Newspaper article International New York Times

Nestle Loses a Round in Clash over Coffee Pods ; French Regulator Compels Nespresso to Work with Capsule-Producing Rivals

Newspaper article International New York Times

Nestle Loses a Round in Clash over Coffee Pods ; French Regulator Compels Nespresso to Work with Capsule-Producing Rivals

Article excerpt

A French regulator has compelled Nespresso make it easier for rivals who produce single-serving capsules for the popular espresso machines.

Nestle, the world's largest food company, was handed a defeat Thursday in its fight to maintain the global lead in the sale of single-dose coffee capsules.

A competition regulator in France agreed that the Swiss giant might have abused its market dominance in siding with two competitors that had accused its Nespresso unit of undermining their sales, the latest twist in an ongoing clash.

In response, Nestle agreed to "lift the barriers to entry and development" facing other companies that want to sell capsules for its machines, the French Competition Authority said in a statement.

The Swiss company pioneered the multibillion-dollar single- serving coffee market, and it accounted for the vast majority of espresso makers sold in France and the Nespresso-compatible capsules used in them.

The case was filed with the competition watchdog three years ago by D.E. Master Blenders and Ethical Coffee Company, which accused Nestle of using a variety of measures to keep competitors' capsules out of its machines.

The competition authority found that Nestle had repeatedly modified its machines so that other makers' capsules fit badly or worked poorly and that it warned consumers in the media and on its machines about using capsules other than those made by Nespresso.

The agreement with the regulator applies only in France. But Diane Duperret, a spokeswoman for Nespresso in Lausanne, said in an email that it would have some "impact outside France." The company agreed to "provide advance information on any modifications or changes to the capsule interface component of our machines," allowing competitors to rejigger their capsules in a timely fashion if necessary.

Beyond France, she said, Nespresso continues to battle in the courts, taking "legal action against a limited number of competitors that it believes have infringed its intellectual property," which includes hundreds of patents related to the Nespresso system.

The French ruling will make it harder for antitrust enforcers in other countries to ignore the dispute. Competition regulators at the European Commission could also get involved. The commission did not respond to requests for comment.

The announcement Thursday comes on the heels of recent defeats for the Swiss company, including in Britain and Germany, where Nestle had tried to stop competitors by claiming patent infringement. "We're back to normal," Jean-Paul Gaillard, chairman and chief executive of Ethical Coffee, said. "Nestle has been told 'You have to behave.' We're again on a level playing field."

Mr. Gaillard, who helped to create the single-dose coffee market as chief executive of Nespresso, said Nestle "got afraid and started to cheat. …

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