Competition & Food Law Flash: When labelling and packaging practices constitute an abuse of dominance

Competition & Food Law Flash: When labelling and packaging practices constitute an abuse of dominance

The European Commission considers that removing mandatory information in a foreign language from the label and changing the packaging size may constitute an abuse of dominance. 

This has probably not escaped your attention: on the 13th of May 2019, the European Commission fined the world’s biggest brewer AB InBev EUR 200 million for abusing its dominant position on the Belgian beer market.

The Commission considered that AB InBev abusively hindered cheaper imports of its Jupiler beer from the Netherlands into Belgium through various restrictive practices.

Key learning of the decision

Besides the classical objections related to restriction of imports, the Commission interestingly considered as abusive for AB InBev to change the packaging of some of its products supplied to retailers and wholesalers in the Netherlands to make these products harder to sell in Belgium, notably by removing the French version of mandatory information from the label, as well as changing the design and size of beer cans.

Unilateral practices only prohibited in case of dominance

These unilateral practices have been condemned as an abuse of dominance. Indeed, it is only because AB InBev was found to be dominant on the Belgian beer market that the Commission has found this unilateral conduct to be a competition law infringement. In other words, if a supplier is not in a dominant position, such unilateral practices are not prohibited. That being said, the absence of dominance of a supplier does nevertheless not allow it to (bi- or multilaterally) agree on restricting imports with a counterpart.

When is a supplier in a dominant position?

A supplier is dominant if the three following conditions are satisfied: (a) a significant market position illustrated by high market shares (at least above 35%); (b) the existence of barriers to entry and/or to expansion; and (c) the absence of countervailing buyer power. As the relationship between retailers and suppliers implies a certain degree of mutual interdependence, the condition related to the absence of countervailing buyer power is crucial to determine whether a supplier has a dominant position. It depends, among others, on the presence of “must-have” items (stock keeping units) in the product portfolio of the supplier. A case-by-case analysis is always necessary.

Potential implications for the food sector

Food business operators should pay attention to their potential dominant position when considering tailoring their label and packaging.

These objections could indeed potentially apply to other types of products and therefore impact the retail business as a whole.

Press release of the Commission is available here.