How Mars transformed the ice cream market
A Masterfoods case study

Page 5: Frustrating times

Mars was understandably frustrated about the restraints on free competition resulting from freezer exclusivity in the impulse ice cream market. Since the launch of Mars ice creams in 1988, Unilever (which owns Wall's) has sought to prevent retailers from stocking competing companies products in their exclusive freezers. A brief summary of the legal dispute between Unilever and Mars is set out below:

  • May 1989 - Launch of Mars ice cream.
  • January 1990 - Unilever in Ireland starts legal proceedings against Mars alleging it is giving inducements to retailers to break their exclusive arrangements with Unilever.
  • April 1990 - Unilever obtains injunction preventing Mars from selling ice creams from Unilever freezers in Ireland.
  • Sept 1991 - After failure to reach agreement with Unilever, Mars files two complaints with the European Commission and complained not just about freezer exclusivity but also about shop or outlet exclusivity in the German market which was later prohibited.
  • March 1992 - European Commission stops main German manufacturers of ice cream from imposing exclusive supply arrangements for retail outlets in Germany. The Commission argues that exclusivity practices substantially restrict access to the market.
  • May 1992 - Irish High Court upholds its exclusivity decision.
  • June 1992 - The European Court of Justice confirms interim measures for the petrol sector - opening 18,000 outlets to Mars - but suspends measures for other sectors. This decision gives Mars access to 40of impulse sales.
  • October 1992 - Office of Fair Trading in the UK announces investigation into freezer exclusivity in the UK.
  • May 1993 - The UK's Director of Fair Trading, asks the Monopolies and Mergers Commission to investigate the supply of 'impulse' ice cream.
  • June 1993 - European Commission issues statement of objections against freezer exclusivity in Ireland and states intention of fining Unilever.
  • December 1993 - Mars proposes a compromise that 50of the freezer could remain 'exclusive' and that manufacturers should not be allowed to force retailers to buy from a specific source.
  • March 1994 - The Monopolies and Mergers Commission reports and states that the market has become more competitive and that therefore exclusivity does not present any public interest issue.
  • March 1995 - European Commission condemns freezer exclusivity but in Ireland accepts changes which have been made by Unilever. * the introduction of a hire purchase arrangement whereby initially the freezer would be exclusive, but once purchased would be open to all manufacturers. * a scheme whereby retailers who provide their own refrigeration would be given a one off rebate on Walls products providing minimum purchase levels are achieved. Unilever forced to sell a large number of its freezers (>20of the market) to retailers in order to reduce its strangle hold on the market!
  • April 1995 - Enquiries were made by the OFT following allegations that the MMC had received misleading evidence from Unilever on the question of exclusive distribution arrangements (March 1994 supra qv). As a result the OFT informs Unilever it is considering criminal prosecution for providing misleading information under section 93B of the Fair Trading Act 1973. The penalties are a fine, a maximum of two years imprisonment, or both.
  • June 8th 1995 - The Court of First Instance issues its judgement on the Unilever/Scholler appeal against the EC's decision on outlet exclusivity. The Court rejects the appeals on all main counts and finds for the EC. The CFI also comments adversely on exclusive distribution systems, whether they are operated directly by a manufacturer or controlled by a manufacturer through exclusive contracts: "It is also apparent from the documents before the Court that, in the traditional trade, there are numerous individual retailers whose average turnover is rather low. The establishment of a profitable distribution system therefore presupposes that a new competitor must have a large number of retailers concentrated within a specified geographical area which can be supplied through regional or central warehouses. The fact that there are no independent intermediaries means this fragmentation of demand constitutes an additional barrier to access to the market."

Masterfoods | How Mars transformed the ice cream market

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