Exclusivity deals go up in smoke
Central Cigarettes have been ordered to make space in their vending machines for cigarette brands other than their own after exclusivity agreements it struck with some vendors were deemed to breach competition rules. Photo: Darrin Zammit Lupi.
Central Cigarettes, which produce the popular Rothmans brands, will be forced to have competing cigarettes sold in their vending machines following a judgment by the Commission for Fair Trading.
The commission concluded that exclusivity agreements the company entered into with vendors in Paceville and St Julians were an obstacle to fair competition and constituted an abuse of a dominant market position on the part of Central Cigarettes.
On this basis, the company was ordered to reserve 15 per cent of the capacity of their vending machines for other cigarette brands other than theirs.
The case started in 1995 when Interbrands Ltd (formerly Austria Tabak (Malta) Ltd) filed a complaint with the Director of Fair Competition against Central Cigarettes.
Interbrands claimed Central Cigarettes was entering into exclusivity agreements with commercial outlets in the areas in question whereby cigarette vendors would bind themselves only to stock cigarettes manufactured by Central Cigarettes.
The director had found in favour of Interbrands and the case was then referred to the Commission for Fair Trading.
Magistrate Silvio Meli, presiding over the commission, pointed out that any agreement or practice intended to limit fair competition was null and void according to law.
Central Cigarettes had entered into agreements through which a commission would be paid to outlets on condition they would only stock the company's products.
They would receive other benefits, such as travel allowances and money for refurbishment works. As a result of such agreements, the outlets would only use vending machines belonging to Central Cigarettes and would only sell cigarettes produced by the same company.
Such agreements, the commission ruled, were objectively aimed at hindering fair competition in a way that made it practically impossible for competitors to penetrate the market in St Julians and Paceville.
Moreover, the commission noted that the Director for Fair Trading had concluded, after carrying out investigations, that Central Cigarettes held 96.4 per cent of the cigarette market when Malta was examined as a whole. With regard to the St Julians and Paceville areas, Central Cigarette enjoyed 82 per cent of the market in these products.
This meant that Central Cigarettes enjoyed a dominant position in the cigarette market and, therefore, a position of economic strength, which enabled it to hinder effective competition. It was empowered to behave in a manner that was independent of competitors and consumers, the commission ruled.
Such a dominant market position was detrimental to the consumer and to competitors who would not be able to penetrate the market.
The Commission confirmed the director's findings and declared that the agreements entered into by Central Cigarettes were null and void.
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Andre Pace
Oct 28th 2009, 17:03
It’s a pity that companies like Central Cigarettes do not get penalized for operating in such manner and keeping consumers without a choice. It also comes from retail outlets for agreeing to give exclusivity to these companies against commission and benefits and not considering that they are limiting the choice of there consumers.
The law should also monitor these outlets and make sure that they have different suppliers for similar items sold in there outlets, being soft drink, ice creams, cigarettes etc.....
Proset Magistrate Silvio Meli.
D Vella
Oct 28th 2009, 15:14
This news has just explained why often I cannot find my favourite band of cigarettes.I often wondered what the reason was/is..this being Malta nobody,bar or shopkeeper never ever volunteered a reason.As in all things on this Island,the law of 'omerta' is supreme.
Galea. L
Oct 28th 2009, 14:23
Joe Cordina
You are perfectly correct. How about making it a legal requirement for bars and clubs to have different drinks not only those with whom the barman or club have exclusive distribution agreements? Why should I ask for and orange and be given a lemon because of the barman/club agreement?
Tonio Azzopardi
That's another good point. Why should I have to be a private company subscriber when all important events should be broadcast by the national television station free to air?
Tonio Azzopardi
Oct 28th 2009, 12:36
What about television ? exclusive transmission rights ? where is competition?
R.Sciberras
Oct 28th 2009, 12:21
Fully agree with what was posted till now in this blog...I think that this judgement should set a good precedent for another good investigation in the way soft drinks are being sold. It really irritates me when you ask a restaurant for a Kinnie and they bring you Krest...they don't even have the decency to inform you that they do not stock the desired product
Dr Emmy Bezzina, B.A.,LL.D.
Oct 28th 2009, 11:38
A LANDMARK DECISION by Magistrate Dr Silvio MELI - WELL DONE. Magistrate MELI was correctly following the elimination of MONOPOLY and the FREE INTERNAL MARKET of the European Union`s FOUR FUNDAMENTAL PRINCIPLES which are being constantly flouted here in Malta where some entrepreneurs deem it fit that they are powerful enough to do what they like.Some outlets particularly Restaurants & Bars do not sell particular products because they are bound by a Contract not to do so in return for benefits,such as the purchasing of FREEZERS,SUN SHADES,Tables & Chairs with Advertising Logos,and this type of Abuse.This all violates EU LAW DIRECTIVES & REGULATIONS - so Magistrate Meli is 100% correct on this local Decision.
THOSE WHO FEEL THAT THEY CAN KEEP GETTING FATTER on the grounds of THEIR POWERFUL MANIPULATIVE HOLD in certain commercial quarters should reflect on this DECISION as it is now incumbent on Parliament to implement the related EU DIRECTIVES & REGULATIONS,otherwise the EU COMMISSION should be informed and INFRINGEMENT Proceedings taken against MALTA.MALTA should wake up to its EU Obligations once we boasted so much about becoming EU Members:ONCE IN,OUR OLD VICES must be cropped out and hence the significance of this Decision.
Joe Cordina
Oct 28th 2009, 10:57
The same goes for beverages. Many outlets offer only one particular brand of soft drinks and even beer. I think that this also should be investigated...
Ask for a Coke and you get a Pepsi, ask for a 7Up and you get a Sprite
R. Bartolo
Oct 28th 2009, 10:55
So if this is wrong,
why are so many restaurants/bars allowed to have a similar agreement on Coke/Pepsi?
R. Sciberras
Oct 28th 2009, 10:14
Isn' this the same scenario for soft drinks in certain restaurants or pubs/ band clubs?
michael fenech
Oct 28th 2009, 09:52
this goes as well for soft drinks companies....
they make it a point that shop owners stock only their products in ' spnsored ' freezers which seems unfair.....i was in a grocer one time were a soft drink company manager entered and noticed other items in the fridge and he went nuts !