It seems that my recent post on “predatory technology / innovation” has touched a nerve. The theme has been taken up not only on the 21st Century Competition blog (to which I referred in my original post), but also by the blog of the Ayn Rand Institute, which has reacted to the idea with something approaching horror.
Whether or not the concept of predatory innovation is in fact a “legal godzilla”, as the ARI blog suggests, it is one which has in the last week been at least implicitly embraced by the French Competition Authority (FCA), which has accepted commitments (subject to market testing) from Nespresso in relation to alleged exclusionary practices concerning its coffee machines and capsules.
The competition concern relates to Nespresso conduct designed to ensure that customers purchase only Nespresso capsules, and not ‘generic’ competitor products. One limb of the conduct which concerned the authority – and the aspect which seems by far the most important, given that it would be the most effective in practice – was Nespresso’s practice of making regular technical changes to its machines. These changes (to quote the FCA press release) “have had the effect of rendering capsules produced by competing manufacturers incompatible with the new models (repositioning of a seal, the addition of ribbing, hooks and grooves in the extractor cage, modification of flow meter settings, changes to the capsule perforation system)”. While the explicit competition concern is the bundling of the product with consumables, the fact that this is achieved primarily by technical means brings product redesigns, which could be described as ‘predatory’, directly into the abuse of dominance firing line.
Nespresso has chosen the increasingly well-trodden path of commitments which avoids an actual adverse legal finding. The FCA appears pleased to announce that it is the first antitrust authority to investigate such a practice, yet of course competition law cases relating to the bundling of products and consumables are well-known in the EU, from Hilti through to Microsoft. The coffee market has perhaps been under-represented to date, but issues have been aired in private litigation in the UK, including where Dualit pleaded a defence to patent litigation brought by Nestlé / Nespresso, raising similar issues*.
One first – to my knowledge – which this case does involve, is a reference to the commercial relevance of Mothers’ Day. The FCA is concerned that the exclusionary effects of Nespresso’s conduct should not be perpetuated around this period of peak sales. I conclude, based on my own experience, that French mothers must receive more generous gifts than English ones!