MMC Management Consulting Group Plc

RNS No 6298u
COMPETITION COMMISSION
20 July 1999

                   INQUIRY INTO IMPULSE ICE CREAM:
          COMPETITION COMMISSION CONSULTS ON POSSIBLE REMEDIES

The Competition Commission, as part of its monopoly inquiry into impulse ice
cream, is seeking further comments on possible remedies should it conclude that
there are any matters which operate against the public interest.

The Commission is still pursuing its investigation and has, as yet, reached no
conclusion on any matter, or in respect of any party. It may be, therefore, that
there will be no adverse public interest findings, in which case no
recommendations will be made.  To help the Commission assess the wider
implications of any recommendations it might wish to propose, were it in due
course to make adverse public interest findings, it is now inviting comments.

Accordingly, the Commission would welcome any comments on the practicality and
effectiveness of the suggestions set out in a statement of possible remedies
annexed to the news release.  The possible remedies relate to:

(a)  Freezer exclusivity;

(b)  Outlet exclusivity;

(c)  Discounts to retailers; and

(d)  Distribution.

The statement of possible remedies is available from the Competition Commission
web site: www.competition-commission.gov.uk/ice2.htm or, in writing, from: The
Reference Secretary (Ice Cream), Competition Commission, Room 506, New
Court, 48 Carey Street, London, WC2A 2JT.

Note to Editors
1.   This reference was made by the Director General of Fair Trading, under
sections 47(1), 49(1) and 50(1) of the Fair Trading Act 1973 on 22 December
1998 (see OFT Press Release No 54/98).  The Commission made a statement of
issues available on 6 May 1999 (No 6/99).

Ice Cream Inquiry: Statement of possible remedies

1.  The Competition Commission, as part of its monopoly inquiry into impulse ice
cream is seeking further comments on possible remedies should it conclude that
there are any matters which operate against the public interest.

2.  The Commission is still pursuing its investigation and has as yet reached no
conclusion on any matter, or in respect of any party. It may be therefore that
there will be no adverse public interest findings, in which case no
recommendations will be made. In order, however, to help the Commission assess
the wider implications of any recommendations it might wish to propose, were it
in due course to make adverse public interest findings, it is now inviting
comments.

3.  Accordingly, the Commission would welcome any comments on the practicality
and effectiveness of the suggestions set out below.  For each of the matters
referred to below (freezer exclusivity, outlet exclusivity, discounts to
retailers and distribution), the Commission is considering a range of options.
In certain cases some measures could be additional to others.  The definitions
of the terms used in this statement are set out at the end.

A.  Freezer exclusivity

(a)  Birds Eye Walls (BEW) to be prohibited from entering into any agreement or
arrangement with a retail outlet controller (whether or not at the request of
the retail outlet controller) for capacity in any freezer in any retail outlet
to be reserved for Wall's impulse ice cream products unless 40 per cent of the
capacity and display area of the freezer is permitted to be used for stocking
impulse ice cream products of any other manufacturer.  Any such agreement
or arrangement reserving freezer capacity must be on annually published terms
which must be non-discriminatory.

Or

(b)  The prohibition in (a) but extended to any exclusivity in freezers, not
just arrangements dedicating more than 60 per cent of capacity and display area
to Wall's products.

Or

(c)  The prohibition in (a) or (b) applying not only to BEW but also to Nestle,
and Mars or to all manufacturers having a turnover in impulse ice cream of more
than #10 million.

B.  Outlet exclusivity
(a)  BEW to be prohibited from entering into any agreement or arrangement with
any retail outlet controller that impulse ice cream products of other
manufacturers cannot be supplied, or such supplies are to be limited, at any
retail outlet, whether or not the retail outlet controller has requested such an
arrangement.

Or

(b)  The prohibition in (a) applying to BEW and Nestle and Mars, or to all
manufacturers having a turnover in impulse ice cream of more than #10
million.

(c)  The prohibition in (a) or (b) applying also to any wholesaler agreeing
exclusivity for the products of the relevant manufacturer.

C.  Discounts to retailers

(a)  BEW to be prohibited from offering to any retail outlet controller any
discount or bonus (i) which is not volume-related, or (ii) under which the price
for incremental sales is less than incremental costs at every point on the
scale.  Such discounts and bonuses to be on annually published terms and non-
discriminatory.  Lower discounts and bonuses depending on the provision by
BEW of any freezer would be permitted.

Or

(b)  The prohibition in (a) applying to BEW and either Nestle, and Mars, or all
manufacturers having a turnover in impulse ice cream of more than #10
million.

(c)  BEW to be prohibited from offering or giving to any retail outlet
controller any other unpublished price-related or other incentive in connection
with the supply or promotion of Walls' products at any site or retail outlet.
Any permitted incentive to be on an annually published basis and to be non-
discriminatory.

Or

(d)  The prohibition in (c) applying to BEW, and either Nestl, and Mars, or all
manufacturers having a turnover in impulse ice cream of more than #10
million.

(e)  The prohibition in (c) or (d) applying also to any wholesaler giving
incentives relating to the supply or promotion of the products of any of the
relevant manufacturers.

D.  Distribution

4.  The Commission is considering the following measures, in each case either
applied to BEW alone, or BEW and Nestle, or all manufacturers having a turnover
in impulse ice cream of more than #10 million.


 (a)  The relevant manufacturer to be required to supply independent wholesalers
on terms that would permit distribution to be carried out on an economically
viable basis.  Any such terms to be published annually and non-discriminatory.
Unreasonable refusal to supply to be prohibited.  Our present view is that an
appropriate minimum level of discount for independent wholesalers would be in
the range of 17 1/2 per cent to 22 1/2 per cent of Gross Sales Value: we would
welcome comments on this.

(b)  The relevant manufacturer to be required to carry out through a subsidiary
any activities of sales or deliveries (including the contracting out of such
activities) to retail outlet controllers, and to account separately for
manufacturing activities and any such sales or distribution activities. Such
activities not to be operated at a loss (after all attributable direct and
indirect overheads). The relevant manufacturer to be required not to
discriminate between supply to such a subsidiary and supply to other
distributors.  Supply to both to be on annually published terms. Unreasonable
refusal to supply to be prohibited.

(c)  As a possible addition to the measures in (b), the relevant manufacturer to
be required to allow any other manufacturer or any distributor access to its
distribution system, on annually published and non-discriminatory terms.

5.  If the Commission were to conclude that none of the above measures would be
adequate, an alternative could be to restrict the relevant manufacturer's
ability to sell, or deliver to, or otherwise contract with retail outlet
controllers.  That might be achieved by the following.

(d)  Controls on contracts between manufacturers and retail outlet controllers,
as follows:

(i)  A prohibition, applying to any relevant manufacturer, on sales and delivery
to retail outlet controllers, with the exception of national accounts.*

(ii) In addition to (i), the relevant manufacturer to be prohibited from
entering into any contracts or arrangements with retail outlet controllers
(other than national accounts) unless they comply with the following conditions:

(aa) They must be on annually published terms.

(ab) They must be non-discriminatory.

(ac) Terms should not be linked with the use of any distributor or class of
distributor.

(ad) There should be no linkage with the acquisition of any other goods and
no linkage between different classes of impulse ice cream.

*The Commission will wish to keep the scope of this term as narrow as
practicable: comments would be welcome as to how this could be defined.

(iii)     Or, in addition to (i) the relevant manufacturer to be prohibited from
entering into any other contract or arrangement with retail outlet controllers
(ie other than one relating to sales or delivery to national accounts permitted
by (i), or for any permitted freezer or outlet exclusivity).

(iv) Contracts and arrangements between the relevant manufacturer and
distributors to meet the following conditions; and unreasonable refusal to
supply to be prohibited:

(aa) They should be on annually published terms.

(ab) They should be non-discriminatory.

(ac) There should be no limitation on the supply or delivery of other
manufacturers' products, whether or not at the request of the distributor.

(ad) Any rebate must be volume related; and the price of incremental sales
must not be less than incremental cost at every point on the scale.

(ae) There should be no linkage with the acquisition of any other goods and
no linkage between different classes of impulse ice cream.

(e)  In addition to any of the above, a restriction on the use the relevant
manufacturer may make of information provided to it by distributors, eg use of
information for the purpose of selling products to customers of the
distributors.

6.  The Commission is also considering preventing any manufacturer to which a
prohibition is applied from enforcing any existing agreement to the extent that
it does not comply with that prohibition.

7.  We would welcome your views on these possible remedies, and in particular on
the appropriateness of the turnover threshold, any level of exclusivity which
might be permitted perhaps for a limited period and whether any exceptions are
desirable.

8.  Given the date by which we are required to report, we would be grateful for
any comments on these possible remedies by 13 August.


Definitions of terms used in this statement

In this statement, we use the terms:

(a)  'manufacturer' to include an importer;

(b)  'distributor' to refer to (i) any wholesaler who buys and sells the
reference goods on its own behalf (an 'independent wholesaler'), (ii) any
manufacturer who sells or delivers to retail outlets, whether by itself, a
subsidiary or by contractors (ie including Birds Eye Wall's (BEW)) and (iii) any
person who sells or delivers to retail outlets on behalf of a manufacturer, ie
including Wall's Direct contractors;

(c)  'Wall's Direct' to include its contractors, unless the context otherwise
requires;

(d)  'retail outlet controller' to include both retailers and any person,
including a local authority, who controls or manages premises ('sites') at which
impulse ice cream is sold, including eg theatres, theme parks, public parks and
beaches, shopping centres and motorway services;

(e)  'BEW' to refer to Unilever plc and any of its subsidiaries operating in the
UK, such as BEW and Van den Bergh Foods Ltd, unless the context otherwise
requires.

(f)  'annually published terms' to refer to published terms which remain in
force from at least 1 February in any year to the following 31 January.

END

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