Nespresso offers improved commitments to open up the market for coffee capsules

By Gabriele Accardo

Last 4 September the French Competition Authority (“AdlC”) made legally binding the improved commitments Nespresso offered to open up the market for coffee capsules to competitors in France and beyond.

As it may be recalled (see Newsletter 2/2014, p. 16, for additional background) the AdlC found that Nespresso held a dominant position in the market for single portion coffee machines as well as in the market for coffee capsules compatible with Nespresso machines, whereas the company incentivised consumers to only use Nespresso-brand capsules with Nespresso machines. This, according to the AdlC, was arguably in breach Art. 102 of the Treaty on the Functioning of the European Union, which prohibits the abuse of a dominant position.

In particular, the AdlC took issue with the following practices: i) frequent changes of capsules design, ii) information provided to consumers that proper functioning of the coffee machines depended on using only Nespresso capsules, and iii) encouraging consumers to only use Nespresso capsules.

Based on the set of commitments offered last April, Nespresso’s warranty conditions will be applicable to compatible capsules. It will also refrain from making any comment about competitors’ capsules.

However, following the market test, Nespresso has significantly improved its commitment relating to its communication to competitors of information regarding any technical modifications made to the machines which are liable to affect their interaction with the capsules.

In particular, Nespresso will first notify its competitors of any such changes and provide them with the relevant information at the time the order is given to put the new machines into production. In any event, competitors will have the information at least four months before the machines are released onto the market. Nespresso will also provide some 15 prototypes of the new machines, so that competitors will be able to carry out compatibility tests with the capsules.

To avoid any transfer of confidential information between the competitors and itself, Nespresso will use a “monitoring trustee”, that is a third party who will play the role of intermediary in the information transfer.

Nespresso will also inform the AdlC of the general objectives underlying the technical changes it intends to implement on the machines.

Finally, Nespresso will also implement a competition compliance program within its organization for the duration of the commitments, which will last for seven years.