Walkers Snacks Ltd: alleged abuse of a dominant position
Office of Fair Trading (OFT) closed Competition Act 1998 case.
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
‘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)