The decision to refer the issue to the MMC was taken by the Office of Fair Trading which said the existing structure of the distribution system restricts competition between wholesalers and between ice cream manufacturers.
Birds Eye's delivers its wrapped ice-creams to shops by a network of 32 exclusive operators, known as concessionaires. They undertake not to distribute other makes of ice-cream. The OFT said rival wholesalers, if supplied, received ice cream on less favourable terms. It said the existing structure would restrict choice and possibly lead to consumers paying higher prices.
John Bridgeman, Director-general of fair trading, said: "At the end of the day, it is consumers who lose out if Wall's distribution policy restricts the choice of ice creams in a shop, or makes it difficult for manufacturers to enter or expand in the market."
The MMC said the practices under investigation would include:
- the refusal to supply wrapped ice-cream to wholesalers who are not dedicated distributors, unless it is on less favourable terms;
- the granting of discounts to retailers who buy Wall's ice-cream from dedicated distributors but not to those who buy it from other suppliers.
Mr Bridgeman said: "Wall's concessionaires have an excellent reputation with retailers. But there are other wholesalers who would like to provide just as good a service." He said the current system operated by Wall's encouraged retailers to buy ice-cream from the Wall's dedicated wholesalers even if it meant they could not get other brands of ice-cream
The OFT said it would have liked Wall's to have agreed to give equal terms to concessionaires and independent wholesalers for doing the same business. However, it said that though Wall's had been willing to make some concessions they did not meet all the OFT's concerns.
Birds Eye Wall's said it welcomed the MMC decision but did not agree with the OFT that its system restricts consumer choice. It said it has been in discussions with the OFT since February 1996 over various aspects of its distribution systems and planned to introduce changes in 1998.
Tony Pearce, the company's sales director said: "We look forward to the new enquiry and are confident that these new proposals, which amount to a restructuring of our terms and discounts will put beyond doubt the fairness of the system."
The latest move by the OFT follows an MMC inquiry into freezer exclusivity in the ice- cream trade in 1994. That investigation centred on the practice of Mars, Wall's and others of giving freezers to retailers as long as the shop only uses them for that manufacturer's products. The MMC found that the practice was not against the public interest.
Unilever shares melted slightly on the news, closing down 3.25p to 486.75p.