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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
SEAL:
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