ACCC takes Peters to court over allegedly hindering or preventing competition in ice-cream supply

The ACCC alleges 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 confectionery products to petrol and convenience retailers nationally.

The ACCC said the agreement contained a condition that PFD could not distribute any competing ice cream products in certain locations around Australia.

A spokesperson for AFG said, “AFG notes today’s announcement by the ACCC and intends to vigorously defend any proceedings. AFG has confidence in its position and the arguments that support it. For many years there have been an extensive number of commercially viable distribution options available for the delivery of ice cream products around Australia to petrol and convenience retailers. It is our position that other manufacturers have not been prevented from supplying their products to retailers by virtue of AFG’s distribution arrangements with PFD.”​

During the term of the distribution agreement, the ACCC said 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 said it 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% during the relevant time.” ​

Sims added, “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.”​

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 that no longer includes a term restricting PFD from distributing ice cream products for other ice cream producers.

The ACCC said is seeking declarations, pecuniary penalties, a compliance program order and costs.

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.