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021 0174

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

NESTLÉ HOLDINGS, INC., a corporation,
DREYER'S GRAND ICE CREAM HOLDINGS, INC., a corporation, and
DREYER'S GRAND ICE CREAM, INC., a corporation.

Docket No. C-4082

COMPLAINT

Pursuant to the provision of the Federal Trade Commission Act and the Clayton Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that Nestlé Holdings, Inc. ("Nestlé"), Dreyer's Grand Ice Cream Holdings, Inc., and Dreyer's Grand Ice Cream, Inc. (Dreyer's Grand Ice Cream Holdings, Inc., and Dreyer's Grand Ice Cream, Inc., are hereinafter referred to as "Dreyer's"), have entered into an agreement in violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C.  45, and that the terms of such agreement, were they to be implemented, would result in a violation of Section 5 of the Federal Trade Commission Act and Section 7 of the Clayton Act, as amended, 15 U.S.C.  18, and it appearing to the Commission that a proceeding in respect thereof would be in the public interest, hereby issues its complaint, stating its charges as follows:

I. Respondent Nestle

1. Respondent Nestlé Holdings Inc., is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 383 Main Avenue, Fifth Floor, Norwalk, Connecticut 06851. Nestle Holdings, Inc., is a subsidiary of, and controlled by, Nestlé S.A., a corporation organized, existing, and doing business under and by virtue of the laws of Switzerland, with its principal executive offices located at Avenue Nestlé 55, CH-1800 Vevey, Switzerland.

2. Respondent Nestlé is, and at all times relevant herein has been, among other things, engaged in the production, sales and distribution of superpremium ice cream to customers located throughout the United States. 3. Respondent Nestlé and its affiliates, in 2002, had total worldwide sales of all products of approximately 89.2 billion Swiss francs and United States sales of all products of approximately $ 11.8 billion. Respondent Nestlé and its affiliates, in 2002, had United States sales of all superpremium ice cream products of approximately $ 340 million. Nestlé sells superpremium ice cream in the United States under the Häagen-Dazs brand. 4. Respondent Nestlé is, and at all times relevant herein has been, engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C.  12, and Section 4 of the Federal Trade Commission Act, 15 U.S.C.  44. Respondent Dreyer's

5. Respondent Dreyer's Grand Ice Cream, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its principal place of business at 5929 College Avenue, Oakland, California 94618. 6. Respondent Dreyer's Grand Ice Cream Holdings, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its principal place of business at 5929 College Avenue, Oakland, California 94618. Respondent Dreyer's Grand Ice Cream Holdings, Inc., as a result of the transaction, will be the parent of Respondent Dreyer's Grand Ice Cream, Inc. 7. Respondent Dreyer's is, and at all times relevant herein has been, among other things, engaged in the production, sales, and distribution of superpremium ice cream to customers located throughout the United States. 8. Respondent Dreyer's, in 2002, had total worldwide sales of all products of approximately $ 1.3 billion, and United States sales of all products of approximately $ 1.3 billion. Respondent Dreyer's, in 2002, had United States sales of all superpremium ice cream products of approximately $ 108 million. Dreyer's sells superpremium ice cream in the United States under the Dreamery, Godiva, and Starbucks brands. Dreyer's planned to introduce a new superpremium ice cream in the United States through its joint venture with Mars, Incorporated. 9. Respondent Dreyer's is, and at all times relevant herein has been, engaged in commerce , or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. 12 and Section 4 of the Federal Trade Commission Act, 15 U.S.C. 44.

III. The Proposed Acquisition

10. On or about June 16, 2002, Respondents Nestlé and Dreyer's executed an agreement for Respondents Nestlé and Dreyer's to combine their ice cream businesses. The value of the proposed acquisition is approximately $2.8 billion.

IV. The Relevant Product Market

11. The relevant product market in which it is appropriate to assess the effects of the proposed acquisition is the sale of superpremium ice cream products to the retail channel because, inter alia:

(a) superpremium ice cream contains more butterfat and less air than premium or economy ice creams;

(b) superpremium ice cream contains more expensive and higher quality ingredients than premium or economy ice creams; and

(c) superpremium ice cream is priced significantly higher than premium or economy ice creams.

12. Total United States sales (at retail) of all superpremium ice cream products are approximately $ 604.7 million. The parties sell superpremium ice cream products through different retail channels of distribution, including supermarkets, mass merchants, club stores, and convenience stores.

V. The Relevant Geographic Market

13. The relevant geographic market in which it is appropriate to assess the effects of the Acquisition in the relevant line of commerce is the United States or a narrow region therein.

VI. Concentration

14. The relevant market is highly concentrated and the proposed acquisition, if consummated, will substantially increase that concentration, as follows:

(a) In the superpremium ice cream market, Nestlé has approximately a 36.5% share (in dollars) across all channels. Dreyer's has approximately a 19.1% share (in dollars) across all channels.

(b) After the acquisition, Respondents will have a market share of approximately 55.6% (in dollars) of the superpremium ice cream market identified in paragraphs 12 and 13 above.

(c) The acquisition raises the HHI from 3,501 to 4,897, an increase of 1,396 points.

VII. Conditions of Entry

15. Entry into the relevant market would not be likely, or sufficient to prevent the anticompetitive effects in the relevant market because, inter alia,

(a) an entrant with a new or unknown brand is unlikely to successfully take a sufficient amount of sales from superpremium ice cream incumbents to remain profitable; and

(b) a superpremium ice cream entrant would face great difficulty developing a nationwide Direct Store Delivery network comparable to either of the merging parties.

VIII. Violations Charged

16. Nestlé and Dreyer's compete in the sale of superpremium ice cream in the United States. 17. The effect of the proposed acquisition, if consummated, may be to substantially lessen competition in the sale of superpremium ice cream in the United States in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C.  45, and Section 7 of the Clayton Act, 15 U.S.C.  18, in the following ways, among others:

(a) by eliminating direct competition in the sale of superpremium ice cream between Nestlé and Dreyer's;

(b) by eliminating Dreyer's as an important competitive constraint in the relevant market, e.g., when Dreyer's expanded into superpremium ice cream in 1999, the price of other superpremium ice creams decreased significantly;

(c) by increasing the likelihood that the combination of Nestlé and Dreyer's will unilaterally exercise market power; and

(d) by increasing the likelihood of, or facilitation of, collusion or coordinated interaction; each of which increases the likelihood that prices will be higher with the acquisition than they would be absent the acquisition.

IX. Illegal Acquisition

18. The Agreement entered into between Respondents Nestlé and Dreyer's to combine their ice cream businesses constitutes a violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C.  45, and Section 7 of the Clayton Act, 15 U.S.C.  18.

WHEREFORE, THE PREMISES CONSIDERED, THE Federal Trade Commission on this twenty-fifth day of June, 2003, issues its Complaint against Respondents Nestlé and Dreyer's.

By the Commission.

C. Landis Plummer
Acting Secretary

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