Nespresso has been under investigation in France for a number of years following complaints made by competitors (Demb and Ethical Coffee Company) about the tie between the Nespresso machines and the Nespresso coffee capsules.
The competitors accused Nespresso of illegally telling customers and consumers that product guarantees and proper functioning of machines depended upon using only the Nespresso capsules. This included making technical changes to the Nespresso machines which were allegedly intended to stop other capsules from fitting properly. Earlier in the year, in an attempt to end the investigation, Nespresso offered commitments:
- it promised to change its warranty to state that the use of other capsules would not invalidate the warranty and it would cover damage within the warranty period unless the damage or dysfunction was caused by the non-Nespresso capsules
- it would no longer make comments actively discouraging consumers from using non-Nespresso capsules.
Consumables that are tied in some way to 'capital' equipment are usually the big and/or longer term money-maker for businesses (e.g. printers and cartridges; nail cartridge strips and nail guns; Windows operating system and Windows Media Player). For companies that are or may be dominant, there is a clear antitrust risk.
In the EU, there is a five step test for assessing the tied consumables antitrust risk:
there must be dominance in the capital equipment market
the capital equipment market and the tied consumables must constitute two separate product markets
there needs to be a form of coercion or some form of limitation on customers using non-tied consumables (which can include things like compromising the warranty)
as a consequence, competition is foreclosed and
there should be no objective justification for the tie.
If you are interested in these issues, please do not hesitate to contact John Cassels at email@example.com
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