On 6 December 2017 the Italian Competition Authority ("AGCM") announced that it had decided to impose a €60.7 million fine on Unilever Italia Mkt. Operations S.r.l. ("Unilever") for exclusionary abuse aimed at preventing the development of other competitors active in the market of the single-wrapped "impulse" (i.e. for immediate consumption) ice-creams, in relation to which the company holds a dominant position, mainly through the sale of the Algida brand. The AGCM took this decision on 31 October 2017.
The anticompetitive conduct assessed by the AGCM related to the following exclusivity and rebate/bonuses schemes included by Unilever in its contracts with retailers:
- product exclusivity clauses requiring retailers to sell exclusively Unilever ice-creams;
- cabinet exclusivity clauses requiring retailers to use only the fridges provided by Unilever;
- rebate and bonuses provisions which were applied retroactively once certain sales targets were reached;
- conditional bonuses which were only paid to retailers if they adopted specific Unilever promotional initiatives; and
- "assortment" bonuses granted only if the retailer offered a specific basket of Algida ice-creams.
The AGCM held that all of these clauses discouraged retailers from switching suppliers, even for limited volumes. Unilever also granted bonuses to retailers' trade associations in order to induce their members to choose Algida's products.
The AGCM rejected all Unilever's attempts to claim that the agreements resulted in efficiency gains deriving from its commercial policy (e.g. claims that product exclusivity maximised protecting the specific investments made by Unilever, including covering distribution costs and provision of free equipment like fridges).
Moreover, the AGCM further rejected Unilever's claim that its alleged exclusionary conduct should have been subject to a quantitative economic assessment, as established by the European Court of Justice in the Intel case, in order to ascertain whether an as efficient competitor could match the conduct under scrutiny. Notably, the AGCM found that Unilever's conduct differed to that of Intel in a number of ways such that, as a whole, Unilever's conduct could not be subject to the "as efficient competitor" test. In particular, Unilever's conduct was characterised by the:
- fact that it was primarily based on exclusivity agreements, which are capable in their own right of preventing market entry in certain circumstances;
- long duration of the agreements concerned; and
- use of trade associations to monitor compliance with the exclusivity provisions.
The AGCM, however, did grant Unilever a 10-15% reduction to its fine as a result of improvements made to its antitrust compliance programme. A further 10-15% reduction was granted as a consequence of Unilever implementing voluntary commitments which it originally submitted in relation to which Unilever agreed to: scale back the scope of product exclusivity to 10-20% of the retailer's turnover; limit the assortment bonuses; and remove the retroactive rebate and bonuses granted to trade associations.
Unilever has announced its intention to appeal the AGCM's decision. It will be interesting to see how the Italian courts apply the lessons from the European Court of Justice's Intel judgment which also considered rebates.
With thanks to Giulia Carnazza of Ashurst for her contribution.
