey  found  an
average  figure  of  1,50.  It  is  clear,  however,  that
there  must  be  an  upper  limit  on  the  number  of
cabinets  which  an  outlet  is  prepared  to  install  for
the  sale  of  impulse  ice  cream.  This  point  is
illustrated,  not  only  by  the  very  small  proportion
of  outlets  with  more  than  two  cabinets (79),  but
also  by  the  reluctance  expressed  by  retailers  when
questioned  about  their  willingness  to  take  further
cabinets:  the  Lansdowne  survey  came  up  with
detailed  attitude  data 
(see
paragraphs  97  to  100  and  103).  It  should  in
particular  be  noted  that  retailers  considered  1,57
(average)  to  be  the  optimal  number  of  cabinets  to
have  in  place  during  the  height  of  the  season,
indicating  (on  the  basis  of  the  figures  for  the
average  number  of  cabinets  in  place  in  outlets)
that  the  market  is  more  or  less  cabinet-saturated,
and  that  new  entry  or  expansion  in  the  future  is
therefore  that  much  less  likely.

regard 

this 

in 

(78) This  is  confirmed  by  the  B&A  ‘Qualitative  study’,  which
found  that  retailers  favour  frequent  restocking  of  a  freezer
over 
(see
the 
paragraph  123).

additional  one 

installation  of 

an 

(79) 7 %  according  to  Lansdowne;  4 %  according  to  Rosslyn;
[. . .] %  according  to  B&A,  a  survey  weighted  significantly
toward  larger  outlets  (see  paragraph  86).

4.9.98

(181)

EN

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In  addition  to  the  general  considerations  just
outlined  in  relation  to  the  likelihood  of  a  retailer
choosing to install a cabinet in addition to the HB
cabinet/s  already  present 
the
following points should be made in relation to the
specific  options  mentioned  at  paragraph  172.

in  his  outlet, 

(a) Addition  of  retailer’s  own  cabinet  alongside

an  HB  cabinet/s

(iii) Conclusion

(184) From  the  foregoing  it  can  be  concluded  that  HB
freezer-cabinet  agreements,  concluded  in  relation
to  cabinets  installed  in  outlets  where  the  only
freezer  cabinets  in  place  in  the  outlet  has/have
been  provided  by  HB,  fulfil  the  conditions  set  out
in  paragraph  143  and  so  have  as  their  effect  the
restriction  of  competition  in  the  relevant  market.
In  view  of  this  conclusion,  the  category  of  outlets
in  question  can  be  said  to  be  de  facto  exclusively
tied  to  the  sale  of  the  impulse  ice-cream  products
of  HB.  Competing  suppliers  are  consequently
foreclosed  from  access  to  these  outlets.

(182) Most  of  the  disincentives  described  at  point  (i)(a)
in relation to the acquisition of their own cabinets
by  retailers  apply  also  to  this  scenario.  A  retailer
will  be  deterred  by  the  risk  inherent  in  making
‘sunk’).  The
such  an 
and
acquiring 
involved 
inconvenience 
maintaining  a  cabinet  also  amounts 
to  a
substantial  deterrent  for  retailers.

(probably 
in 

investment 

(b) Addition  of  a  supplier-exclusive  cabinet

alongside  an  HB  cabinet/s

(and 

(183) From the point of view of the supplier, the factors
mentioned  at  paragraph  169 
further
discussed  below)  are  at  least  equally  applicable.
Where  a  supplier  provides  an  additional  cabinet,
as  opposed  to  a  replacement  one,  his  profits  will
be constrained by competition from the remaining
incumbent/s,  whereas  a  replacement  cabinet  does
not have to compete with the displaced incumbent
in  that  outlet.  When  that  incumbent  is  HB,  the
strength  of  HB’s  position  on  the  relevant  market
means  that  a  retailer  is  even  more  unlikely  to
install  an  additional  supplier-exclusive  cabinet  in
an  outlet  which  already  contains  one  or  more  of
HB’s  network  of  cabinets.  Because  of  the  greater
range  and  popularity  of  the  products  offered  by
HB  than  by  any  of  its  competitors,  the  additional
profits  likely  to  result  from  the  installation  of
the  HB
another  supplier’s  cabinet  alongside 
cabinet  are  reduced (80).

(80) Where  an  additional  supplier-exclusive  cabinet  is  installed,
the  outlet  remains  foreclosed  to  any  third  party  suppliers
not  already  present  in  the  outlet.

5. Other  relevant  market  conditions

(i) Freezer  exclusivity  as  a  substantial  logistical
and  cost  barrier  to  entry  and  expansion  by
competing  suppliers

(185) The  general  provision  of  supplier-exclusive  freezer
cabinets to retailers by ice-cream suppliers renders
access  to  the  relevant  market,  and  expansion
therein,  difficult  (see  paragraphs  147  to  156),  a
majority  of  outlets  are  in  a  position  to  offer  for
sale  the  impulse  ice-cream  products  of  only  one
supplier. 
to  a
substantial  impediment  to  competition  between
suppliers.

In  consequence, 

it  amounts 

(186)

suppliers. 

In  point  4, 

incumbent  HB 

It  is  clear  that  the  provision  of  supplier-exclusive
freezer  cabinets  amounts  to  a  logistical  barrier  to
market  entrants  and  to  expansion  by  existing
ice-cream 
it  was
demonstrated  that, 
in  outlets  with  only  HB
cabinets,  it  is  difficult  to  persuade  retailers  to
replace 
freezer  cabinets,  and
difficult  to  persuade  retailers  to  install  additional
freezer  cabinets  for  the  display  of  impulse  ice
cream.  It  is  moreover  clear  from  point  4  that,  in
general,  this  is  true  not  only  for  HB  cabinets  in
outlets  with  only  HB  cabinets,  but  also  for
supplier-exclusive 
retail  outlets
cabinets 
generally.  While  other  suppliers  do  not  have  the
position  of  market  strength  enjoyed  by  HB,  they

in 

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4.9.98

none  the  less  provide  cabinets  to  retailers  on
very  similar  terms  and  the  cabinets  are  installed
in  outlets  with 
the  same  space  constraints.
Inconvenience  to  retailers,  their  risk  aversion,  and
unwillingness to rupture with established suppliers
are all factors contributing to this logistical barrier
to  competing  suppliers.

large
Farm  and  Häagen  Dazs  all  belong  to 
multinational  groups  of  companies.  Apart  from
the  greater  risk  involved  for  small  companies  in
financing  such  an  investment,  large  groups  can
achieve  scale  economies  in  both  the  acquisition
and  maintenance  of  cabinets  which  are  not
possible  for  smaller  companies,  again  raising  the
cost  of  entry  for  such  companies.

(187) The  market  research  relied  on  by  the  Commission
illustrates  this  general  logistical  barrier.  The  three
market  surveys  demonstrate  that  retailers  do  not
incumbent  supplier-exclusive
generally  replace 
cabinets  with  cabinets  other  than  from  the  same
supplier, and that retailers are in general reluctant
to  attribute  space  to  the  installation  of  further
cabinets  (see  paragraphs  164,  165  and  173).

(188) The  provision  of  supplier-exclusive  cabinets  also
amounts to a cost barrier to entry or expansion in
the  relevant  market.  Where  a  supplier  of  impulse
ice  cream  in  the  relevant  market,  whether  an
established market participant or a new entrant to
the  market,  wishes  to  have  his  products  offered
for  sale  from  an  outlet  where  a  supplier-exclusive
cabinet/s  only  is/are  in  place  (that  is  to  say,  from
most  outlets 
see
paragraph  149),  and  where  he  cannot  persuade
the  retailer  to  acquire  his  own  non-exclusive
cabinet,  the  supplier’s  only  course  of  action  is  to
make  available  to  the  retailer  a  cabinet  for  the
storage  of  his  (the  newcomer  to  the  outlet’s)
products.  Apart  from  the  difficulty  involved  in
persuading the retailer to accept the offer (detailed
above),  the  cost  to  the  supplier  of  providing  such
a  service  is  very  substantial.

relevant  market, 

the 

in 

costs,  which 

(189) The  expense  involved  in  acquiring  a  stock  of
freezer  cabinets  for  installation  in  outlets  which
will  ensure  that  a  supplier’s  products  can  achieve
viable  distribution  levels  renders  it  very  difficult
for small and even many medium-sized companies
to  enter  the  relevant  market  and  sustain  their
presence  there.  There  are  also  ongoing  cabinet
maintenance 
are  only
sustainable  where  there  is  a  minimum  number  of
the  supplier’s  cabinets  present  in  a  reasonably
concentrated  geographic  area.  The  two  small
impulse 
ice-cream  companies  that  have  been
operating  in  Ireland,  Valley  (now  in  liquidation)
and  Leadmore,  have  both  experienced  serious
financial difficulties in recent times, and both have
resorted 
in  distribution  with
newcomers  to  the  market  (Valley  with  Mars,  and
Leadmore  with  Nestlé).  HB,  Mars,  Nestlé,  Dale

to  cooperation 

costs 

(190) The  breadth  of  the  range  of  products  offered  by
the  supplier  is  also  a  consideration.  The  smaller
the  range,  the  more  difficult  it  is  to  justify  the
investment.  If  a  supplier  only  offers  one  or  two
products,  he  will  almost  certainly  not  offer  the
retailer  a  cabinet,  and  so  will  be  precluded  from
entering  the  outlet.  This  militates  in  particular
against  niche  suppliers  of  impulse  ice  cream,
limiting their opportunities for obtaining access to
wide-scale  distribution.

(191) Established  suppliers,  with  cabinets  in  place  in  a
significant  number  of  outlets,  are  protected  from
the  entry  of  competitors  to  outlets  in  which  they
are  present  by  this  cost  barrier:  the  presence  of
a  number  of  networks  of  incumbent  supplier-
exclusive  cabinets,  extending  to  almost  all  outlets
in the relevant market, has the effect of raising the
costs  of  the  entry  to  the  relevant  market  of  non-
incumbent  competitors  and  expansion  therein  by
all  suppliers.  Retailers  will  not  be  likely  to  accept
cabinets  from  suppliers  not  offering  terms  which
are  at  least  equally  favourable  to  those  being
offered  by  suppliers  with  cabinets  already  present
in the outlet, or to those being offered by suppliers
in  the  market  generally.  In  the  context  of  the
relevant market, this means that the supplier must
be prepared to offer a modern cabinet on ‘free on
loan’ terms (hence entailing no direct charge), and
with maintenance assured by that supplier. A new
entrant  will  moreover  not  normally  expect  to  get
the  same  return  from  installing  a  cabinet  as  an
incumbent would, at least not until his position in
the  market  has  been  well-established.  This
incumbency  advantage  has  ensured  that  the  only
new  entrants  to  the  relevant  market  in  recent
times have had ‘deep pockets’: Mars, Häagen Dazs
and  Nestlé.  The  cost  of  the  entry  of  Mars  is
illustrated  by  the  investment  which  it  made  in
cabinets  in  1994,  as  a  proportion  of  its  ice-cream
turnover  in  that  year(see  paragraph  80).  This
heavy  investment  in  cabinet  provision  means  that
an 
investment
accordingly,  particularly
requirements 

supplier’s 

ice-cream 

suffer 

other 

4.9.98

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during the period following market entry when the
supplier has not yet recouped from the retailer the
cost  of  its  investment  in  freezer  cabinets.

(192) HB  is  by  far  the  most  important  incumbent
supplier  in  the  relevant  market.  Its  longstanding
position  of  strength  in  that  market  has  been
described  in  detail  above.  Its  network  of  cabinets
is  the  largest  in  the  relevant  market,  about  three
times the size of that of its nearest competitor, and
HB  cabinets  are  present  in  most  outlets.  These
cabinets also tend to be larger than those installed
by 
its  competitors,  and  the  fleet  has  been
extensively  modernised  in  recent  years.

competition  in  the  market  for  impulse  ice  cream.
It  goes  without  saying  that  competition  between
ice-cream  suppliers  in  the  provison  of  freezer
cabinets to retailers is not in itself undesirable; it is
only  when  such  provision  is  made  on  exclusive
terms by all ice-cream suppliers that any economic
benefits  brought  about  by 
the  practice  are
outweighed  by  its  harmful  effects  on  competition
in  the  relevant  market.

(ii) Other  anti-competitive  consequences  of  the
barrier  to  entry  and  expansion  discussed
above

(193) HB  has  expressed  the  view,  in  this  regard,  that  a
distribution  system  whereby  freezer  cabinets  are
made  available  to  retailers  subject  to  a  condition
of exclusivity does not, in all the circumstances of
the  relevant  market,  amount  to  a  restriction  of
competition  within  the  meaning  of  Article  85(1).
HB  has  stated  that  ‘Competition  of  the  type
considered under Article 85(1) in conjunction with
Article 3g is broad enough to encompass a system
where  ice-cream  suppliers  compete,  inter  alia,  by
sale’.  This
providing  cabinets  at  point  of 
contention is essentially based on the fact that the
system  is  established  commercial  practice  in  the
relevant  market  and 
that
competition 
includes
competition  in  the  supply  to  retailers  of  freezer
cabinets subject to exclusivity. This competition in
the  supply  of  freezer  cabinets  applies  both  to
established  operators  and  to  new  entrants.

the  relevant  market 

elsewhere,  and 

in 

(194) To this it can be responded that competiton in the
relevant  market  should  not  compel  ice-cream
manufacturers  to  engage  in  the  supply  of  freezer
cabinets  as  an  unavoidable  prerequisite 
to
operating  in  the  market  for  the  supply  of  impulse
ice  cream  to  retailers.  In  most  cases  where
suppliers  wish  to  have  access  for  the  sale  of  their
products  to  an  outlet  having  no  ‘open’  freezer
cabinet,  such  compulsion  appears  to  be  a  reality.
Moreover, interbrand competition at the consumer
level  cannot  be  substituted  by  competition  for
access  to  the  retail  level.  This  is  particularly  the
case  where  impulse  products  are  concerned,  in
that  competition  tends  to  a  large  extent  to  be
(see
intra-outlet  rather 
paragraph  195  et  seq.).  In  the  present  case,  the
necessity  to  compete  in  the  supply  of  freezer
cabinets  has  the  effect  of  substantially  restricting

than  between  outlets 

(195) There are at least two additional factors rendering
entry  to  the  relevant  market  more  difficult:  first,
the  relatively  undeveloped  independent  wholesale
business  in  impulse  ice  cream  in  Ireland  means
that  access  to  distribution  via  such  independent
intermediaries is rendered more difficult; secondly,
the  strength  of  existing  brands  in  the  relevant
market,  and  customer 
loyalty  towards  them,
amounts to a formidable obstacle to new entrants.
It  is  acknowledged  that  brand  recognition  in  the
ice-cream  business,  as  in  that  of  most  fast-moving
consumer  goods,  is  of  paramount  importance.  In
this  regard,  it  should  be  pointed  out  that  Mars
and  Nestlé  have  both  benefited  substantially  from
the  strength  of  their  respective  brands  in  the
confectionery  sector,  which  brands  are  in  many
cases 
ice-cream
products.  The  other  new  entrant  in  recent  times,
from  a  very  high
Häagen  Dazs,  benefits 
invested
international  brand  profile  and  has 
considerable  resources  in  advertising;  its  market
share  remains  in  any  event  very  small.  The
particular strength of the HB brand in the relevant
market,  and  of  the  wide  product  range  which  it
offers  under  this  brand,  is  an  obstacle  rendering
competiton  with  HB  all  the  more  difficult.

those  of 

identical 

their 

to 

(196) New  entrants  are,  as  a  result  of  the  barriers  to
entry  described  above,  precluded  in  practice  from
many  retail  outlets  for  the  sale  of  their  products.
When  entry  is  possible,  it  can  only  be  achieved  at
great cost, thereby presenting a particular obstacle
to the entry of small and medium-sized companies.
Existing  suppliers  are  similarly  restricted  in  their
scope  for  expansion  in  the  market.  The  relative
numeric and weighted distribution figures achieved
by  the  various  ice-cream  suppliers  provides  clear
in  achieving  wide
evidence  of  the  difficulty 

L 246/34

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4.9.98

to  52): 

in
(see  paragraphs  46 
distribution 
particular, no supplier approaches the distribution
levels  being  obtained  by  HB.  Mars,  for  example,
had  achieved  a  higher  degree  of  market
penetration  in  the  year  after  its  entry  (when
retailers  had  been  placing  its  products  in  HB
cabinets)  than  it  has  managed  to  achieve  in  the
more than five years which have elapsed since then
(see  paragraphs  47  and  48).  Nestlé,  who  entered
the  market 
its  numeric
in  1994,  has  seen 
distribution  level  remain  unchanged  since  then,
and only a slight increase in the weighted level (see
paragraph  50).  The  effectiveness  of  these  barriers
is  understood  by  the  suppliers  operating  the
practice of cabinet provision subject to exclusivity.
This  is  most  clearly  illustrated  by  the  various
reactions  of  HB  to  the  market  entry  of  Mars  in
1989 (see paragraphs 64 to 68): it is evident from
company  documentation  that  HB’s  insistence  on
maintaining  freezer  exclusivity  was  not  motivated
by  concern  about  ‘piracy’  of  its  property  alone,
but  rather  saw  the  exclusivity  as  a  very  useful
means  of  checking 
the  effective  entry  and
expansion  of  the  new  rival.

(197) As  mentioned  above,  the  heavy  investment  in
cabinet  provision  means  that  other  investment
requirements  suffer  as  a  result,  and  that  the
consequent  allocation  of  resources  by  suppliers  is
likely  to  lead  to  a  distortion  of  competitive  forces
in  the  relevant  market.  Competitors  who  are
obliged  to  invest  so  heavily  in  achieving  physical
distribution,  particularly  when  entering  a  market,
may  be  obliged  to  neglect  other  aspects  of  the
marketing  of  their  products.  Such  marketing
(advertising,  promotion  and  so  on)  is  particularly
crucial  at  the  market  entry  stage,  the  point  at
which 
is  also  most
important.  New  entrants  or  suppliers  seeking  to
grow  in  the  market  are  similarly  constrained  in
their  ability 
innovate  and  develop  new
products,  to  the  detriment  not  just  of  those
suppliers but also of consumers, as a result of this
cost  of  obtaining  or  increasing  distribution  levels.

in  cabinets 

investment 

to 

is  only  between 

in  a  serious  restriction  of 

interbrand
results 
competition (competition between suppliers) in the
relevant  market.  Where  an  outlet  is  only  in  a
position  to  offer  the  products  of  a  single  supplier,
such competition at the consumer level is excluded
the
altogether:  competition 
various  products  offered  by  the  same  supplier.
This  is  the  case  in  over  half  of  all  retail  outlets  in
the 
a
supplier-exclusive  cabinet/s  alone  in  the  outlet (81).
In  these  circumstances,  price  competition  between
suppliers  is  likely  to  be  reduced (82).  Consumers
consequently  suffer  both  from  a  poorer  choice  of
competing  products  and  from  the  effects  of
weaker  price  competition.

relevant  market,  where 

there 

is 

(199) The  harmful  effects  to  retailers  produced  by
supplier-exclusive  cabinet  networks  consist  in  a
restriction  in  their  ability  to  offer  the  products  of
competing  suppliers,  limiting  their  ability  to  select
from  the  product  ranges  of  such  suppliers  in
accordance  with  demand  or  perceived  demand.
This restriction can result in lost opportunities for
the  retailer  to  become  more  efficient,  and  hence
more  profitable,  on  the  basis  of  his  choice  of
product  offering:  a  retailer  may  often  stock
products  in  supplier-exclusive  cabinets  which,  in
the  absence  of  exclusivity,  he  would  not
necessarily  choose  to  offer  for  sale.  The  exclusive
networks  are  also 
in
inefficient  space  allocation  inside  an  outlet  (as
discussed  above);  the  more  that  a  retailer  seeks  to
compensate  for  his  inability  to  stock  all  the
products  which  he  wishes  to  offer  for  sale  to
consumers  by  accepting  the  installation  of  more
cabinets,  the  more  these  space  inefficiencies  will
become  apparent.

likely  to  often  result 

least  60 %  according 

(81) 56 %  according  to  the  Lansdowne  survey  at  paragraph  92;
at 
the  Rosslyn  survey  at
paragraph  108.  HB  faces  direct  intra-outlet  competition
from other ice cream brands in [. . .] of the outlets surveyed
by  B&A 
(see
in  which  HB  products  are 
paragraph  116).

sold 

to 

(198) As  demonstrated  above,  supplier-exclusive  cabinet
networks have the effect of severely restricting the
number  of  competitors’  products  which  an  outlet
can offer. As competition in impulse products is to
a  large  extent  intra-outlet  on  account  of  the
spontaneous  nature  of  the  demand  created  by  the
impulse  to  purchase  (see  paragraph  12),  this

(82) In  June/July  of  1995,  Mars  ran  a  special  price  promotion
whereby  it  reduced  the  recommended  retail  prices  (and
hence  also  trade  prices)  of  its  bar  products  by  over  20 %:
this  promotion  was  not  responded  to  by  HB  —  see  Mars
letter of 9 August 1996. Mars ran the same promotion again
in the summer of 1996; again, it has not been responded to;
nor  did  it  appear  to  affect  HB’s  market  share,  which
increased  during  the  period.

4.9.98

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(200) HB’s  cabinet  agreements,  as  the  largest  and  most
extensive  single  network  of  supplier-exclusive
cabinet  agreements, contribute substantially  to the
anticompetitive effects just outlined. Indeed, in the
case of HB’s network, these effects are accentuated
by the strength of HB’s position on the market. In
those  outlets  where  the  only  cabinets  in  place  in
the  outlet  are  HB  cabinets  (some  40 %  of  all
outlets  in  the  relevant  market),  HB  is  exposed  to
no  interbrand  competition  at  the  consumer  level
whatsoever.

in  the  relevant  market,
40 %  of  all  outlets 
representing some 40 % of total impulse ice-cream
sales  in  the  relevant  market.  This  alone,  but
particularly  in  combination  with  the  far-reaching
anti-competitive  effects  brought  about  by  the
various  networks  of  supplier-exclusive  cabinet
agreements  operated  by  suppliers  in  the  relevant
market  generally,  and  against  the  background  of
the  other  relevant  market  circumstances  discussed
above,  amply  demonstrates  an  appreciable
restriction  of  competition  within  the  meaning  of
Article  85(1)  and  an  appreciable  effect  on  trade
between  Member  States.

6. Likelihood of affecting trade between Member

States

impeded, 

irrespective  of 

(201) Where,  for  the  reasons  described  above,  the  effect
of the HB freezer-cabinet agreements in question is
to  eliminate  the  freedom  of  retailers  to  stock  and
impulse
offer  for  sale  to  the  consumer  the 
ice-cream  products  of  competing  suppliers,  those
suppliers  are 
their
geographical  location  and  the  origin  of  the  goods,
from gaining access to the retail outlets concerned.
This  restriction  of  retailers  and  suppliers  has  the
effect  of  rendering  penetration  of  the  Irish  market
more  difficult  for  foreign  competitors,  with  the
consequence  that  the  level  of  trade  in  ice-cream
products  may  be  at  a  lower  level  than  would
otherwise  be  the  case.  The  opportunities  for
foreign  suppliers  to  establish  themselves  in  the
Irish  impulse  ice  cream  market  are  adversely
affected  by 
thereby
contributing to the consolidation of markets along
national  lines (83).  There  is,  moreover,  significant
trade between Ireland and other Member States in
ice-cream  products,  as  exhibited,  inter alia, by  the
import  of  all  Mars’  ice-cream  products  from
France,  and  by  the  import  of  a  portion  of  HB’s
products  into  Ireland  (paragraphs  25  and  29).
Accordingly,  the  HB  freezer-cabinet  agreements
may  affect  trade  between  Member  States.

the  cabinet  agreements, 

7. Appreciability

(202) The  identified  part  of  the  network  of  HB  cabinet
agreements  referred  to  at  paragraph  184  only
it  affects
infringes  Article  85(1),  however, 
competition  and  trade  between  Member  States  to
an  appreciable  extent.  It  has  been  established  that
the  identified  part  of  HB’s  network  of  cabinet
agreements  relates  to  cabinets  installed  in  some

if 

(203)

It  can  thus  be  concluded  that  the  part  of  HB’s
network of cabinet agreements relating to cabinets
installed  in  outlets  where  the  only  freezer  cabinets
in  place  in  the  outlet  has/have  been  provided  by
HB, fulfils all of the conditions for the application
of  Article  85(1).

(204) HB  has  argued  that  the  Commission  has  not
observed the principle of equal treatment in that it
has made a finding in relation to HB’s network of
supplier-exclusive  cabinets  alone,  and  not 
in
relation  to  those  of  HB’s  competitors  in  the
relevant  market,  thereby  ‘tilt(ing)  the  competitive
playing  field’  against  HB.  To  this,  it  should  be
responded  that  the  Commission  has  taken  into
effects
account 
produced 
of
supplier-exclusive  cabinets  in  place  in  the  market.
The  Commission’s  examination  has  not,  however,
identified  a 
the
foreclosure  of  the  relevant  market  by  any  single
supplier’s  network  of  supplier-exclusive  cabinets
(or  identifiable  part  thereof)  other  than  that
produced  by  the  relevant  part  of  HB’s  own
network  (see  paragraph  95).

anticompetitive 
other 

the  overall 
the 

significant  contribution 

networks 

by 

to 

impulse 

(205) HB  has  submitted  that  Article  85(1)  does  not
require  that  all  impediments  to  the  availability  of
ice-cream
different  manufacturers’ 
products in any outlet in the relevant market must
be  removed.  In  this  context  it  has  made  reference
to  the  Court’s  reasoning  in  Delimitis (84),  and
concluded  that  there  need  only  be  access  for
competitors  to  the  minimum  number  of  outlets
the  economic  operation  of  a
necessary 
the
(paragraph  21  of 
distribution 

system 

for 

(83) See  Langnese  judgment  at  paragraphs  119  to  124.

(84) Case  234/89.

L 246/36

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Official  Journal  of  the  European  Communities

4.9.98

judgment).  In  HB’s  view  there  need  only  exist
some  possibility  for  expansion  by  competitors  in
the market. HB considers that these conditions are
met  if  a  supplier  is  able,  at  whatever  cost,  to
achieve  a  minimum  degree  of  market  penetration
and  to  operate  profitability.

(206)

to 

In  relation  to  this  point,  it  should  be  emphasised
that exclusivity agreements of this kind should not
be  considered  per  se  infringements  of  Article
85(1),  without  reference  to  the  context  in  which
they  are  found  (see  paragraph  129).  Neither  is  it
suggested  that  Article  85(1)  requires  that  all
impediments 
the  availability  of  different
suppliers’ impulse ice-cream products in any outlet
in  the  relevant  market  must  be  removed.  Where,
however,  a  supplier’s  network  of  exclusive
agreements  (or  an  identifiable  part  thereof),  in  all
the circumstances of the relevant market, produces
the  very 
effects
described  above,  thereby  also  affecting  trade
between  Member 
the  network  of
States, 
agreements  in  question  is  incompatible  with  the
common  market.

substantial  anticompetitive 

in 

its 

contained 

(207) HB  has  further  argued  that  the  condition  of
freezer-cabinet
exclusivity 
agreements falls outside Article 85(1) as a restraint
ancillary  to  the  allegedly  otherwise  legitimate
object  of  those  agreements,  namely  the  provision
of installations to retailers to enable them to stock
ice  cream  for  sale (85).  To  this,  it  must  be  replied
that  such  a  restraint  can  only  escape  from  the
application  of  Article  85(1)  where  it  is  directly
related  and  objectively  necessary  to  that  purpose.
Given  that  there  is  no  objectively  indispensable
link  between  the  supply  of  freezer  cabinets  to
retailers  for  the  purpose  of  stocking  impulse  ice
cream  and  the  condition  of  exclusivity,  that
condition  cannot  be  considered  ancillary.

flawed 

(208) HB  considers  that  the  Commission’s  reasoning
is 
freezer-cabinet
agreements  which  are  ‘effectively  terminable  at
will’  (in  that  HB  apparently  does  not  seek  to
enforce  the  two  months’  notice  requirement)  can

in  concluding 

that 

(85) HB  has  stated  that  ‘the  cabinet  exclusivity  provision  is
necessary to secure the full benefits of the system’, and goes
on  to  say,  inter  alia,  that  it  is  not  ‘unreasonably  restrictive’
and  so  falls  outside  Article  85(1)  as  an  ancillary  restraint.

lead  to  a  de  facto  tie  of  the  kind  referred  to  at
paragraph  184.  A  ‘temporary  relationship’  of  this
kind  is,  according  to  HB,  inconsistent  with  the
existence  of  such  a  tie.  The  Commission  does  not
agree.  The  cabinet  agreements  are  of  indefinite
duration,  requiring  the  initiative  of  either  party  to
bring them to an end. Far from indicating that the
contractual  relationship  is  a  temporary  one,  the
evidence  demonstrates  that  the  opposite  is  true.
The  economic  reality,  as  confirmed  by  the  market
research,  is  that  retailers  who  take  HB  cabinets
only  very  rarely  replace  them  with  their  own  or
competitors’  cabinets  (see  paragraph  158  et  seq.).
HB  cabinet  agreements  are  almost 
invariably
identical  cabinet  agreements  (see
replaced  by 
paragraph  111).

(209) Nor  does  HB  accept  that  there  is  evidence  that
the  category  of  outlets  with  only  HB  cabinets
identified  at  paragraph  184 
is  foreclosed  to
competitors, or that there is any causal connection
between  that  restrictive  effect  and  the  exclusivity
provision in the HB cabinet agreements relating to
those outlets. In this regard, it principally relies on
the  degree  to  which  these  retailers  appear  to  be
satisfied  with  their  current  supply  arrangements.
HB  contends  that  those  outlets  where  there  is  ‘no
interest on the part of the retailer to stock another
brand  of  ice  cream’  should  be  excluded  in  any
proper  calculation  of  foreclosure.  HB  also  points
to the apparent low level of consumer demand for
brands other than HB in the outlets in question as
lack  of
being  the  probable  reason  for  this 
interest.

(210) Again, 

the  Commission  cannot  accept 

this
reasoning.  An  agreement  between  any  two  parties
is  capable  of  producing  an  effect  restrictive  of
competition  within  the  meaning  of  Article  85(1),
irrespective  of  the  motivation  of  the  parties  in
concluding  such  a  restrictive  agreement.  More
specifically,  an  exclusive  purchasing  arrangement
of whatever kind is, in principle, liable to fall foul
of  Article  85(1)  where 
it  has  the  effect  of
foreclosing  third  party  suppliers  to  a  significant
extent,  notwithstanding  the  fact  that  the  party
subject to the exclusivity may express himself, at a
given  moment  in  time,  to  be  disinterested  in
purchasing from any such third parties. As regards
the  apparently  low  level  of  consumer  demand  for
brands  other  than  HB,  it  should  be  pointed  out
that  competitors’ 
inability  to  gain  access  to
wide-scale  distribution  for  these  impulse  products

4.9.98

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is  one  of  the  principal  reasons  for  absence  of
demand, particularly in the case of products which
are  being  newly-launched  (see  paragraphs  12  and
44).  In  the  absence  of  the  exclusivity  provision,
retailers  could  more  easily  be  persuaded  to  stock
additional  products,  given  that  this  would  not  in
such  circumstances  require  the  replacement  of  an
incumbent,  or  the  installation  of  an  additional,
freezer  cabinet.  It  can  be  expected  that  such
additional  brand  stocking  might  in  turn  stimulate
higher  levels  of  consumer  demand  for  brands
other  than  HB.

8. Property  rights

(211) HB  has  argued 

that 

the  EC  Treaty 

the  application  of
Article  85(1) (86)  of 
the
exclusivity  provision  in  its  cabinet  agreements
would  be  tantamount  to  interference  with  its
property  rights,  contrary  to  Article  222  of  the
it  would  permit  other
EC  Treaty, 
manufacturers’  products  to  be  stored  in  its  freezer
cabinets.

that 

to 

in 

(212) The Commission does not accept this argument. In
the  Community  legal  order  the  right  to  property,
as  laid  down  in  Article  222  of  the  EC  Treaty,  is
guaranteed 
in  accordance  with  the  principles
common  to  the  constitutions  of  the  Member
States.  In  the  constitutions  of  all  Member  States,
however,  it  is  recognised  that  the  exercise,  as
distinct  from  the  essence,  of  property  rights  may
be  restricted  in  the  public  interest,  and  to  the
extent  necessary  in  that  regard (87).

(213) As  one  of 

the 

the  public 

interest.  Moreover, 
in 

fundamental  provisions  of
Community  law,  Article  85  of  the  EC  Treaty
serves 
the
application  of  Article  85(1) 
the  present
proceedings  does  not  concern  HB’s  use  of  its  own
property,  but  the  restrictions  which  it  imposes  on
others  to  whom  it  has  granted  the  use  of  its
property.  Furthermore,  HB’s  exercise  of 
its
property  rights  would,  in  the  present  case,  only
be  restricted  to  the  extent  necessary  to  ensure
that  competition  in  the  common  market  is  not
distorted  (Article  3g  of  the  EC  Treaty).

(214) As a general principle, this approach is reflected in
the  Commission’s  block  exemptions  with  regard,
inter  alia,  to  bans  on  dealing 
in  competing
products 
exclusive  purchasing
in 
agreements  (see  Commission  Regulation  (EEC)

contained 

No  1984/83 (88),  as  amended  by  the  Act  of
Accession  of  Austria,  Finland  and  Sweden,  Article
8(2)(b)),  and  exemptible  obligations  contained  in
technology 
(Commission
transfer  agreements 
Regulation  (EC)  No  240/96 (89),  Article  1).  In
these  Regulations,  restrictions  imposed  by  the
owners  of  property  rights  on  the  users  of  those
rights  are,  under  certain  circumstances,  exempted
and  thus, 
instance,  fall  foul  of
Article  85(1) (90).

in  the  first 

to  Article  2  of  Regulation 

(215) HB has argued that the exclusivity provision in its
freezer-cabinet  agreements  is  analogous  to  the
for  example,
types  of  obligations  permitted, 
according 
(EC)
No  240/96,  and  in  particular  those  listed  at  1(8)
and  1(2)  of  that  Article;  these  are  the  clauses
permitting  restrictions  to  specific  ‘technical  fields
of  application’,  and  restrictions  forbidding  the
granting of sub-licences. This analogy is flawed for
the  following  reasons.

(216) First,  a  ‘field-of-use’  type  restriction  would  relate
to the use of the freezer cabinet for the stocking of
ice  cream  as  opposed  to  other  categories  of
products; 
in  HB’s
the  exclusivity  condition 
freezer-cabinet  agreements,  however,  restricts  the
use  of  the  freezer  cabinet  for  stocking  similar
products  of  different  manufacturers.  Even  were
the 
to  be
type  of 
considered  similar  to  the  exclusivity  condition  in
HB’s  freezer-cabinet  agreements,  Article  2  of
Regulation  (EC)  No  240/96  does  not  exclude  the
possibility  that  such  obligations  may  be  restrictive
of  competition  in  certain  circumstances,  as  is  the
case  here.

‘field-of-use’ 

restriction 

(217) Secondly, the present proceeding does not interfere
with  the  right  of  HB,  as  the  owner  of  the
property, to deny parties other than the retailer to
whom  the  freezer  cabinet  has  been  supplied  the
use  of  that  freezer  cabinet.  Rather,  it  is  intended
to  permit  the  retailer  to  exercise  his  commercial
freedom of choice by allowing him to decide what
products he should offer in his outlet. The present
proceeding is accordingly aimed at the contractual
provisions concerning the conditions on which the

(86) This  issue  is  further  discussed  in  relation  to  Article  86.
(87) Case  44/79  Hauer  v.  Land  Rheinland  Pfalz  [1979]  ECR

3727,  at  paragraph  18.

(88) OJ  L  173,  30.6.1983,  p.  5.
(89) OJ  L  31,  9.2.1996,  p.  2.
(90) See  also  Commission  Decision  88/491/EEC,  Aalsmeer

Bloemenveilingen  (OJ  L  262,  22.9.1988,  p.  27).

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retailer  may  use  the  property  which  the  owner
has,  for  a  rental  fee,  made  available  to  him.

B. ARTICLE  85(3)

(218) HB  has  further  contended  that  it  would  suffer
considerable  competitive  detriment  if  third  party
competitors could, by inducing retailers to also use
the  freezer  cabinets  which  HB  supplies  for  the
storage  of  those  competitors’  products,  avoid  the
costs  that  the  competitors  themselves  might  incur
if they had to provide their own freezer cabinets at
point  of  sale.  HB  argues  that  other  manufacturers
thus  benefit  from  the  investment  which  it  has
made.

(219)

recouping 

In  relation  to  this  argument,  it  should  not  be
forgotten that it is ultimately the retailers who are
paying for the cabinet provision, not HB. It should
also be pointed out that there need be no objective
connection  between  the  exclusivity  provision  in
HB’s freezer-cabinet agreements and arrangements
for  the  repayment  of  its  investment  in  those
cabinets.  The  inclusion  of  this  cost  element  in  the
price  of  the  ice  cream  charged  to  retailers  is  a
choice which HB has made for its own commercial
reasons.  Other  methods  of 
the
investment  in  freezer  cabinets  could  be  devised  in
order  to  avoid  the  consequence  that  the  retailer
passes on this cost to consumers only via the price
which  he  charges 
for  HB’s  products.  The
application  of  Article  85(1)  to  the  exclusivity
freezer-cabinet  agreements
provision 
would  not, 
from
charging  the  retailer  a  separate  rental  fee  for  the
supply  of  a  freezer  cabinet  sufficient  to  cover  the
investment.  Although  HB
entire  cost  of  that 
asserts  that  the  charging  of  such  a  rent  would
involve the additional transaction costs involved in
administering  and  collecting  the  rental  payments,
this  would  hardly  be  over-burdensome  on  HB,
given  that  the  company  already  arranges  for  the
billing of its customers in relation to the ice cream
itself,  and  for  the  collection  of  payment  from
those  customers.

for  example,  prevent  HB 

in  HB’s 

(220) HB  further  argues  in  this  context,  as  described  at
paragraph  230,  that  if  it  introduces  a  separate
rental  system,  this  will  involve  considerable  costs,
may  not  prove  attractive  to  retailers,  and  will
motivate  retailers  to  turn  to  HB’s  competitors  for
‘free-on-loan’  cabinet  provision.  The  Commission
can only respond to this point in the same manner
as  it  has  done  at  paragraph  231.

(221) The  provisions  of  Article  85(1)  cannot,  under
Article  85(3),  be  declared  inapplicable  to  the
freezer-cabinet  agreements  concluded  between  HB
and  retailers,  and  relating  to  cabinets  installed  in
outlets  where  the  only  freezer  cabinets  in  place  in
the  outlet  have  been  provided  by  HB,  for  the
reasons  set  out  below.

1.

Improving  the  distribution  of  goods

(222) Any  improvements  in  distribution  which  the  part
of  HB’s  network  of  freezer-cabinet  agreements
which  infringes  Article  85(1)  (see  paragraph  203)
may  bring,  have  to  be  balanced  against  the
restrictive  effect  of  those  agreements,  and  in
particular  how  they  limit  access  by  competing
ice-cream  suppliers  in  the  relevant  market  to  the
retail  level  and  ultimately  to  consumers.

(223) The restrictive effect brought about by the relevant
part  of  HB’s  network  of  cabinet  agreements  is
broadly  analogous  to  that  produced  by  exclusive
purchasing  obligations.  The  fifth  recital  in  the
preamble to Regulation (EEC) No 1984/83 on the
application  of  Article  85(3)  to  categories  of
that
exclusive  purchasing  agreements 
exclusive  purchasing  obligations 
in
general  to  an  improvement  in  distribution’.  They
‘. . .  enable  the  supplier  to  plan  the  sales  of  his
goods  with  greater  precision  and  for  a  longer
period,  and  ensure  that  the  reseller’s  requirements
will  be  met  on  a  regular  basis  for  the  duration  of
the  agreement  . . .  this  allows  the  parties  to  limit
the risk to them of variations in market conditions
and  to  lower  distribution  costs’.

states 

lead 

‘. . . 

(224) The  HB  cabinet  agreements  may  secure  some  or
all  of  the  benefits  described  in  the  fifth  recital  to
Regulation  (EEC)  No  1984/83  for  HB  itself  and
for  the  retailers  who  are  the  other  parties  to  the
agreements. The fact that these agreements may be
advantageous  to  the  parties  to  those  agreements
is,  however,  not  sufficient 
to  constitute  an
improvement  in  distribution  within  the  meaning
of  Article  85(3).  Rather,  they  must  produce
appreciable  objective  advantages  in  the  public
interest  of  such  a  character  as  to  compensate  for
the  disadvantages  which  they  cause  in  the  field  of
competition (91).

(91) See  Joined  Cases  56  and  58/64  Consten/Grundig  [1966]
ECR  299,  at  p.  348;  see  also  the  Langnese  judgment  at
paragraph  180.

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It 

is 

an 

that 

intensification  of 

(225) An  objective  benefit  of  this  kind  which  exclusive
purchasing  obligations  may  conceivably  bring
about 
interbrand
competition  (sixth  recital  to  Regulation  (EEC)
No  1984/83). 
the  cabinet
is  clear 
agreements  in  question  considerably  strengthen
HB’s  position  in  the  relevant  market,  particularly
with  respect  to  potential  competitors.  However,  a
strengthening  of  an  undertaking  which 
is  as
important on the market as HB leads not to more
but  to  less  competition,  because  the  network  of
that  undertaking’s  agreements  constitutes  a  major
barrier  to  the  entry  of  others  into  the  market,  as
well  as  to  expansion  within  the  market  by  its
existing  competitors.

cabinets  to  all  of  the  outlets  which  it  currently
supplies  with  a  cabinet/s,  were  the  exclusivity
provision  in  its  freezer-cabinet  agreements  to  be
dropped.  HB  has  argued  that,  were  it  to  cease
supplying  a  freezer  cabinet/s  to  a  number  of  these
retailers,  it  is  likely  that  some  of  them  would  no
longer continue to sell impulse ice cream at all, as
they  would  not  be  able  to  justify  the  investment
required  for  the  installation  of  their  own  freezer
cabinets.

(228)

(226) HB has, for example, pointed to the importance of
‘merchandising’  in  the  sale  of  branded  products;
the  condition  of  exclusivity  enables  HB  to  market
its  portfolio  of  products/brands  together  in  a
unified  display  or  ‘corporate  block’,  with  the
brands  giving  authority  to  each  other,  as  well  as
benefiting  from  the  advantages  of  visibility  and
prominent  positioning  in  an  outlet.  According  to
HB, the comprehensiveness of its range means that
an  HB  freezer  cabinet  will  generally  satisfy
consumer  demand  for  different  types  of  impulse
ice-cream  products.  HB  points  out  that,  in  the
absence of exclusivity, some of its product offering
(particularly 
lower  margin
‘lower  priced  and 
impulse  products’)  might  be  displaced.  The
advantages  to  HB  produced  by  the  exclusivity
provision  clearly  strengthen  its  position  in  the
market  and, 
those  outlets  with  only
supplier-exclusive cabinets, and in particular those
with  only  an  HB  cabinet/s,  they  contribute  to  the
barriers  to  entry  and  to  expansion  within  that
market  described  above  under  Article  85(1).

in 

(227) The  wide  availability  of  freezer  cabinets  in  retail
outlets  for  the  sale  of  impulse  ice-cream  products,
covering the totality of the geographic market, and
brought  about  in  large  part  by  HB’s  cabinet
network, can be considered an objective advantage
(in  the  distribution  of  products)  which  is  in  the
public  interest.  In  this  regard,  HB  has  said  that  it
cannot  be  assumed  that  it  would  continue  to  be
commercially  attractive  for  it  to  provide  freezer

sale 

its  products 

incentive  for  an 

In  relation  to  this  contention,  it  must  be  pointed
out  that  it  is  unlikely  that  retailers  would  cease
altogether  to  be  offered  freezer  cabinets,  on
whatever terms, by HB in any but a small number
of instances, were it to be restricted in its ability to
impose  an  exclusivity  obligation  in  relation  to
those  cabinets.  The  commercial  reality  for  a
company like HB, wishing to maintain its position
of strength on the market, is that it will seek to be
present  in  as  many  outlets  as  possible,  even  in
those with lower levels of impulse ice cream sales.
As  described  above,  widespread  visibility  and
availability are important for all impulse products.
The  need  to  ensure  sales  and  thus  profit  levels
provides  sufficient 
ice-cream
supplier, particularly one with a range of products
and a share of the market as important as HB’s, to
continue  ensuring  that  retail  outlets  are  able  to
stock 
to  consumers.
for 
Moreover,  even  where  the  freezer  cabinet/s  in  an
outlet would no longer be subject to exclusivity, it
is  likely  that  the  products  stocked  in  the  cabinet/s
would  more  or  less  reflect  the  different  market
shares  of  the  various  different  manufacturers  in
the relevant market. HB could therefore expect, on
the  strength  of  its  product  offering  alone,  to
continue  to  achieve  a  very  substantial  share  of
ice-cream  sales  in  such  outlets.  HB  is  accordingly
unlikely  to  run  the  risk  of  losing  these  sales
altogether  by  ceasing  to  make  freezer  cabinets
available  to  outlets  which  would  otherwise  not
choose  to  continue  stocking  ice  cream  at  all.  HB
has,  in  any  event,  a  policy  of  only  providing
freezer  cabinets  to  retailers  on  the  basis  of  certain
established  financial  and  trading  criteria  which
ensure a minimum return on HB’s investment (see
paragraph 62), with the consequence that the least
important  outlets  in  the  relevant  market  are  often
not currently provided with HB freezers. It should
also  be  pointed  out,  in  this  regard,  that  most  of
the  recent  cabinet  disposals  by  HB  took  place  in
low-turnover  outlets  (see  paragraph  73).

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(229) HB  argues  that,  in  the  absence  of  its  ability  to
enforce cabinet exclusivity, the competitive playing
field would be tilted against it as a supplier which
provides  freezer  cabinets  in  favour  of  those  who
do  not.  It  says  that  other  ice-cream  suppliers
would  be  able  to  offer  preferential  terms  to
retailers  in  that  they  would  not  be  carrying  the
cost of freezer cabinet provision. HB has said that
its  natural  reaction  in  such  circumstances  would
be to discontinue making freezer cabinets available
to  retailers.  In  relation  to  this  argument  it  should
be  remembered  that  there  is  no  question  of  the
application of Article 85(1) (where Article 85(3) is
found  to  be 
inapplicable)  to  the  exclusivity
provision  in  HB’s  freezer-cabinet  agreements  not
permitting HB to use whatever methods it chooses
of recouping the investment it has made in freezer
cabinets.  Such  methods  need  not  have 
the
consequence  that  other  ice-cream  suppliers  benefit
from  HB’s  investment  (paragraphs  218  and  219).

(230) HB  further  argues  that,  if  it  does  introduce  a
separate  rental  system,  it  has  no  certainty  that
retailers  will  opt  to  continue  taking  HB  cabinets.
In  support  of  this  contention,  HB  points  to  the
failure  of  the  hire-purchase  scheme  which 
it
introduced  in  1995  to  attract  the  interest  of
retailers,  the  generally  low  number  of  retailer-
owned  or  leased  cabinets  in  the  market,  and  the
low  level  of  reported  retailer  preparedness  to  buy
or  rent  their  own  cabinets  found  by  the  Rosslyn
survey.  In  these  circumstances,  HB  contends,
retailers will be more inclined to turn to the other
suppliers  of  ice  cream  in  the  market,  who  may
continue  to  make  available  freezer  cabinets  to
retailers  on  the  basis  of  cabinet  exclusivity,
thereby  effectively  excluding  HB  from  many  of
those  outlets.

[. . .] %  of  retailers  said  that  they  would  continue
to  do  so  in  such  hypothetical  circumstances,  and
that  many  would  choose  to  buy/lease  their  own
cabinet  to  that  end  (see  paragraph  120).  In
relation to HB’s assertion that retailers will instead
turn to HB’s competitors for the provision of ‘free
on  loan’  supplier-exclusive  freezer  cabinets,  it  can
only  be  said  that  if  retailers  do  so  to  such  an
extent  that  that  network,  or  those  networks,  of
supplier-exclusive  freezer  cabinets  (and  where
these  are  the  only  cabinets  in  place  in  those
outlets)  then  contribute  significantly  to  the  overall
foreclosure  of  the  relevant  market,  then  the
relevant  part  of  such  network  would  equally  fall
foul  of  Article  85(1).

(232)

It  cannot  however  be  ruled  out  that  HB  may
choose  to  cease  providing  freezer  cabinets  to  a
certain small number of outlets, for example those
no  longer  meeting  certain  criteria  relating  to  HB
ice  cream  sales  or  distance  from  an  HB  depot.
These outlets will not all necessarily cease stocking
impulse  ice  cream  as  a  result.  Such  a  retailer  may
choose  to  buy/lease,  his  own  cabinet  or  another
ice-cream  supplier  may  decide  to  make  a  freezer
to  him.  Other  competing
cabinet  available 
manufacturers  may  well  have  a  policy  of  making
freezer cabinets available to outlets which generate
a lower turnover in impulse ice cream than would
make the outlet eligible for an HB cabinet, and on
terms  more  attractive  than  the  retailer  could
expect  to  obtain  himself.

(231)

In relation to this argument, it must be stated that
the  reasons  for  the  failure  of  the  hire-purchase
scheme  introduced  by  HB  in  1995  are  not  solely
explicable  by  an  unwillingness  in  principle  on  the
part  of  retailers  to  own  or  lease  their  own
cabinets. Rather, the Lansdowne survey found (see
paragraph  100)  that  the  principal  reason  was
satisfaction  with  current  arrangements,  experience
has  shown  that  retailers,  faced  with  the  option  of
taking from HB a ‘free on loan’ cabinet or one on
invariably  opted  for  the
hire  purchase,  have 
former.  That  it  not  to  say  that,  in  the  absence  of
cabinet exclusivity, retailers would not continue to
stock  ice  cream:  the  B&A  survey  found  that  over

(233) Even  where  such  competitors  are  not  forthcoming
to  make  available  freezer  cabinets  in  outlets  from
which HB has withdrawn its cabinets, or to which
it  does  not  choose  to  provide  them,  there  still
remains  the  possibility  that  cabinets  could  be
installed by independent dealers who would obtain
supplies  from  a  variety  of  sources  and  supply  all
of  those  outlets’  requirements.  The  fact  that  there
are  so  few  independent  dealers  of  this  kind  at
present  is  at  least  partly  due  to  the  exclusivity
obligations  arising 
freezer-cabinet
from 
agreements customary in the trade, in combination
with  the  leading  supplier’s  (HB’s)  policy  of  direct
delivery  to  almost  all  outlets.  In  the  absence  of
cabinet  exclusivity,  the  supply  of  ice  cream  to

the 

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consumers  would  not  therefore  be  likely  to  be
affected  to  any  significant  extent.

(234) The  possible  slight  reduction  in  the  number  of
outlets  stocking  impulse  ice  cream  in  the  relevant
geographic  market  which  might  result  from  the
dropping  of  the  exclusivity  provision  in  HB’s
freezer-cabinet agreements concluded in relation to
cabinets installed in outlets with only HB cabinets
must  be  balanced  against  the  restrictive  effect  of
those  agreements. 
the
advantage  produced  by  the  fact  that  a  small
number of outlets would continue offering impulse
ice  cream  only  if  the  exclusivity  provision  in  the
network  of  HB  freezer-cabinet  agreements 
in
question  were  to  be  upheld,  cannot  outweigh  the
disadvantages  arising  from  the  restriction  of
competition which those agreements cause in their
totality.

this  assessment, 

In 

(235)

In  this  regard,  reference  should  be  made  to  the
hire-purchase  scheme  introduced  by  HB  in  1995.
It  was  envisaged  that  this  scheme  would  motivate
retailers  to  purchase  their  own  cabinets,  thereby
bringing  about  a  far-reaching  structural  change  in
the  market  which  might  have  enabled 
the
restrictive effect of HB’s network to be reduced to
an  extent  where  its  benefits  to  distribution  could
outweigh  its  restrictive  effect.  This  expectation
was  however  misconceived  (see  paragraph  71).

(236) HB  has  also  argued 

the 

lead 

that 
to  planning, 

its  distribution
logistic  and
arrangements 
distributive  efficiencies; 
it  contends  that  they
facilitate the planning of deliveries and the rhythm
of  supply;  the  arrangements  lead  to  efficiencies  in
distribution in that ‘drop sizes’ (the quantity taken
by  the  retailer  on  one  delivery)  to  freezer  cabinets
which only stock its products are greater than they
would  be  in  the  absence  of  exclusivity,  and  that  a
high concentration of HB freezers also contributes
to  such  efficiencies.  As  pointed  out  above
(paragraph  224), 
the  cabinet
agreements  may  be  advantageous  to  HB  and  even
to  the  retailers  is  not  sufficient  to  constitute  an
improvement  in  the  distribution  of  goods  within
the  meaning  of  Article  85(3);  the  agreements  can
only  be  considered  as 
to  such  an
improvement  where 
the  advantages  can  be
demonstrated to be of an objective kind. Whilst it
is  clear  that  the  current  method  of  distribution
operated  by  HB  may  produce  certain  advantages
for  itself  and  retailers  in  terms  of  efficiency,  it
should  be  pointed  out  that  HB’s  exclusivity
arrangements  have  the  effect  of  undermining  the
efficiency  of  other  impulse  ice-cream  suppliers  by
effectively  requiring  them  to  compete  not  only  in

leading 

that 

fact 

the  supply  of  ice  cream  but  also  in  the  provision
of  cabinets  to  retailers  on  attractive  terms.  The
result  is  a  strengthening  of  HB’s  position  in  the
relevant market, reinforcing a barrier to entry into
or  expansion  within  it.  As  such,  any  advantages
clearly
resulting 
outweighed by the disadvantages which they bring
in  the  form  of  restricted  competition.

the  agreements  are 

from 

to 

freezer 

cabinets 

improving 

contribute 

(237) An  assessment  of  the  advantages  produced  by
HB’s cabinet network should take into account the
scale  economies  which  it  achieves  in  the  purchase
and  maintenance  of 
(see
paragraph  63).  HB  has  argued  that  these  scale
economies 
the
distribution  of  goods  within  the  meaning  of
Article  85(3).  It  must  be  accepted  that  exclusivity
arrangements  offer  an  attractive  incentive  to  a
manufacturer  to  install  a  large  number  of  freezer
reducing  procurement  and
cabinets, 
It  must  be  emphasised,
maintenance  costs. 
however,  that  exclusivity 
is  not  a  necessary
condition  for  the  achieving  of  such  economies  of
scale. There is no apparent reason why these scale
economies  could  not  continue  to  be  achieved  by
HB  in  relation  to  a  fleet  of  freezer  cabinets  in  the
absence  of  exclusivity.

thereby 

(238) Although  it  is  accepted  that  the  provision  of
freezer  cabinets  to  retailers  by  ice-cream  suppliers
leads  to  an  improvement  in  the  distribution  of
impulse  ice  cream  by,  inter  alia,  dispensing  with
the  need  for  the  retailers  to  concern  themselves
with  capital  requirements  or  the  inconvenience  of
purchasing  and  maintaining  cabinets,  it  none  the
less  follows  from  what  has  been  said  in  the
previous  paragraph  that  these  advantages  can
equally  be  achieved 
the
in 
exclusivity requirement. Neither can it be said that
in
HB’s  network  produces  only  advantages 
distribution  for  retailers.  As 
in
is  discussed 
paragraph  199, 
the  network  also  produces
disadvantages  by  contributing  substantially  to  a
reduction 
the
products which they wish to offer for sale, as well
as  creating  space  inefficiencies  in  those  outlets.

in  retailers’  ability 

the  absence  of 

to  choose 

2. Allowing  consumers  a  fair  share  of  the

benefit

(239)

In  outlets  where  only  an  HB  freezer  cabinet/s
is/are,  in  place,  the  freedom  of  the  retailers  in
stocking  and  offering  for  sale  to  the  consumer  ice
cream  of  competing  suppliers  is  restricted.  The
part  of  HB’s  cabinet  network  relating  to  the

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cabinets  installed  in  these  outlets  thereby  restricts
the  choice  of  impulse  ice-cream  items  available  to
consumers:  only  HB  impulse  ice-cream  products
are  offered  for  sale  in  those  outlets.  Even  if  there
is  another  outlet  selling  other  manufacturers’
products in the neighbourhood, the alternative this
represents  is  not  equivalent  to  a  choice  available
from an individual outlet, as consumers of impulse
ice  cream  will  not  generally  travel  to  buy  or  defer
a  purchasing  decision.  In  any  event,  such  an
option  will  often  not  be  available.  Moreover,  a
consumer  who  wishes  to  buy  products  from
different ranges will find it inconvenient to have to
visit separate outlets in order to do so. He will not
generally  take  trouble  of  that  kind  for  an  impulse
purchase.  Due  to  this  restriction  of  choice,
consumers  cannot  be  considered  as  sharing  in
whatever  alleged  benefits 
those  HB  cabinet
agreements may bring. In view of the restriction of
interbrand  competition  brought  about  by  HB’s
network,  price  competition  between  suppliers  is
also  likely  to  be  weakened,  to  the  detriment  of
consumers  (see  paragraph  198).

(242)

(240)

freezer 

In so far as the economies of scale in the purchase
cabinets  and
and  maintenance  of 
distributive efficiencies (see paragraph 222 et seq.)
allegedly  facilitated  by  the  exclusivity  provision  in
HB’s  cabinet  agreements  are  concerned,  it  should
be  noted  that,  given  HB’s  economic  strength
which  enables  it  to  prevent  the  maintenance  of
effective  competition  (see  paragraph  255  et  seq.),
there  is  no  guarantee  that  these  benefits  will  in
fact  be  passed  on  to  the  consumer.

3.

Indispensability

to 

indispensable 

(241) The exclusivity condition contained in the relevant
part of HB’s network of cabinet agreements could
only  be  described  as 
the
attainment  of  any  of  the  alleged  benefits  referred
to  above  if  it  was  the  least  restrictive  means  of
bringing  them  about.  No  compelling  reason  has
been  put  forward  by  HB  which  would  indicate
that  any  such  allegedly  objective  advantages,
leading  to  a  general  improvement  of  production
and  distribution  for  the  benefit,  inter  alia,  of
consumers, could not be secured equally effectively
by  removing  the  exclusivity  in  favour  of  HB’s
products,  thereby  ‘unbundling’  the  provision  of

freezer cabinets and the supply of ice cream in the
manner  described  in  paragraph  219.

4. Possibility  of  eliminating  competition 

in
respect of a substantial part of the products in
question

concluded 

In  this  respect,  consideration  must  be  given  to  the
barriers to entry to the relevant market, as well as
to their effect on competitive relationships existing
within  that  market.  These  are  discussed  in  detail
under paragraph 130 et seq. From that analysis, it
can  be 
that  HB’s  network  of
freezer-cabinet  agreements  in  general,  and  that
part  of  the  network  relating  to  cabinets  installed
in  outlets  with  only  HB  cabinets  in  particular,
constitute  an  important  barrier  to  entering  the
relevant  market  or  to  expansion  within  it.  These
in
barriers 
competition  between  competing  suppliers  in  the
market.  As  such,  and  particularly  in  combination
with  the  strength  of  HB’s  position  on  the  relevant
market, 
to  an
they  contribute  substantially 
elimination  of  competition  in  that  market.

to  a  deterioration 

turn 

lead 

in 

(243) This 

is 

competition 

elimination  of 

clearly
illustrated  by  the  very  large  proportion  of  retail
outlets  in  the  relevant  market  which  are  only
currently in a position to offer for sale the impulse
ice-cream  products  of  HB  as  a  result  of  the
exclusivity  provision  in  the  relevant  part  of  HB’s
cabinet  agreement  network:  some  40 %  of  all
outlets 
into  the
in  the  relevant  market  fall 
category,  being  outlets  which,  moreover,  account
for  some  40 %  of  total  impulse  ice-cream  sales  in
the  relevant  markets  (see  paragraphs  156  and
184).

it 

to  prevent 

(244) HB’s  dominant  position  in  the  relevant  market,
the
discussed  below,  enables 
maintenance  of  effective  competition  on  that
market.  As  such,  it  must  be  considered  a  major
barrier  to  competition  in  the  market.  The  brand
reputation  of  HB’s  impulse  ice-cream  products,
which  has  been  built  up  over  many  years,  also
represents  a  major  impediment  to  any  changes  in
the  competitive  structure  of  the  relevant  market.

(245) The economic considerations which have just been
examined  make  it  clear  that  competition  in  the
relevant  market 
is  seriously  restricted.  This
assessment  is  confirmed  by  the  fact  that  it  is  a
long  time  since  any  substantial  change  in  the
competitive  structure  of  the  relevant  market  has
occurred.  The  market  continues  to  be  dominated

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by  one  supplier  who  has  consistently  secured  a
share  in  the  region  of  four  fifths  of  the  market,
with  a  number  of  smaller  suppliers  (some  of
whom  may  change)  making  up  the  remainder.
HB’s  freezer-cabinet  agreements  have  helped  to
ensure  the  perpetuation  of  this  structural  inertia.
These  agreements,  and 
those
concluded  in  relation  to  outlets  with  only  HB
cabinets, 
the  possibility  of
eliminating  competition  in  respect  of  a  substantial
part  of  the  products  in  question  in  such  a  way  as
to  preclude  exemption  under  Article  85(3).

thus  afford  HB 

in  particular 

(246) The  cabinet  hire-purchase  scheme  introduced  in
1995 by HB as one of the elements in the revision
of  its  distribution  arrangements  (see  paragraph  69
et  seq.)  appeared  prima  facie  to  the  Commission
to provide, in combination with the other changes
introduced  at  the  same  time,  an  opportunity  for  a
far-reaching  structural  change  in  the  market.  HB
expressed  the  belief  that  the  scheme  would
motivate  retailers  to  acquire  their  own  cabinets
on  account  of  the  attractiveness  of  its  terms.
The  scheme  was  thereby  expected  to  result  in  a
significant 
restriction  of
in 
competition  to  an  extent  which  would  mean  that
the residual provision by HB of cabinets subject to
exclusivity  could  no  longer  be  regarded  as  having
the  effect  of  substantially  eliminating  competition
in  the  relevant  market.  This  result  has,  however,
not materialised.

reduction 

the 

5. Conclusion

(247) HB’s  freezer-cabinet  agreements,  therefore,  do  not
qualify  for  exemption  under  Article  85(3)  for  the
reasons  outlined  above.  HB’s  application  for  such
an  exemption  must  accordingly  be  refused.  In
particular,  it  should  be  pointed  out  that  the
various  changes  made  by  HB  to  its  distribution
arrangements  (see  paragraphs  69  to  73)  with  a
view  to  making  those  arrangements  qualify  for
exemption  under  Article  85(3)  have,  contrary  to
the  preliminary  view  taken  by  the  Commission
(see  paragraph  6),  not  proved  capable  of  bringing
about  the  structural  changes  which  might  have
made exemption possible. Specific reference to the
various  elements  has  in  particular  been  made  at
paragraphs  228,  230,  231,  235  and  246.  It  is
therefore  no  longer  possible  for  the  Commission
to  maintain  the  ‘favourable  position’  which  it
proposed  to  take  in  the  publication  on  15  August
1995  pursuant  to  Article  19(3)  of  Regulation
No  17  (see  footnote  6).

(248) HB  contends  that  the  Commission’s  refusal  to
proceed  towards  an  exemption  decision  amounts
to  a  breach  of  its  legitimate  expectations.  In  this
regard,  HB  says  that  it  ‘struck  a  deal  with  the
Commission’,  and  that  it  ‘implemented  its  side  of
the  bargain  in  full,  at  its  own  commercial  cost’.
HB  continues  that  the  Commission  has  ‘renege(d)
on  its  favourable  view’  in  the  light  of  the  ‘failure
of  one  element  of  the  settlement  to  attract  retailer
interest  (namely  the  failure  of  the  hire-purchase
element)’.  HB  points  out  that  the  reason  for  this
failure  is  ‘entirely  outside  HB’s  control’.

(249)

In  claiming  breach  of  its  legitimate  expectations,
indication  by  the
HB  seeks  to  rely  on  an 
Commission that the proposals which HB had put
forward  appeared 
likely,  on  the  basis  of  a
preliminary  assessment,  to  produce  effects  which
would  render  HB’s  distribution  arrangements
eligible  for  an  exemption  under  Article  85(3).
This  preliminary  view  was  expressed  in  a  press
release  issued  following  HB’s  notification  and,
subsequently,  in  a  publication  in  the  Official
Journal of the European Communities pursuant to
Article 19(3) of Regulation No 17. To describe the
contacts  between  the  Commission  and  HB  as
resulting in a ‘bargain’ or ‘deal’ by virtue of which
the  Commission  renounced  the  possibility  of
is
proceeding  towards  a  prohibition  decision 
therefore  completely  misleading.  It  goes  without
saying  that  the  Commission  could  not,  in  any
event,  agree  to  desist  from  the  enforcement  of
rules  which  are  of  objective  application.  None
indications  given  by  the
of  the  preliminary 
Commission,  as  just  described,  are  capable  of
creating  legitimate  expectations  of  the  kind  which
could  render  invalid  a  subsequent  Commission
measure 
those  preliminary
indications.  The  press  release  made  explicit
reference 
the
Commission’s  assessment.  An  Article  19(3)  notice
can,  by  its  very  nature,  contain  no  more  than  an
announcement  of  the  Commission’s  preliminary
intentions,  the  purpose  of  its  publication  being  to
solicit  the  views  of  third  parties  before  the
adoption  of  a  final  position.

the  preliminary  nature  of 

inconsistent  with 

to 

(250) As is mentioned above (paragraphs 235 and 246),
the  Commission’s  preliminary  assessment  was
based  on  an  expectation 
revised
distribution  arrangements  would,  via  an  evolution
freezer-cabinet  ownership  by
towards  wider 
retailers,  lead  to  a  substantial  reduction  in  the
foreclosure  effect  produced  by  HB’s  cabinet
agreements.  The  fact  that  this  expectation  was

that 

the 

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disappointed  is  not  attributable  to  the  fact  that
HB  did  not  implement  the  proposed  changes,  but
rather  to  the  fact  that  those  changes  did  not
produce  the  effects  in  terms  of  opened  outlets
which  HB  had  expected.

to 
retailer 

the  key 
towards  wider 

(251) HB  is  particularly  critical  of  the  fact  that  the
Commission’s assessment is based on the failure of
only  one  element  in  those  revised  arrangements,
the  hire-purchase  scheme.  To  this  it  should  be
responded  that  the  hire-purchase  scheme  was  not
just  one,  but  the  central,  element  of  the  revised
the  expected
arrangements,  and 
evolution 
cabinet
ownership.  Its  failure  to  attract  retailers  therefore
inevitably entailed the failure of the desired effects
to  materialise.  HB  is  also  critical  of  the  fact  that
the  Commission  appeared  to  have  reached  a
premature  conclusion  about  a  measure  which  was
only  intended  to  produce  effects  over  the  longer
term. In relation to this it can only be said that, by
the  time  the  Commission  issued  its  Statement  of
Objections  in  January  1997,  the  scheme  had
already  been  running  for  two  ice-cream  seasons.
Given  that  not  a  single  retailer  had  by  that  stage
opted  to  take  a  cabinet  under  the  scheme,  it  was
reasonable  to  assume  that  it  was  unlikely  to  have
any  long-term  impact.

could  take  up  this  offer  would  rest  with  HB,
rather  than  with  the  retailer,  as  is  the  case  under
the  current  hire-purchase  scheme;  (ii)  there  would
be  no  possibility  for  retrospective  application  of
the  scheme,  and  so  the  first  effects  would  be  felt,
its
at 
introduction;  (iii)  there  would  be  no  guarantee
that  the  cabinet  would  not  be  replaced  by  an
HB-exclusive  cabinet  during  the  five-year  period,
or  shortly  thereafter,  in  which  case  the  exclusivity
in  favour  of  HB  would  continue.

following 

earliest, 

years 

five 

the 

in 

to 

serious 

(254) HB  is  of  the  view  that  the  Commission  has  not
given 
these  new
consideration 
proposals,  and  that  an  assessment  of  them  should
have  been  contained 
the  Statement  of
Objections.  The  Commission  does  not  agree.  The
reasons  why  the  new  proposals  would  not  alter
the  Commission’s  view  as  to  the  eligibility  for
exemption  of  HB’s  distribution  arrangements,  as
just  described,  were  detailed  in  a  letter  sent  to
Unilever  several  weeks  after  receipt  of 
the
proposals.  This  was  an  appropriate  administrative
response  to  proposals  made  by  a  company  with  a
view 
under
Article  85(3).  Given  that  the  proposals  were  not
implemented,  it  was  not  necessary  to  take  them
into  consideration  in  the  Statement  of  Objections.
The  Commission’s  position  in  relation  to  the
proposals  was  moreover  reiterated  at  the  oral
hearing  in  June  1997.

exemption 

obtaining 

an 

to 

to  guarantee 

(252) Subsequent  to  the  Commission’s  indication  to  HB
that  the  conditions  for  the  granting  of  an
exemption under Article 85(3) no longer appeared
fulfilled,  HB  devised  new  proposals,
to  be 
apparently  designed 
the  result
intended  by  the  introduction  of  the  hire-purchase
scheme,  and  put  these  to  the  Commission  in  June
1996.  The  proposals  can  be  summarised  as
follows:  (i)  the  exclusivity  provision  in  two  types
of smaller cabinets which HB provided to retailers
would  be  limited  to  five  years;  (ii)  at  the  end  of
the  five-year  period,  the  retailer  would  have  ‘the
opportunity  to  take  the  cabinet,  free  of  all  ties,  to
use  as  he  wishes’;  (iii)  following  a  12-month
interval,  an  outlet  taking  such  a  cabinet  would  be
eligible  for  the  differential  pricing  lump  sum.

C. ARTICLE  86

1. Dominant  position

(i) Relevant  market

(253) The  Commission  considers  that  these  proposals
would  not  render  HB’s  distribution  arrangements
the
eligible 
following  reasons:  (i)  the  offer  would  be  confined
to  two  types  of  small  freezer  cabinet  and,  more
fundamentally,  the  choice  as  to  which  outlets

exemption,  principally 

for 

for 

(255) The  relevant  market  in  which  the  position  of  HB
falls to be assessed is that of single-wrapped items
of  impulse  ice  cream  in  Ireland.  There  is  no
reason,  nor  has  HB  suggested  one,  to  take  the
view  that  the  geographic  and  product  markets
differ  from  the  Commission’s  findings  in  the
the  basis  of
the  assessment  on 
context  of 
Article  85  (paragraphs  120  et  seq.).  Ireland  is  a
substantial part of the common market within the
meaning  of  Article  86.

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(ii) Economic  strength

(256) The  Court  of  Justice  has  held (92)  that  the
dominant  position  referred  to  in  Article  86  relates
to  a  position  of  economic  strength  enjoyed  by  an
undertaking  which  enables  it  to  prevent  effective
competition  being  maintained  on  the  relevant
market  by  giving  it  the  power  to  behave  to
its
an  appreciable  extent 
independently  of 
competitors,  customers  and  ultimately  of 
its
consumers.

(257) The  existence  of  a  dominant  position  may  be
inferred  from  a  combination  of  several  factors
which,  taken  separately,  might  not  necessarily  be
conclusive  but  which, 
together  with  others,
constitute  such  a  position;  among  these,  an
important  one  is  the  existence  of  a  very  large
market  share.

(260)

(258) Very large market shares are in themselves, save in
exceptional circumstances, evidence of a dominant
position (93). The Court of Justice in Akzo (94)  held
that  under  normal  circumstances  a  50 %  market
share  is  sufficient  to  infer  dominance.  In  Hilti (95)
the Court of First Instance stated: ‘In this case it is
established  that  Hilti  holds  a  share  of  between
70 %  and  80 %  in  the  relevant  market.  Such  a
share is, in itself, a clear indication of the existence
of  a  dominant  position  in  the  relevant  market’.

(259) HB has for a long time had a share in volume and
value  of  over  75 %  of  the  relevant  market  (see
paragraph  27).  By  virtue  of 
its  volume  of
production  and  scale  of  supply,  this  undertaking
enjoys  a  position  of  great  economic  strength.  For
many  retailers  stocking  HB 
ice  cream,  HB’s
reasonable
do 
competitors 
alternative  sources  of  supply,  in  view  of  the  range
and  popularity  of  HB’s  products.  HB’s
competitors  would  be  unable  effectively  to  meet
the expectations and demand requirements of such
is  an
retailers. 

therefore,  HB 

In  practice, 

constitute 

not 

unavoidable  trading  partner  for  many  retailers  in
the  relevant  market,  as  illustrated  by  the  fact  that
the large majority of retailers all choose to sell HB
ice  cream,  and  many  of  these  exclusively  so.  HB’s
position  of  strength  is  further  confirmed  by  the
relative  market  shares  of  its  rivals,  as  well  as  by
their more limited product ranges (96). This secures
for  HB,  at  least  for  the  foreseeable  future,  that
freedom  of  action (97)  which  is  the  special  feature
of a dominant position (98).  The  freedom  of  action
enjoyed  by  HB  is  further  enhanced  by  the  fact
that, in some 40 % of retail outlets in the relevant
market,  which  outlets  account  for  some  40 %  of
impulse  ice  cream  sales  in  the  relevant  market,  it
(see
the  sole 
is 
paragraph  159).

ice-cream  supplier 

impulse 

the  market 

companies  are 

In  addition  to  HB’s  very  large  market  share,
consideration  has  to  be  given  to  other  factors
which  contribute  to  its  economic  strength.  HB  is
part of a multinational group of companies which
has  been  producing  and  distributing  ice  cream  for
many  years  in  all  Member  States  and  in  many
other  countries,  in  many  of  which  the  Unilever
group 
leaders.
Consequently,  it  has  access  to  long  established
know-how concerning production and distribution
of  these  products,  acquired  from  its  experience  in
these  areas.  No  other  operator  in  the  relevant
market  has  this  degree  of  relevant  knowledge  and
experience. Furthermore, HB has a strong position
on the neighbouring frozen food market and other
undertakings  of  the  Unilever  group  of  companies
enjoy  similar  positions  in  the  food  market  as  a
whole, giving it an added advantage in its dealings
important
with  the  grocery  trade,  the  most 
distribution  channel  for  impulse  ice  cream  in
Ireland (paragraph 39 et seq.). In addition, HB has
an  extensive  product  range  including  most  of  the
leading brands of impulse ice cream in the relevant
market,  and  a  distribution  network  which
provides  nationwide  coverage.  It  is  also  clear  that
HB,  by  virtue  of  its  huge  share  of  the  market,
achieves  scale  economies  in  distribution  which
cannot  be  enjoyed  to  the  same  extent  by  its
competitors.

(261) Having  regard  to  all  these  factors,  it  can  be
concluded that HB has a dominant position in the
market  for  impulse  ice  cream  in  Ireland.

(92) Case  27/76  United  Brands  and  Case  85/76  Hoffmann-La

Roche  [1979]  ECR  461.

(93) Case  85/76  Hoffmann-La  Roche  [1979]  ECR  461,  at

paragraph 41.

(94) Case  C-62/86  Akzo  Chemie  [1991]  ECR  I-3439,  at

paragraph 60.

(95) Case T-30/89 [1991] ECR II-1439, paragraph 92 (confirmed
on  appeal  by  the  Court  of  Justice,  Case  C-53/92  P,
judgment  of  2  March  1994  [1994]  ECR  I-667).

(96) Case  27/76  United  Brands.
(97) The  price  promotion  introduced  by  Mars  in  the  summer  of
1995  (see  footnote  83)  was  not  responded  to  by  any  of  its
competitors.

(98) Case  85/76  Hoffmann-La  Roche,  at  paragraph  41.

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2. Abuse  of  dominant  position

(i) The  concept

supplier of a customer to grant it exclusivity, so as
to  prevent  competing  suppliers  over  significant
periods 
is
prohibited  by  Article  86,  as  the  Court  of  Justice
and  the  Court  of  First  Instance  have  in  a  number
of  cases  confirmed (100).

from  dealing  with 

the  customer, 

(262) The  Court  of  Justice  has  defined  an  abuse  of  a
dominant  position  as  ‘. . .  an  objective  concept
relating  to  the  behaviour  of  an  undertaking  in  a
dominant  position  which  is  such  as  to  influence
the structure of a market where, as a result of the
very  presence  of  the  undertaking  in  question,  the
degree  of  competition  is  weakened  and  which,
through  recourse  to  methods  different  from  those
which  condition  normal  competition  in  products
or  services  on  the  basis  of  the  transactions  of
commercial  operators,  has  the  effect  of  hindering
the  maintenance  of  the  degree  of  competition  still
existing  in  the  market  or  the  growth  of  that
competition’ (99).  In  particular,  small  competitors
should  not  be  the  victims  of  behaviour  by  a
dominant  firm,  facilitated  by  that  firm’s  market
power,  which 
those
competitors from the market or which has such an
exclusionary  effect.

is  designed 

to  exclude 

(ii)

Infringement

(263) HB  abuses  its  dominant  position  in  the  relevant
market,  contrary  to  Article  86,  in  that  it  induces
retailers  (as  described  at  paragraph  266)  who  do
not  have  a  freezer  cabinet  for  the  storage  of
impulse  ice  cream  either  procured  by  themselves
or  provided  by  another  ice-cream  supplier  than
freezer-cabinet  agreements
HB 
subject 
to  a  condition  of  exclusivity.  The
inducement  takes  the  form  of  an  offer  to  supply
the  freezer  cabinets  to  retailers,  and  to  maintain
them,  at  no  direct  charge  to  the  retailer.

to  enter 

into 

(264) Given 

inherent 

the  difficulties 

in  persuading
retailers either to replace such cabinets or to install
additional  cabinets  in  those  outlets  (described  in
detail  under  Article  85(1)),  HB’s  inducement  of
retailers  to  enter  into  freezer-cabinet  agreements
subject  to  a  condition  of  exclusivity,  as  described
in  the  previous  paragraph,  has  the  effect  of
rendering those outlets de facto exclusive sellers of
HB  impulse  ice-cream  products.  This  strengthens
HB’s  dominant  position,  and  as  such  infringes
inducement  by  a  dominant
Article  86.  Any 

(99) Cases  85/76  Hoffmann-La  Roche  at  paragraph  91.

(265) Where,  as  in  the  present  case,  an  economic
operator holds a dominant position in the market,
exclusive  supply  (whether  this  is  the  object  or  the
effect (101)  of  agreements  concluded  by 
this
operator)  constitutes  an  unacceptable  obstacle  to
entry  into  the  market  and  impairs  the  effective
competitive  structure  envisaged  by  Article  3g  of
the Treaty (102). HB’s freezer-cabinet agreements in
outlets  with  only  HB  cabinets  have  the  effect  of
eliminating  the  freedom  of  a  very  substantial
number (103)  (some  40 %  of  all  outlets  in  the
relevant  market,  which  acocunt  for  some  40 %  of
impulse ice cream sales in the relevant market, see
paragraphs 156 and 184) of retailers to stock and
offer  for  sale  to  the  consumer  ice  cream  of  any
competing  suppliers.  These  retailers,  as  a  result  of
the  agreements,  obtain  all  their  requirements
exclusively  from  HB.  Consequently,  access  to  the
relevant  market  for  other  suppliers  is  made  more
difficult.  The  effect  of  a  freezer-cabinet  agreement
subject  to  the  condition  of  exclusivity  is,  in  these
circumstances,  the  same  as  that  of  any  other
measure  taken  by  a  dominant  supplier  which
excludes  its  competitors  from  dealing  with  that
retailer (104).  Although  the  concept  of  abuse  is  an
objective one, it may be noted that HB is not only
aware  of  this  exclusionary  effect  produced  by  its
freezer-cabinet agreements but has indeed targeted
it  (see  paragraph  64  et  seq.).

(266) By  inducing  retailers  to  grant  exclusivity  in  the
circumstances  mentioned  at  paragraph  263,  HB
in  a  manner  different  from  the
is  behaving 

(100) Cases  85/76  Hoffmann-La  Roche;  C-62/86  Azko;  T-65/89

BPB  and  British  Gypsum  [1993]  ECR  II-389.

(101) Cases 85/76 Hoffmann-La Roche, at paragraph 91; 322/81

Michelin,  at  paragraph  70.

(102) Hoffmann-La  Roche,  at  paragraph  89;  BPB  and  BG,  at

paragraph  68;  cited  above.

(103) In  T-65/89  BPB  and  British  Gypsum,  at  paragraph  68,  the
Court  said  that  ‘. . .  the  conclusion  of  exclusive  supply
contracts in respect of a substantial proportion of purchases
constitutes  an  unacceptable  obstacle  to  entry  to  that
market . . .’.

(104) Cases 85/76 Hoffmann-La Roche, at paragraph 89; 322/81
at
Michelin, 
paragraph  149;  T-65/89  BPB  and  British  Gypsum  cited
above;  C-393/92  NV  Energiebedrijf  Ijsselmij  [1994]  ECR
I-1477,  at  paragraph  44.

70;  C-62/86  Akzo, 

paragraph 

at 

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in
conditions  governing  normal  competition 
consumer  goods.  This  practice  is  attractive  to
retailers,  thereby  amounting  to  an 
incentive,
because  of  its  general  convenience,  in  particular
the fact that the cabinet is also maintained by HB,
and  because  it  relieves  retailers  of  concerns  about
capital requirements, including the risk inherent in
such an investment. Moreover, it provides retailers
with  a  cabinet,  the  cost  of  which  reflects  HB’s
scale  economies  in  providing  the  service,  a  cost
which  no  individual  retailer  could  match  if  he
chose  to  purchase  his  own  cabinet.  However,  it
interferes  with  the  retailers’  freedom  to  choose
suppliers on the basis of the merits of the products
which  they  offer.  The  exclusivity  resulting  from
the  inducement  not  only  harms  HB’s  competitors
in 
the  relevant  market  by  making  market
penetration  and  expansion  more  difficult,  but  is
also  contrary  to  the  interests  of  the  retailers  and
ultimately  the  consumers,  in  that  the  former  are
prevented  from  exercising  their  freedom  of  choice
in  the  products  they  may  stock  as  well  as  in  how
they  maximise  outlet  space  efficiency,  and  the
latter as to which products they may purchase. HB
therefore  abuses  its  dominant  position  within  the
meaning  of  Article  86 (105).

that 

(267) HB has argued that freezer-cabinet agreements are
normal  commercial  usage  in  the  specific  market
under  analysis  in  these  proceedings  and  therefore
do  not  constitute  an  abuse  within  the  terms  of
Article  86.  It  may  be  true  that  the  use  of  such
agreements  is  standard  practice  in  the  relevant
market  and 
these  contracts  may  be
advantageous  to  both  contracting  parties  in  that
the  supplier  secures  a  minimum  level  of  sales  and
the  retailer  can  rely  on  security  of  supply  and  the
benefit 
provided.  Those
facility 
considerations,  however,  which  may  apply  in  a
normal  competitive  market  situation,  cannot  be
unreservedly  accepted  in  the  case  of  a  market
where, because of the dominant position of a firm,
the degree of competition is already weakened. An
undertaking  in  a  dominant  position  has  a  special
responsibility  not  to  allow  its  conduct  to  impair
genuine  undistorted  competition  in  the  common
market (106).

the 

of 

(268) Furthermore, HB has contended that a prohibition
of its cabinet agreements on the basis of Article 86
would  amount  to  condemning  it  to  harm  its  own
interests  and  penalising  it  merely  for  having  a
dominant  position.  It  points  to  the  Court  of  First
Instance’s  view  that  the  mere  fact  that  an
undertaking  in  a  dominant  position  enters  into
agreements  restricting  competition  does  not per  se
constitute  an  abuse  within 
the  meaning  of
Article  86 (107).  In  relation  to  this  point  it  should
be  stressed  that,  for  the  purpose  of  applying
Article  86,  the  circumstance  surrounding  the
agreements  and  particularly  their  effect  on  the
structure  of  competition  in  the  relevant  market
must  be  taken  into  account  in  establishing  the
existence  of  an  abuse,  as  has  been  done  at
paragraphs  264,  265  and  266.

in 

its 

(269) HB  has  put  forward  the  argument  that  the
exclusivity  provision 
freezer-cabinet
agreements  is  justified  in  the  interest  of  protecting
its  property  from  being  used  by  other  ice-cream
suppliers.  In  this  context,  HB  considers  that
Community  law  may,  exceptionally,  treat  aspects
of  property  rights,  such  as  contractual  provisions,
as  abusive  in  circumstances  where  they  could  be
described  as  ‘unfair’  or  ‘unreasonable’ (108).  It  is,
however,  HB’s  contention  that  the  usual  terms  of
the  cabinet
its  cabinet  agreement, 
exclusivity  provision,  are  not 
to  be
considered  as  ‘unfair’.

including 

liable 

(270)

In  addition  to  the  earlier  arguments  advanced
concerning  the  exercise  of  the  right  to  property  in
the  context  of  Article  85  (see  paragraphs  211  to
220) it must be noted that the retailers pay a rent,
included  in  the  ice-cream  price,  as  consideration
for  the  leasing  of  the  equipment  which  HB  has
made available to them. In such circumstances, an
additional exclusivity provision concerning the use
of the property by the lessee cannot be justified by
to  property  rights.  The  exclusivity
reference 
granted  is  for  the  benefit  of  the  supplier  alone,  at
the  expense  of  the  retailer’s  freedom  of  choice,
and  can  in  that  sense  be  regarded  as  unfair.  HB
uses  its  property  as  an  inducement  to  grant
exclusivity  in  relation  to  the  purchase  of  goods,

(105) Cases  85/76  Hoffmann-La  Roche,  at  paragraph  89;

C-62/86  Akzo,  at  paragraph  149.

(106) Case  322/81  Michelin,  at  paragraph  57;  T-65/89  BPB  and

British  Gypsum,  at  paragraph  67.

(107) Case  T-51/89  Tetra  Pak,  at  paragraph  24.
(108) Case  247/86  Alcatel  [1988]  ECR  5987  at  paragraph  10.

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with the result that this use constitutes in itself an
abuse  within  the  meaning  of  Article  86 (109).

3. Effect  on  trade  between  Member  States

(271) The abuse by HB of its dominant position is liable
to affect trade between Member States in the same
way  as  was  discussed  in  relation  to  Article  85
(paragraph  201).

IV. ARTICLE  3  OF  REGULATION  No  17

(272)

In  response  to  the  applications  by  Mars  and
Valley,  and  in  response  to  the  application  for
negative clearance or, in the alternative, exemption
by  HB  for  its  distribution  arrangements,  the
Commission, for the reasons outlined above, finds
pursuant to Article 3(1) of Regulation No 17 that,
in  Ireland,  and  as  regards  single-wrapped  items  of
impulse  ice  cream  sold  through  retail  outlets:

(a)

relating 

the  exclusivity  provision  in  HB’s  freezer-
cabinet  agreements 
to  cabinets
installed  in  outlets  where  the  only  freezer
cabinets  in  place  in  those  outlets  have  been
provided  by  HB,  constitutes  an  infringement
of  Article  85(1),

and

(b) HB’s  inducement  to  retailers  who  do  not
have  a  freezer  cabinet/s  either  procured  by
themselves  or  provided  by  an 
ice-cream
supplier  other  than  HB,  to  enter  into  freezer-
cabinet  agreements  subject  to  a  condition  of
exclusivity  by  offering  to  supply  the  freezer
cabinets to retailers, and to maintain them, at
no  direct  charge  to  the  retailer,  constitutes  an
infringement  of  Article  86.

in
has  concluded  the  agreements  referred  to 
point  (a)  that  each  of  the  said  agreements  is  void,
and  that  HB’s  inducement  of  them  to  enter  into
the  agreements  in  question  constitutes,  in  the
circumstances,  an  abuse  of  its  dominant  position
contrary  to  Article  86.

(274) HB  has 

that 

expressed 

the  opinion 

the
Commission,  by  continuing  with  the  present
proceeding,  is  not  acting  in  accordance  with  the
principle  of  subsidiarity  as  tangibly  expressed,
in  the  field  of  competition  law,  by  the  notice
of  13  February  1993  on  cooperation  between
national  courts  and  the  Commission (110).  HB  has
argued  that  the  present  case,  which  concerns  the
Irish  market,  has  already  been  fully  analysed  and
is the subject of a decision by the Irish High Court
(paragraph  3),  which  held  that  neither  Article  85
nor  Article  86  had  been  infringed.

(275) Freezer exclusivity is a contractual practice applied
by  the  majority  of  ice-cream  manufacturers  in  all
parts  of  the  Community.  The  legality  of  this
practice 
is  challenged  not  only  by  the  two
complainants  in  this  case,  but  also  by  Mars  in  a
supplementary  complaint  concerning  the  German
market. Freezer exclusivity in the United Kingdom
impulse ice-cream market has also been the subject
of a recent report by the Monopolies and Mergers
Commission (111).  Finally,  a  German 
ice-cream
manufacturer has notified standard freezer-cabinet
agreements  to  the  Commission.  The  Commission
is  obliged  to  state  its  position  in  relation  to
such  notifications. 
these  circumstances,  a
Commission  decision  is  appropriate  in  order  to
ensure  that  the  Community  competition  rules  are
applied consistently to various forms of exclusivity
practised  by  ice-cream  manufacturers  throughout
the  Community.

In 

(273) The  freezer-cabinet  agreements  referred  to 

in
point  (a),  containing  the  exclusivity  provision,  are
still  in  force.  HB  also  continues  to  offer  cabinets
on  the  terms  referred  to 
in  point  (b).  The
Commission  therefore  requires  HB,  pursuant  to
Article  3(1)  of  Regulation  No  17,  to  bring  those
infringements  to  an  end.  The  Commission  further
requires  HB  to  inform  the  parties  with  whom  it

(276)

In  its  notice  of  13  February  1993  on  cooperation
between  itself  and  national  courts  in  applying
Articles  85  and  86  of  the  Treaty,  the  Commission
stated  that  there  will  not  normally  be  a  sufficient
Community interest in examining a case when the
plaintiff  is  able  to  secure  adequate  protection  of
his rights before the national courts (at least when
the
those  courts  are  concurrently  seised  of 

(109) See 

in  this  respect  Commission  Decision  88/589/EEC
London  European/Sabena  (OJ  L  317,  24.11.1988,  p.  47);
and 
the  Commission’s  decision  of  11  June  1992,
B&I/Sealink,  (not  published),  Competition  Report  1992
No  219  and  [1992]  5  C.M.L.R.  255.

(110) OJ  C  39,  13.2.1993,  p.  6.
(111) Report on the supply in the UK of ice cream for immediate

consumption,  April  1994.

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question,  judgment  of  the  Court  of  First  Instance
in Case T-24/90 Automec II (112). The Commission
intends  to  concentrate  on  proceedings  having
particular  political,  economic  or  legal  significance
for  the  Community.

(277) Where  a  case  does  have  that  kind  of  significance
for  the  Community,  the  Commission  may  take
action  itself  even  if  proceedings  have  already  been
brought  before  a  national  court.  In  deciding
whether or not it will do so, the consideration that
the  case  is  significant  for  the  Community  prevails
the  particular
over 
complainant  may  be  able  to  obtain  a  remedy  in
national  proceedings  or  that  it  has  already  taken
proceedings.

consideration 

that 

the 

found 

(278) This  case  does  have  particular  political,  economic
and  legal  significance  for  the  Community,  since  it
addresses  fundamental  questions  about  business
practices  which  are 
the
Community, not only in the ice-cream market, but
also  (as  HB  itself  has  pointed  out)  in  many  other
markets  where  suppliers  provide  equipment  to
resellers  in  connection  with  the  sale  of  goods.  It
therefore  belongs  to  the  category  of  cases  which
the  Commission  will  continue  to  investigate  itself,
even  if  national  courts  have  already  ruled  on
them.

throughout 

(280) As 

and  with 

to  HB’s  concern  with 

the  existence  of
conflicting  decisions, 
legal
the 
uncertainty  allegedly  resulting  from  this,  it  should
be pointed out that it is for the Court of Justice to
give  a  final  interpretation  of  the  Treaty  Articles
involved.  Any  Commission  decision  is  susceptible
to  judicial  review  by  the  Court  of  First  Instance
and  ultimately,  on  points  of  law,  by  the  Court  of
Justice.  Under  Article  177  of  the  Treaty,  the  Irish
Supreme  Court,  before  which  an  appeal  against
the  decision  of  the  High  Court  is  pending,  may
also  ask  the  Court  of  Justice  for  a  preliminary
ruling,

HAS  ADOPTED  THIS  DECISION:

Article  1

in 

the 

exclusivity  provision 

The 
freezer-cabinet
agreements  concluded  between  Van  den  Bergh  Foods
Limited  and  retailers  in  Ireland,  for  the  placement  of
cabinets  in  retail  outlets  which  have  only  one  or  more
freezer  cabinets  supplied  by  Van  den  Bergh  Foods
Limited  for  the  stocking  of  single-wrapped  items  of
impulse ice cream, and not having a freezer cabinet either
procured  by  themselves  or  provided  by  an  ice-cream
manufacturer  other  than  by  Van  den  Bergh  Foods
Limited  constitutes  an  infringement  of  Article  85(1)  of
the  EC  Treaty.

(279)

In  its  judgment  of  28  May  1992  (paragraph  3),
the  Irish  High  Court  referred  to  the  Commission
decisions  of  25  March  1992  granting  interim
measures (113). The High Court also considered the
option  of  contacting  the  Commission,  as  well  as
the possibility of referring a question to the Court
of  Justice  under  Article  177  of  the  EC  Treaty.
Exercising  its  discretion  in  this  matter,  the  High
Court  did  not  find  either  of  these  options
necessary  for  it  to  give  judgment.  It  is  not
inconsistent  with  the  principles  governing  the
concurrent  powers  of  the  national  courts  and  the
Commission  in  the  application  of  Article  85(1)
and  Article  86  of  the  Treaty,  for  the  Commission
to  take  a  decision  which  differs  from  a  judgment
delivered  by  a  national  court,  provided  that  there
exists a sufficient Community interest in doing so.
As  has  already  been  said,  in  the  present  case  this
interest  consists  in  settling  fundamental  questions
found
about  business  practices  which  are 
throughout  the  Community.

(112) [1992]  ECR  II-2223.
(113) Decisions  in  Cases  IV/31.533  and  IV/34.072  Schöller  and

Langnese-Iglo.

Article  2

The  request  by  Van  den  Bergh  Foods  Limited  for  an
exemption  of  the  exclusivity  provision  described  in
Article  1  pursuant  to  Article  85(3)  of  the  EC  Treaty  is
hereby  rejected.

Article  3

Van den Bergh Foods Limited’s inducement to retailers in
Ireland  not  having  a  freezer  cabinet  either  procured  by
themselves  or  provided  by  an  ice-cream  manufacturer
other  than  by  Van  den  Bergh  Foods  Limited,  to  enter
into  freezer-cabinet  agreements  subject  to  a  condition  of
exclusivity  by  offering  to  supply  to  them  one  or  more
freezer  cabinets  for  the  stocking  of  single-wrapped  items
of  impulse  ice  cream,  and  to  maintain  the  cabinets,  free
of  any  direct  charge,  constitutes  an  infringement  of
Article  86  of  the  EC  Treaty.

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Article  4

Article  6

is  hereby  required
Van  den  Bergh  Foods  Limited 
immediately  to  cease  the 
in
Articles 1 and 3, and to refrain from taking any measure
having  the  same  object  or  effect.

infringements  set  out 

Article  5

Van  den  Bergh  Foods  Limited  is  hereby  required,  within
three  months  of  notification  of  this  Decision,  to  inform
retailers  with  whom  it  currently  has  freezer-cabinet
agreements  constituting  infringements  of  Article  85(1)  of
the  EC  Treaty  as  described  in  Article  1  of  the  full
wording  of  Articles  1  and  3,  and  to  notify  them  that  the
exclusivity  provisions  in  question  are  void.

This  Decision  is  addressed  to:

Van  den  Bergh  Foods  Limited
Whitehall  Road
Rathfarnham
Dublin  14
Ireland.

Done  at  Brussels,  11  March  1998.

For  the  Commission

Karel  VAN  MIERT

Member  of  the  Commission