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Peter’s suffers an ice-cream headache after Federal Court orders $12 million penalty for anti-competitive exclusive dealing

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On 25 March 2022, the Australian Competition and Consumer Commission (ACCC) obtained orders in the Federal Court against Australasian Food Group Pty Ltd, trading as Peters Ice Cream (Peters) for engaging in the practice of exclusive dealing in contravention of section 47(1) of the Competition and Consumer Act 2010 (Cth) (the Act). The practices in question related to an agreement (Distribution Agreement) with PFD Food Services Pty Ltd (PFD) for the distribution of single serve ice cream products sold in Australian petrol stations and convenience stores between 21 November 2014 to around December 2019.

The Federal Court ordered that Peters pay a penalty of $12,000,000, a contribution to the ACCC’s costs and that Peters establish, and maintain for at least three years, a program for ensuring future compliance with the Act.

The background to Peters’ conduct

Peters is one of the largest suppliers of single serve ice cream products in Australia, and owns brands such as Connoisseur, Drumstick, Maxibon, Frosty Fruits and Life Savers. Peters also manufactures products in collaboration with brands such as Allen’s, Cadbury, and Nestle.

PFD is an Australian based food distributor, with a national distribution network for dry, frozen and chilled products. Between 2014 and 2019, PFD’s network offered distribution to at least 90% of postcodes throughout Australia to petrol and convenience retailers such as Woolworths Petrol, Coles Express, Caltex and 7-Eleven.

On 21 November 2014, Peters and PFD entered into the Distribution Agreement for Peters’ single serve ice cream products on the condition that PFD would not, without Peters’ prior written consent, sell or distribute single serve ice cream products that competed with Peters’ in the areas to which the Distribution Agreement applied.

In November 2020, the ACCC commenced proceedings in the Federal Court against Peters alleging that, among other things, Peters’ Distribution Agreement hindered/prevented entry and expansion by competitors within the market of single serve ice cream products.

Specifically, the ACCC alleged that, by way of Peters’ exclusive dealing conduct, new entrants into the market, such as Bulla, and competitors, such as Unilever Australia (Holdings) Pty Ltd trading as “Streets”, were prevented new entry and expansion into the single serve ice cream market.

We provide a summary of the ACCC’s allegations here.

The legal position

Under section 47(1) of the Act, a company shall not, in trade or commerce, engage in the practice of exclusive dealing.

Exclusive dealing arises where a company supplies, offers to supply, goods or services, or offers to give a discount in relation to the supply of goods or services, on the condition that the supplier:

  1. will not, or will not to a certain extent, acquire or re-supply goods or services directly or indirectly from a competitor of that company; or
  2. in the case where the company supplies or would supply goods or services, will not, or will not to a limited extent, supply goods or services, or supply goods or services of a particular kind or description:
    • to a particular persons or classes of persons; or
    • in particular places or classes of places.

However, a company’s conduct will only contravene section 47(1) of the Act if it can be established that that company’s conduct had the purpose, or likely effect of substantially lessening competition.

The scope of section 47 is remarkably broad, in that any condition, whether direct, indirect, or one existing by inference only, may satisfy the requirements of exclusive dealings.

The findings of the Federal Court – key takeaways

Justice Moshinsky of the Federal Court declared, in favour of the ACCC, that Peters had engaged in conduct which contravened section 47(1) of the Act.

Ordinarily, the maximum pecuniary penalty for a company which breaches section 47 of the Act is $10,000,000 – see section 76(1A). However, where the Court determines that the infringing company has obtained a “reasonably attributable” benefit, that penalty can be up to 3 times the ordinary value (i.e. $30,000,000). The maximum penalty for individuals is $500,000.

As is apparent, the Court found that Peters had obtained a reasonably attributable benefit from its Distribution Agreement, but the pecuniary penalty was on the lower end of the potential maximum available.

It is important to ensure that your businesses practices (including contractual agreements) are not anti-competitive as the ACCC imposes significant penalties for breaches of the Act. The ACCC’s investigations are not limited to exclusive dealing and anti-competitive behaviour

McCabes has experience in advising clients in relation to their obligations under the Competition and Consumer Act 2010 (Cth). Please contact our Litigation and Dispute Resolution team if any of the issues raised in this article apply to you.

Contributors

William Wade
Lawyer

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