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'See you in court Nespresso!' Rival alleges ‘systematic’ smear campaign

By Ben Bouckley+

06-Dec-2012

The Ethical Coffee Company (ECC) has launched a law suit against Nestlé subsidiary Nespresso in Paris claiming its larger rival ran a ‘systematic smear and defamatory’ campaign to discredit ECC's coffee capsules.

Speaking yesterday, ECC chief executive and founder, Jean-Paul Gaillard (former MD of Nespresso until 2008) said: “ECC’s only choice is to take Nestle to court. It is regrettable. It would have been fairer and far better if Nespresso had tried to beat the competition in terms of quality and price.”

A Nespresso spokeswoman immediately hit back, telling BeverageDaily.com this morning: The allegations by ECC are without substance and we believe that the complaint has no merit. This is part of an ongoing pattern and is not the first time that this company has made similar claims.

“We are committed to free and fair competition and we conduct our business in line with all applicable laws and regulations. We will vigorously defend ourselves against these baseless claims and look forward to presenting our arguments in the appropriate forum."

Previous court skirmishes

Nestlé’s smaller Swiss rival won court battles earlier this year for the right to market its capsules (which are compatible with Nespresso machines) in Germany and Switzerland.

Launched in France in 2010 and nine other EU states in 2011, ECA says it produces the only closed capsule that really competes with Nespresso’s aluminum capsules, and claims its product is both biodegradable and less expensive.

Multinational Nestle subsequently launched lawsuits in several countries in a move to protect Nespresso capsule sales (totaling circa. $3.2bn in 2011), but in July, German and Swiss courts ruled against granting an injunction blocking the sale of ECCs capsules.

The market for such products is expected to exceed $8bn by 2014, ECC told newswire AFP, with France accounting for around 60% of ECC’s capsule sales.

‘Considerable compensation’ sought

Launched via the Commercial Court in Paris, the latest legal action from ECC alleges unfair, misleading commercial practice, and seeks “considerable compensation” from Nespresso for alleged damage suffered since it arrived on the compatible capsule market.

It claims Nespresso ran a “systematic and defamatory campaign against its competitor, both directly (via the Nespresso Club) and indirectly (on the internet and through certain machine distributors”.

Gaillard said: “In the end, it is unfortunately, the consumer who suffers most from not being able to decide which coffee capsules they want to use in their machine and being able to make a choice on the basis of product quality, price and accessibility’.

“Nespresso declared that ‘the consumer would decide’, but, where the consumer opted for our products, Nespresso clearly tries, even through unlawful means, to influence their decision.”