Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Nestle charged with anticompetitive conduct intended to drive Nirvana from bottled water market, (Aug 21, 2014)

By Linda O’Brien, J.D., LL.M.

Nestle Waters North America, Inc., a major distributor of bottled water, engaged in deceptive and anticompetitive practices in an attempt to drive Nirvana, Inc., a small competitor, out of business, according to a complaint filed in the New York Supreme Court, County of Oneida (Nirvana, Inc. v. Nestle Waters North America, Inc., August 20, 2014).

Nirvana, Inc. is a family-owned company that bottles and distributes natural spring water. Nestle Waters North America is the largest distributor of bottled water in the United States, handling the brands Poland Spring, Deer Park, and Nestle Pure Life.

The complaint alleges that, in 2005, Nestle began discussions with Nirvana regarding the co-packing of Nestle’s Pure Life brand, which Nirvana agreed to do. Nestle also made an oral offer to buy the company, which Nirvana declined. In 2011, Nirvana transitioned from a co-packing business model to a self-branded company and began to take market share directly from Nestle’s Poland Spring and Deer Park brands.

In 2011, Nestle made another inquiry about the possibility of purchasing Nirvana, requesting internal proprietary information in anticipation of the possible acquisition. In 2012, the companies signed a non-disclosure agreement (NDA) in light of the sensitive information that Nestle requested from Nirvana. Subsequently, Nestle engaged in substantial research into Nirvana’s operations, including requesting information about the capacity of Nirvana’s springs, the status of required permits, local regulations that limited water usage or truck access, complete financial information for the company for the years 2011-2013, and projections for 2014 and 2015, the complaint states.

Although Nestle never made any formal written offer to purchase Nirvana, it falsely told retailers that purchased from both companies that it planned to buy Nirvana in an effort to convince the retailers to discontinue carrying Nirvana’s products, according to the complaint. Nestle allegedly paid two supermarket companies to discontinue carrying Nirvana’s water. Nestle also engaged in a pervasive practice of charging higher prices to commercial buyers who also buy from Nirvana, while giving incentives to commercial buyers who do not buy from Nirvana. Nestle was charged with approaching prospective Nirvana customers and offering incentives for not carrying Nirvana products.

During the past two years, Nirvana’s sales have fallen dramatically, in part because of Nestle’s predatory and discriminatory pricing, insistence on exclusivity, and other anticompetitive practices, the lawsuit claimed. Through its practices and possession of confidential information obtained from Nirvana, Nestle allegedly conspired to prevent and substantially lessen competition.

Nirvana asserts claims for trade disparagement, unfair competition, tortious interference with contractual relations, tortious interference with prospective business relations, breach of contract, and violations of the Clayton Act and state antitrust laws. The action seeks declaratory and injunctive relief, compensatory, punitive, and treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. CA2014-001807.

Attorneys: Richard Pertz for Nirvana, Inc.

Companies: Nirvana, Inc.; Nestle Waters North America Inc.

News: Antitrust NewYorkNews