Walkers Snacks Ltd: alleged abuse of a dominant position

Source text

Walkers Snacks Ltd: alleged abuse of a dominant position

Office of Fair Trading (OFT) closed Competition Act 1998 case.

From:

Competition and Markets Authority

Published:

3 May 2007

Case type:

CA98 and civil cartels

Case state:

Closed

Market sector:

Food manufacturing

Outcome:

CA98 - administrative priorities

Opened:

8 July 2002

Closed:

3 May 2007

Case information

Party: Walkers Snacks Limited (WSL)

Issue: Walkers Snacks Limited's trading practices, in particular

its rebate scheme.

Relevant provision: Chapter II prohibition, Competition Act 1998 and

Article 82, EC Treaty

Outline of case

In the summer of 2002, the OFT considered the proposed acquisition by a

WSL-related company of the 'Wotsits' snack brand, and associated

production and distribution facilities, from Golden Wonder. The report

on the Director General of Fair Trading's merger advice (see note

1) noted that significant concerns had been

expressed in relation to WSL's trading practices. Following the

clearance of the merger, the OFT opened a case file and invited

submissions from relevant parties.

Submissions received alleged that WSL was abusing a position of

dominance in the relevant market in the UK, through a range of

practices, including growth rebates, financial inducements and solus

agreements, and that these practices led to significant foreclosure of

the relevant market. In particular it was alleged that WSL's growth

rebates foreclosed the market by linking the discount customers received

on WSL products to the percentage increase in the annual volumes they

purchased from WSL.

In February 2003, the Director General found that there were reasonable

grounds for suspecting an infringement of the Chapter II prohibition on

the basis of information available about WSL's practices, and opened

the investigation under section 25 of the Act.

In its investigation, the OFT considered the relevant market, dominance

and whether WSL's practices, in particular its growth and qualitative

rebate schemes, were in breach of the Chapter II prohibition and Article

82, having regard to relevant case law.

The OFT obtained extensive evidence on the features of WSL's growth and

qualitative rebate schemes and their impact on customer decision making

in relation to purchasing, listing and promotional decisions in the

provisional relevant market. The investigation uncovered no evidence

that the WSL rebates had a material impact on customer decision making

or on the process of competition generally. Although the OFT cannot

altogether rule out the possibility that the WSL rebates resulted in

some degree of foreclosure, it is unlikely that such foreclosure is

material and therefore unlikely that material consumer detriment has

been caused.

The OFT's investigation of other alleged practices did not yield

sufficient evidence to warrant further investigation.

The investigation is incomplete. In relation to market definition, the

OFT has reached a provisional view only and a number of questions remain

outstanding in relation to dominance. Further, the OFT has not prepared

or issued a Statement of Objections ('SO') and has therefore not had

the benefit of any responses to an SO that WSL or any third parties

might make.

Having regard to its prioritisation criteria (see note

2), the OFT weighed up the potential benefits

of pursuing the WSL investigation against the potential benefits of

diverting resources to other cases. In particular the OFT considered the

fact that it was unlikely that the rebates gave rise to material

consumer detriment. The OFT also took into account the substantial

resources over a significant period of time which would be required to

pursue this case.

In light of these factors, the OFT decided, after consultation, to close

the WSL investigation on the grounds that it does not constitute an

administrative priority.

Case reference: CE/1604-02

Notes

‘Proposed acquisition by Frito Lay Trading Co GmbH, a subsidiary

of Pepsico Inc, of certain assets of the Golden Wonder Group Ltd, namely

the Wotsits brand and associated production and distribution

facilities' – A report under section 125(4) of the Fair Trading Act

1973 on the advice of the Director General of Fair Trading, given on 8

July 2002, to the Secretary of State for Trade and Industry under

Section 76 of the Act.

Competition prioritisation framework (pdf 72 kb)

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