In a procedure brought before the French Competition Authority by DEMB and Ethical Coffee Company, Nespresso proposed a series of commitments aimed at lifting the barriers to the entry and growth of other coffee capsule makers manufacturers that are compatible with Nespresso coffee machines.
The Competition Authority launched a market test aimed at consulting the players in this sector and checking whether the commitments proposed by Nespresso are sufficient to address the competition concerns identified during the investigations. If it appears that these commitments, possibly amended or supplemented based on the responses obtained in the scope of the market test, are sufficient, the Competition Authority may close the proceedings and the commitments will become binding.
Nespresso is suspected of having abused its dominant position by tying the purchase of its capsules to that of its coffee machines, without any objective justification, thereby excluding manufacturers of competing capsules.
These practices are by their nature (i) technical, subsequent changes to Nespresso machines have the effect of rendering capsules produced by competing manufacturers incompatible with the new models; (ii) legal, in particular by the wording put on Nespresso machines (and specifically in the warranty) to encourage consumers to only use Nespresso brand capsules; and (iii) commercial, through its communication in the media and within the Nespresso Club.
Accordingly, Nespresso proposed three types of commitments:
- technical, consisting in particular in facilitating transparency concerning the technical changes made to its machines, by providing a technical update on all changes carried out that may affect the use of the capsule and the Nespresso machine to any competing capsule manufacturers so requesting;
- legal, in particular by implementing new warranty conditions; and
commercial, by implementing a compliance program that would prevent any person having ties to Nespresso from making any comments about competitors’ capsules, either in the media or in the Nespresso Club.