By a decision of September 4, 2014 (Decision), the French Competition Authority (FCA) ultimately accepted the commitments offered by the Nestlé group with the aim of resolving the abuse of a dominant position of which it was suspected in the marketing of Nespresso machines and capsules in France. Some of the commitments may, though, raise concerns over the FCA’s excessive interference in the innovation strategy of dominant companies, thus hindering technical progress.
In the relevant case, the FCA had received complaints by manufacturers of capsules compatible with Nespresso machines of allegedly abusive practices implemented by the Nestlé group (Nestlé) in both the markets for singleportion expresso coffee machines, and for capsules compatible with Nespresso machines, in which it was likely to have a dominant position.
The FCA suspected Nestlé of having improperly linked the purchase of its machines (tying market) to that of its capsules (tied market), through legal (limiting the warranty of the equipment when using competing capsules), commercial (disparagement of competing capsules) and technical practices (technical modifications carried out on the machines in order for them to correctly work only with Nespresso capsules). In order to respond to these “competition concerns” and to avoid a financial penalty, Nestlé expressed its willingness to implement the procedure of Article L. 464-2 III of the Commercial Code and to change its behavior for the future.
The extensive and intrusive nature of some of these commitments is questionable, particularly since it is difficult to form an opinion with respect to the definition of the relevant markets and the assessment of the practices on the basis of the Decision, since the FCA devoted little discussion to such issues, as is usual practice in commitments decisions.
In order to limit the risk of disparagement of competing capsules, Nestlé offered to complete its compliance program with means of information and training of Nespresso’s employees who are in regular contact with consumers. In this context, Nestlé went as far as obtaining approval from the FCA of the precise formula that its salesmen, directors and corporate officers will be required to use word-byword to answer consumers’ questions regarding competing capsules.
But more surprisingly, Nestlé undertook technical commitments which it may be questioned as to whether they are likely to wrongfully hinder its technological progress, under the pretext of not delaying the adaptation of its competitors manufacturing compatible capsules. In particular, pursuant to the Decision, Nestlé undertakes:
- to notify competitors of information concerning any technical modifications it intends to implement on its machines at the time the order is given to put the new machines into production, and at least four months before the machines are released onto the market,
- to make available to its competitors fifteen prototypes enabling them to perform compatibility tests on their capsules, and even
- to disclose the FCA a file detailing the reasons for each technical modification.
By doing so, Nestlé’s competitors obtained what amounts to a right of inspection of Nestlé’s innovation strategy, which hardly seems compatible with the freedom of business. Furthermore, it is difficult to understand such a restriction on Nestlé’s ability to innovate given that, as is the case for any company in a dominant position, it is specifically supposed to compete on the merits. As to the FCA, it is questionable how and in what capacity it could technically consider that the modifications carried out by Nestlé are not truly justified.
The commitments are at the very least atypical. Hopefully they will not become widespread, unless the jeopardizing of any effort of innovation is acceptable.