George Clooney (update)
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.
Commitments (binding for 7 years) have been accepted by the French Authority, pursuant to which:
- Nespresso will notify competitors of technical information on new machines on the day of the order to put them in production. A safeguard delay has been agreed on, so that the machines will not be commercialised less than 4 months after the technical information is given.
- Nespresso will make available to its competitors 15 prototypes of its new coffee machines in order for them to test the compatibility of their capsules.
- A third party will be appointed to act as an intermediary so as to prevent any transfer of confidential information between the competitors and Nespresso.
- In order to increase transparency, Nespresso will inform the French Authority of the reasons for new technical changes.
- Nespresso will delete warranty clauses that mention competitors' capsules (such as references to “use only Nespresso’s capsules…”).
- Nespresso will no longer comment on competitors' 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 strip 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 would like to discuss these issues please do not hesitate to contact John Cassels at email@example.com