Nova workboard

a blog from young economists at Nova SBE

Ice Cream Wars

In the end of the 80’s, Mars entered in the ice-cream market in several countries to compete in the multi-pack market (e.g. ice-cream packs in supermarkets) and impulse market (e.g. ice-creams for immediate consumption). Mars had some difficulties to entry in some markets and it argued/lodged the complaint that Unilever was acting in an anti-competitive way.
Basically, retailers usually have free freezers to keep the ice-creams supplied by Unilever. These cabinets have an exclusivity condition: Retailers cannot use the cabinets to sell ice-creams from competitors. Is this really anti-competitive behavior? We should look a bit deeper on the topic.
One of the arguments used by Unilever is based on the cabinet property rights, it would not be fair in competitive terms for Unilever to open their freezer while they have the costs of provision and maintenance. In this way, they would be subsidizing the other competitors.
Another point that is important to understand is the possibility of having retailers that would stop selling ice-creams if free cabinet provision is not allowed. In this situation, the exclusivity practice is not excluding consumers from choosing products from others brands but it is giving them the possibility of having ice-creams available which seem to be positive.
Ice-cream freezers have space limits, opening the freezers to other brands will have consequences on the Unilever supply. Having less space available for them, they need to reduce all quantities supplied of their ice-creams (does not seem to be plausible in the most sold products) or stop providing some products supplied before. There is a possible change between intra-brand competition and inter-brand competition; it is not obvious what is better for competition, consumers and innovation.
One of the reasons that make this practice being considered anti-competitive is the fact that many retailers do not have space for an extra cabinet; then freezer exclusivity was implicitly creating brand exclusivity.
In the end, Unilever was forced to open part of their freezers to competitors in order to avoid competition restraints. However when courts/competition authorities are facing this kind of problems, it is necessary to answer question as the ones shown previously. Some of those arguments were the reason why firstly, Irish and British National Courts decisions were favoring Unilever exclusivity instead of opening its freezer to competitors.
Guilherme Rodrigues 541

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Author: studentnovasbe

Master student in Nova Sbe

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