The Australasian Food Group (trading as Peters Ice Cream) (Peters Ice Cream) has been ordered to pay a $12 million penalty after engaging in exclusive dealing practices. The Federal Court has also ordered the ice cream giant to establish a compliance program for a period of three years and pay contribution to the ACCC's legal costs.

The ACCC commenced proceedings against Peters Ice Cream for engaging in anti-competitive conduct in relation to distribution of ice creams sold in petrol stations and convenience stores across Australia from November 2014 to December 2019. During this period, Peters Ice Cream engaged the distribution services of PFD Food Services on the condition that PFD Food Services would not sell or distribute competitors' single serve ice cream products without the prior written consent of Peters Ice Cream.

Peters Ice Cream is the owner of several iconic ice cream brands in Australia, including Connoisseur, Drumstick, Maxibon and Frosty Fruits. PFD Foods Services is also the largest distributor of single serve ice creams in Australia with the capacity to reach more than 90 per cent of Australian postcodes.

As a result of the exclusivity arrangement between Peters Ice Cream and PFD Food Services, PFD Food Services was unable to distribute competitor ice cream products in Australia.

Ultimately, the competition watchdog found (and Peters Ice Cream admitted) that:

• but for this exclusive dealing by Peters Ice Cream, one or more potential competitors could have entered or expanded the market for the supply of single serve ice cream and frozen confectionary products in Australia; and

• the exclusive dealing had the likely effect of substantially lessening competition in the market for the supply by manufacturers of single serve ice cream and frozen confectionary products in Australia.

Relevantly, the ACCC Chair noted that "We [ACCC] took this action because we were concerned that Peters Ice Cream's conduct could reduce competition in this market and impact on the choice of single serve ice creams available to consumers."

What is exclusive dealing? Is it illegal?

Section 47 of the Competition and Consumer Act 2010 (Cth) prohibits various forms of exclusive dealing. Generally, there are two types of exclusive dealing:

• conditional supply or acquisition of goods or services – conditions may relate to the ability to re-supply to, or acquire goods from, competitors; and

• third line forcing - refusing to supply goods or services to a purchaser (or give a particular price or discount) unless the purchaser buys goods or services from a particular third party.

The Peters Ice Cream case is a timely reminder that, as part of the ACCC's compliance and enforcement priorities for 2022/23, the ACCC is targeting exclusive arrangements by businesses with market power that impact competition.

For more information about the ACCC's compliance and enforcement priorities for 2022/23, read our recent article here.

How can we help?

It is imperative that exclusivity provisions in contracts or arrangements comply with Australian competition laws.

Failing to comply with Australian competition laws has serious consequences for businesses and directors, including: litigation, civil and criminal prosecution, penalties, class action, disciplinary action and damage to brand reputation.

If you require assistance or advice regarding compliance obligations or any communication received from a regulator or enforcement body, please do not hesitate to contact Suzanne Howari or Peter Wright.

The material in this article was correct at the time of publication and has been prepared for information purposes only. It should not be taken to be specific advice or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained in this article.

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