Unilever, Wrigley fall foul of European courts

The European courts have delivered a double whammy to the food industry with rulings against both ice cream maker Unilever and gum manufacturer Wrigley.

The ice cream ruling by the European Court of First Instance concerns Unilever's Van den Bergh Foods unit in Ireland, and confirms an earlier decision by the European Commission forcing the company to allow rival companies access to its freezer cabinets.

The traditional practice of ice cream manufacturers in Britain and Ireland has been to supply retailers with freezer cabinets free of charge, with the sole condition being that they are used to stocking only that company's brands.

This was the case with Van de Bergh Foods, formerly known as HB Ice Cream, which is the biggest ice cream producer in Ireland. However, in 1989 retailers with freezer cabinets supplied by HB began to stock and display the products of US company Mars, which was trying to penetrate the Irish market at that time.

When HB insisted that the retailers stock only its products, Mars lodged a complaint against the company in September 1991 with both the Irish courts (which are still to rule on the issue) and the European Commission.

The Commission decided in March 1998 that HB's distribution agreements containing the exclusivity clause were incompatible with Community competition law. It found that HB had a dominant position in the impulse ice cream market, reinforced by the strength of Unilever on the other ice cream markets in Ireland and on the international markets.

Since many retailers supplied with freezer cabinets by HB did not have sufficient space for other cabinets supplied by other manufacturers, the exclusivity clause was a highly effective way of keeping competitors out of the market, the Commission ruled. It found that in some 40 per cent of all outlets in Ireland, the only freezer cabinet or cabinets for the storage of impulse ice cream was or had been provided by HB, and only 17 per cent of retailers had freezer cabinets which were not subject to an exclusivity clause.

But HB appealed against the ruling, claiming that retailers simply had to replace the freezer cabinet with one supplied by a rival producer, leading to the case being transferred to the European Court of Justice.

However, here too it has failed to convince the regulators that its exclusivity clauses were legal. The Court said that the popularity of HB ice creams, HB's strength on the Irish market and the specific features of the products it sold there meant that such agreements clearly restricted competition.

The Court said that in reality, retailers only very rarely opted to replace freezer cabinets supplied by HB, particularly because of the position and popularity of HB on the Irish market.

Retailers were nonetheless prepared to stock ice creams from various manufacturers, provided that they could do so in one and the same freezer. For example, after HB had insisted on retailers' compliance with the exclusivity clause, the numeric distribution of Mars ice creams fell from 42 per cent to less than 20 per cent, the Court said.

The Court also decided that the provision to retailers of freezer cabinets and the maintenance costs of those freezers represented a financial barrier to the entry of new suppliers on the market and to the expansion of existing suppliers. As retailers are not inclined to accept freezer cabinets that are not free, any supplier would have acquired a stock of cabinets, a substantial investment that could dissuade them from entering the market.

What's in a name?​

The ruling against Wrigley concerns not the distribution of its brands but rather its attempt to register the name of one of its most popular chewing gums, Doublemint.

Earlier this year, an Advocate General of the European Court of Justice advised that Wrigley should not be allowed to register its Doublemint brand in the EU as the name was purely descriptive - under EU rules, descriptions cannot be trademarked.

Although the Advocate General's advice was not binding, the European Court of Justice has today followed it to the letter, effectively stopping Wrigley from registering the name in Europe.

The decision by the EU's highest court does not of course stop Wrigley from selling its gum in Europe, and the brand is registered quite legally as a trademark in most of the EU Member States. A pan-European ruling would simply have made the trademark process easier and cheaper for Wrigley.

"A sign may not be registered as a community trademark if one of its possible meanings can designate a characteristic of the goods concerned,"​ the court said in a statement.

Wrigley has been trying to register the name in the EU since 1996, when the EU's Office for Harmonisation in the Internal Market (OHIM) blocked the attempt on the grounds that the name was a description. Wrigley appealed against the decision in 1998, but a year later this attempt was also foiled when the Board of Appeal found that the term Doublemint was simply "descriptive of certain characteristics of the goods in question"​.

Undeterred, Wrigley took the case to the courts, arguing that the OHIM had been wrong when determining that the word Doublemint was only descriptive. It said that the word could also be interpreted as meaning 'containing twice as much mint' or 'made from two types of mint' - a claim which the lower Court of the First Instance backed, saying that the name Doublemint had an "ambiguous and suggestive meaning which is open to various interpretations"​ and that it could not be characterised as exclusively descriptive.

But the OHIM persisted in its attempt to block the name, leading to the cases finally being transferred to the ECJ and today's ruling.