ACCC v Australasian Food Group
[2022] FCA 308
Snapshot
Federal Court
Filing date
19 November 2020
25 March 2022
Citation
[2022] FCA 308
File number
VID738/2020
Registry
Victorian
Judge
Justice Moshinsky
Issues
Exclusive dealing
Applicant
ACCC
Respondents
Australasian food Group Pty Ltd
(Trading as Peters Ice Cream)
Legal representatives
For applicant (ACCC): Corrs Chambers Westgarth
For respondent: Allens
ACCC media release
© Commonwealth of Australia 2020, 2021
ACCC Media release sourced from the ACCC website and reproduced pursuant to Creative Commons By Attribution 3.0 Australia licence as specified on the ACCC copyright page.
Copyright
Case extracts reproduced pursuant to the Federal Court's copyright notice: FCA Copyright Page, permitting reproduction of case material. Text sourced from official
Facts and summary
The ACCC alleged Peters Ice Cream engaged in exclusive dealing conduct ‘which hindered or prevented competition for the supply of single-wrapped ice creams to petrol and convenience retailers‘.
The Court found in favour of the ACCC and ordered Peters Ice Cream to pay $12m penalty.
Concise statement
The ACCC published its concise statement ➤
See also media release:
Peters allegedly hindered or prevented competition in ice-cream supply
20 November 2020
The ACCC has instituted Federal Court proceedings against Australasian Food Group Pty Ltd, trading as Peters Ice Cream (Peters), alleging it engaged in conduct which hindered or prevented competition for the supply of single-wrapped ice creams to petrol and convenience retailers.
The ACCC alleges that between about November 2014 and December 2019, Peters engaged in exclusive dealing by entering into and giving effect to an agreement with PFD Food Services Pty Ltd to distribute its single-wrapped ice cream and frozen confectionary products to petrol and convenience retailers nationally.
The agreement contained a condition that PFD could not distribute any competing ice cream products in certain locations around Australia.
During the term of the distribution agreement, PFD made requests to distribute competing ice cream products to petrol and convenience retailers nationally, but these requests were rejected by Peters.
The ACCC alleges that, for new entrants, PFD was the only distributor capable of distributing single-wrapped ice cream products to national petrol and convenience retailers on a commercially viable basis. Unlike PFD, other potential distributors did not have a national frozen food route to these retailers.
The ACCC will also argue it was not commercially viable for new entrants to incur the cost of establishing their own distribution network to distribute single-wrapped ice creams nationally.
“We allege that, as a result of the agreement and Peters’ conduct, other ice cream suppliers had no commercially viable way of distributing their single serve ice creams to national petrol and convenience retailers,” ACCC Chair Rod Sims said.
“Our case is that the distribution agreement and Peters’ conduct effectively raised barriers of entry, which hindered or prevented potential new entry into the market to supply single serve ice cream products to petrol and convenience retailers.”
“We also allege that a substantial purpose of Peters engaging in the conduct was to protect its market position from competitors, as one of only two major suppliers of single-wrapped ice creams, who together held a combined market share of over 95 per cent during the relevant time,” Mr Sims said.
“We allege that this conduct reduced competition, and may have deprived ice cream lovers of a variety of choice or the benefit of lower prices when purchasing an ice cream at one of these stores,” Mr Sims said.
During the course of the ACCC’s investigation, Peters advised the ACCC, without admission, that it has recently entered into a new agreement with PFD which no longer includes a term restricting PFD from distributing ice cream products for other ice cream producers.
The ACCC is seeking declarations, pecuniary penalties, a compliance program order and costs.
Background
Peters is one of the largest suppliers of single serve ice cream products in Australia, which include brand names such as “Drumstick”, “Maxibon”, “Connoisseur”, “Frosty Fruits” and “BillaBong”.
During the relevant period, Peters directly distributed most of its ice creams to areas in Sydney, Melbourne and Brisbane, while PFD distributed or re-supplied Peters’ ice creams in the majority of other areas.
Exclusive dealing occurs when one person trading with another imposes some restrictions on the other’s freedom to choose with whom, in what, or where they deal. Exclusive dealing is against the law only when it has the purpose or effect or likely effect of substantially lessening competition.
Release number:
242/20
Judgment
Judgment
25 March 2022
The Federal Court ordered Australaisan Food Group (t/a Peters Ice Cream) to pay $12m enalty fo rexclusive dealing conduct in relation to distribution of ice creams sold in petrol stations and convenience stores.
Peters Ice Cream admitted it had engaged in exclusive dealing.
Declaration
[para 1] From 21 November 2014 to around December 2019, the respondent, trading as Peters Ice Cream, in trade or commerce, engaged in the practice of exclusive dealing in contravention of s 47(1) of the Competition and Consumer Act 2010 (Cth) (CCA) as defined in paragraphs (a) and (d) of s 47(4) of the CCA, by acquiring distribution services from PFD Food Services Pty Ltd (PFD) pursuant to an agreement between PFD and the respondent (Distribution Agreement) on the condition that PFD would not, without the prior written consent of the respondent, sell or distribute single serve ice cream products that competed with the respondent’s single serve ice cream products in the various geographic areas throughout Australia specified in the Distribution Agreement as amended from time to time, where engaging in that conduct had the likely effect of substantially lessening competition in the market for the supply by manufacturers of single serve ice cream and frozen confectionery products in Australia.”
Orders
[para 2] Pursuant to s 76(1) of the CCA, the respondent pay to the Commonwealth of Australia a pecuniary penalty in the total amount of $12,000,000 in respect of the contravention referred to in the declaration in paragraph 1 of these orders, to be paid within 30 days of the date of this order.
[para 3] Pursuant to s 86C(1) of the CCA, within three months of the date of this order, the respondent, at its own expense, establish a program which has the purpose of ensuring compliance by the respondent, its employees and agents with Part IV of the CCA, particularly s 47, which meets the requirements set out in Annexure A and maintain the compliance program for three years from the date on which it is established.
[para 4] …
[para 5] The respondent pay the applicant, within 30 days of the date of this order, a contribution to the applicant’s costs of and incidental to this proceeding fixed in the sum of $250,000.
[para 6] The proceeding otherwise be dismissed.
Reasons
Peters admitted the alleged contravention and both parties prepared a statement of agreed facts and written submissions, including in relation to the proposed orders. In particular, they jointly proposed a pecuniary penalty of $12m and a contribution to costs in the amount of $250,000.
In agreeing that the proposed penalty was appropriate his Honour went through the applicable principles and (from para 35) applied them to this case. His Honour identified $33,750,000 as the maximum penalty (based on 10% of revenue for the 12 months prior to the conduct concluding).
His Honour also noted that the parties submitted, and he accepted, that ‘Peters did not deliberately contravene the CCA’ (para 57) but also that those involved in the contravention were at ‘management’ level.
Hearing
Hearing
25 March 2022 before Justice Moshinsky
Media and commentary
ACCC media releases
News media
ACCC, Peters allegedly hindered or prevented competition in ice-cream supply (20 November 2020) ➤
Last updated: 4 April 2022