Peters Ice Cream hit with $12m penalty after admitting anti-competitive conduct

The Federal Court of Australia has fined Peters Ice Cream $12 million for anti-competitive behaviour in proceedings brought by the Australian Competition and Consumer Commission (ACCC) relating to the distribution of ice creams sold in petrol stations and convenience stores.

Australasian Food Group (AFG), trading as Peters Ice Cream, admitted that it acquired exclusive distribution rights from November 2014 to December 2019 from PFD Food Services to supply single-wrapped ice creams to petrol and convenience retailers.

The ice-cream giant, whose brands include Connoisseur, Drumstick, Maxibon and Frosty Fruits, secured an exclusive agreement which included a condition that PFD would not sell or distribute competitors’ single-serve ice cream products without its prior written consent.

The agreement covered most of Australia, including Western Australia, Tasmania, South Australia (inclusive of Adelaide from August 2015), ACT, PFD’s Darwin distribution zone, and regional areas in New South Wales, Victoria and Queensland.

Peters Ice Cream admitted the agreement with PDF meant it had engaged in exclusive dealing conduct that had the likely effect of substantially lessening competition in the market for the supply by manufacturers of single-serve ice cream and frozen confectionery products.

“This is an important competition law case involving products enjoyed by many Australians,” ACCC chair Gina Cass-Gottlieb said.

“We 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.

“Peters Ice Cream admitted that if PFD had not been restricted from distributing other manufacturers’ ice cream products, it was likely that one or more potential competitors would have entered or expanded in this market.”

Reaching more than 90 per cent of Australian postcodes, PFD is Australia’s largest distributor of single-serve ice creams. During the period, PFD advised other single-serve ice cream manufacturers that it could not distribute its products due to its exclusivity arrangement with Peters Ice Cream.

Potential competitors of Peters Ice Cream, founded in Australia in 1907 and now a subsidiary of British global ice cream manufacturer Froneri, included Bulla, Gelativo and Pure Pops.

“This case is a reminder to all businesses of the serious and costly consequences of engaging in anti-competitive conduct,” Cass-Gottlieb said.

“The ACCC is targeting exclusive arrangements by firms with market power that impact competition as one of our compliance and enforcement priorities for 2022/23.”

As part of the penalty, Peters Ice Cream was ordered to establish a compliance program for three years and contribute to the ACCC’s legal costs.

Exclusive dealing occurs when one person trading with another imposes restrictions on the other’s freedom to choose with whom, in what, or where they deal. Exclusive dealing will only breach the Competition and Consumer Act when it has the purpose, effect or likely effect of substantially lessening competition.

Following the announcement, AFG released a statement confirming it was pleased to resolve the matter; however, the proceedings no longer relate to AFG’s current business operations, product offering or customer service.

“While the distribution agreement with PFD did not have the purpose or actual effect of constraining competition, we accept that a likely effect of the distribution agreement was a substantial lessening of competition,” a spokesperson for AFG commented after the proceedings.