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Nestlé facing ice cream lawsuit over ‘monopolistic’ US practices

By Mark Astley , 14-Feb-2013

Nestlé is facing court in the US over allegations it used “unfair” and “monopolistic” business practices to limit the availability of Clemmy’s ice cream in a number of major supermarkets.

Earlier this week, ice cream manufacturer Clemmy’s filed a civil anti-trust and unfair competition lawsuit against Nestlé and its ice cream subsidiary, Dreyer’s, at Los Angeles Superior Court.

The California-based company claims that Nestlé engaged in a campaign to limit the availability of its ice cream and bring a halt to its nationwide expansion plans.

Clemmy’s claims that in response to the popularity and success of its products, Nestlé undertook measures to prevent the nationwide expansion of Clemmy’s by sabotaging deals with US supermarket chains, Safeway and Kroger.

The company, which manufactures sugar-free, lactose-free, gluten-free ice cream, is seeking damages in excess of $10m for the alleged violations, costs, and an injunction barring any future anti-competitive practices by Nestlé.

DairyReporter.com contacted Nestlé regarding the allegations, but no response was forthcoming prior to publication.

Nestlé “coerced” retailers

The core allegations relate to a nationwide distribution deal secured by Clemmy’s with US retail giant Kroger in early 2012.

According to the claimant, just two days after the expansion was announced by Kroger, the retailer informed Clemmy’s that its “plans had changed” and Clemmy’s was no longer “going national.”

“Clemmy’s is informed and believes and thereon alleges that the only reason why Kroger chose to reverse course and cancel its plan to carry Clemmy’s in stores nationwide was because Nestlé expressly or implicitly coerced it to do so,” said the court document.

Clemmy’s added that “despite exponential growth” in the limited number of Safeway stores, the retailer reduced the number of Clemmy’s stock keeping units (SKUs) by more than half.

“Clemmy’s is informed and believes and thereon alleges that the only reason why Safeway chose to reduce the number of SKUs of Clemmy’s ice cream being carried in Safeway-operated stores is because Nestlé expressly or implicitly dictated that result to Safeway.”

Better for you ice cream market “predominance”

According to the filed lawsuit, Nestlé became aware of Clemmy’s in or around 2007 and “sensed a threat to its continued hegemony over the ‘better for you’ ice cream sections in supermarkets.”

Clemmy’s claims that Nestlé used its “predominance” over the ‘better for you’ ice cream market to put pressure on retailers to limit the presence of its products. Clemmy’s claims that its ice cream was placed in “the far corners of the freezer next to the awful tasting brand that no one is buying” as a result of this coercion.

It claims that were if not for Nestlé, Clemmy’s would be a “household name.”

"Clemmy’s should be a household name; and all consumers should have the option of selecting sugar-free ice cream at their local supermarket,” said the court-filed document. “There is one obstacle standing in the way: Nestlé.”

Commenting of the lawsuit, Clemmy’s owner Jon Gordon said: “Nestlé’s business practices harm not only Clemmy’s but also the ability of consumers to find truly sugar-free ice cream in their local markets. Nestlé should not be permitted to continue to mislead American in choosing what they eat.”

Law firm Browne George Ross, which is representing Clemmy's, added: "Through this lawsuit, Clemmy's will ensure the public is not misled as a result of Nestlé's anti-trust violations."