For Release: June 25, 2003
Nestlé- Dreyer's Settle FTC
Charges
Dreamery, Godiva, Whole Fruit Brands and Nestle Distribution Assets Will be Divested to CoolBrands
Nestlé S.A. and Dreyer's Grand Ice Cream Inc. have agreed to divest three of Dreyer's brands and
Nestlé's distribution assets to settle Federal Trade Commission charges that their merger would lessen
competition in the market for the sale of superpremium ice cream to the retail channel and violate federal law.
Under the terms of the proposed settlement, the parties will divest the superpremium ice cream brands
Dreamery and Godiva, the Whole Fruit sorbet brand, and Nestlé's distribution assets to CoolBrands
International, Inc., no later than 10 days after Nestlé acquires Dreyer's.
Should the Commission determine that CoolBrands is not an acceptable purchaser,
or if the divestiture is not consummated in an acceptable manner,
the assets must be divested to another Commission-approved buyer.
"We have structured this settlement to preserve the significant competition that would have been lost
by this merger," said Joe Simons, Director of the FTC's Bureau of Competition.
According to the FTC, U.S. consumers spend at retail
about $600 million annually for superpremium ice cream. Nestlé and Dreyer's, along with Unilever, the marketer of Ben & Jerry's brand ice cream, account
for about 98 percent of superpremium ice cream sales. In June 2002, Nestlé and Dreyer's agreed to combine
their ice cream businesses. The purchase of Dreyer's would give Nestlé,
alone, about 60 percent of the market. At the time, the deal was valued at about
$2.8 billion.
In March 2003, the FTC authorized the staff to seek
a preliminary injunction to block the merger of
Nestlé and Dreyer's, pending trial. The agency asserted the merger would violate the antitrust laws by
eliminating competition and raising prices for superpremium ice cream. Nestlé markets superpremium ice
cream under the Häagen-Dazs brand. Dreyer's superpremium ice cream brands
include Dreamery, Godiva, under a license with Godiva Chocolatier, Inc., and
Starbucks, under a joint venture with Starbucks Corporation.
The proposed order also requires that Dreyer's make
its license to manufacture, distribute, and sell Starbucks superpremium ice
cream nonexclusive; and allow Mars, Inc., and Ben & Jerry's to terminate their
relationships with Dreyer's. To ensure that CoolBrands can operate profitably and provide viable competition,
the settlement requires that, for a period not to exceed one year, Nestlé and Dreyer's supply Dreamery, Godiva,
and Whole Fruit products to CoolBrands at their production costs. It also requires that they distribute those
brands for CoolBrands in any area of the U.S. where Dreyer's previously distributed the products. It requires
that they provide technical assistance and administrative services to CoolBrands, as needed, for one year. The
settlement requires that Nestlé and Dreyer's provide additional premium
ice cream or novelty products to CoolBrands for up to five years to enable CoolBrands
to operate profitably while it develops additional
distribution arrangements.
The consent agreement allows the Commission to appoint an independent trustee to monitor
compliance with the terms of the FTC order and authorizes the Commission to appoint a divestiture trustee if
the parties fail to divest the assets as required by the agreement. It prohibits the parties from reacquiring any of
the assets that were required to be divested without prior notice to the Commission. Finally, the settlement
contains certain record-keeping requirements.
The Commission vote to approve the proposed consent agreement was 5-0, with Commissioner Sheila
F. Anthony issuing a separate concurring statement.
In her statement, Commissioner Anthony said that while
she voted to accept the proposal, she had
some "concerns." She stated that the "mix-and-match" divestiture package is "far from ideal" because
CoolBrands "will end up with one company's less popular brands and the other company's weaker Direct Store
Distribution (DSD)system." In addition, "Nestle's DSD system currently handles more product volume than
that represented by the products CoolBrands will acquire," necessitating "volume commitments" by the merged
parties to CoolBrands that are "a more regulatory form of relief than I ordinarily like to see, in large part
because they effectively will require the Commission to supervise the superpremium ice cream marketplace for
the next five years." Anthony also noted that there is no guarantee that the CoolBrands DSD distribution system
will be profitable once the volume commitments end, and that "[a]ll of the risk
of failure is borne by CoolBrands
and ultimately, consumers -- not the parties."
An announcement regarding the proposed consent agreement will be published in the Federal Register
shortly. The agreement will be subject to public comment for 30 days, until July 25, after which the
Commission will decide to make it final. Comments should be addressed to the FTC, Office of the Secretary,
600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law
violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect
to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the complaint and proposed consent agreement, as well as an analysis to aid public comment,
are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response
Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC's Bureau of
Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by
investigating alleged law violations and, when appropriate, recommending that the Commission take formal
enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of
Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave.,
N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more
information on the laws that the Bureau enforces, the Commission has published Promoting Competition,
Protecting Consumers: A Plain English Guide to Antitrust Laws, which can be accessed at
http://www.ftc.gov/bc/compguide/index.htm..
MEDIA CONTACT:
Claudia Bourne Farrell
Office of Public Affairs
202-326-2181
STAFF CONTACT:
Michael G. Cowie or Catharine M. Moscatelli
Bureau of Competition
202-326-2214 or 202-326-2749
(FTC File No. 021-0174)
(http://www.ftc.gov/opa/2003/06/nestle.htm)
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Related Documents:
In the Matter of Nestle Holdings,
Inc.; Dreyer's Grand Ice Cream Holdings, Inc.; and Dreyer's
Grand
Ice Cream, Inc., Filed
No. 021017,
Docket No. C-4082
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