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CADE’S General Superintendence concludes analysis on exclusivity agreements in the ice cream market

Without evidences

Opinion recommends the filing of the proceeding considering the lack of evidence to proof competitive irregularity
by Assessoria de Comunicação Social published: Jul 19, 2017 12:18 PM last modified: Jul 19, 2017 12:18 PM

The General Superintendence of the Administrative Council for Economic Defense – CADE concluded the analysis of the administrative proceeding which investigates the establishment of exclusivity agreements between the companies Unilever Brasil Ltda. and Nestlé S/A in the impulse ice cream market (Administrative Proceeding nº 08012.007423/2006-27). The opinion, published on 14 July, recommends the filing of the investigation considering the lack of evidence of anticompetitive practices that would benefit the companies.

During the initial phase of investigation, the Superintendence analyzed two types of exclusivity agreement. The first kind concerns the provision of freezers by Nestlé and Unilever, on “free loan terms”, to the sale points, with the condition that such freezers should be used exclusively for the storage of ice creams from the companies. The second agreement provided the exclusivity of sales (regarding Nestlé) and exclusivity of merchandising (regarding Unilever) which included, in addition to the freezer exclusivity, minimum volume clauses, minimum capital, concession of bonus and preferences in the renewal. 

Regarding the freezers exclusivity agreements, the defendants presented arguments aiming to show the economic rationality of this exclusivity exigency. They argued that, as the freezers are owned by them, – bearing the costs of installation and maintenance –, the exigency of compensations would be reasonable. Otherwise, the competitors would start opportunistic behavior, since they would benefit from the investments carried out by Unilever and Nestlé.

In addition to the recognition of the economic justifications, the General Superintendence did not found any strong evidence that these specific exigencies would have created barriers to the entrance of new competitors in the market.

Concerning the exclusivity of sales and merchandise agreements, even though the efficiencies of the practice were not evident, the Superintendence verified that the exclusivity in the limits practiced by the companies, as declared by them, does not seem to close a relevant parcel of the sale points that commercializes impulse ice cream.

According to the opinion, the investigation carried out during the analysis of the proceeding did not raise sufficient elements indicating that the alleged practices could be considered as an infraction to the economic order or benefited the companies. The General Superintendence noticed that both companies have been losing market participation during the years. In addition, it was verified that this market continues dynamic, with the entrance of new agents with the potential to compete with Unilever and Nestlé.    

The case will be forwarded to the judgement of CADE’s Administrative Tribunal, which is responsible for issuing the final decision.