Hagens Berman has assumed responsibility for a large antitrust case against Nespresso, a leading single-serve espresso and coffee maker, for its anticompetitive efforts to exclude environmentally friendly, biodegradable coffee capsules from the market.
In May 2010, our client Ethical Coffee Company (“ECC”) sought to introduce an environmentally sound and more economical coffee capsule to be used in Nespresso’s widely used coffee makers. It manufactured a single-use coffee capsule that did not contain harmful aluminum found in Nespresso’s capsules.
Nespresso knew that ECC posed a formidable challenge to its business model, which relied on captive consumers buying coffee capsules only from Nespresso. With a captive market, Nespresso could continue to charge consumers an inflated price, and continue to use the aluminum capsules that harm the environment.
The environmental impact of using these non-biodegradable capsules is significant. Nespresso has claimed that it has sold 27 billion capsules worldwide as of 2012, but now (likely because of the brewing controversy) refuses to disclose its capsule sales. It also refuses to disclose how many of its capsules are being recycled. These capsules, which contain plastic and aluminum, take 150 to 500 years to break down in a landfill.
To exclude ECC’s capsules from the market and maintain a monopoly in sales of Nespresso-compatible capsules, Nespresso developed and added to its machines a harpoon-like mechanism that snagged ECC’s environmentally friendly capsules, causing them to get stuck in the machine. Nespresso later changed the blades of its machine to make it even more difficult to use ECC’s capsules – all in an effort to corner the market and prevent customers from having a greener, more economical option. Indeed, the Competition Bureau of France, after hearing similar complaints about Nespresso’s conduct, concluded that between 2007 and 2013 Nespresso modified its coffee machines four times, and that these modifications made it more difficult to use ECC’s capsules or more difficult to extract high-quality coffee. The French Competition Bureau concluded that Nespresso had engaged in an “abuse” of Nespresso’s market dominance.
The U.S. Court has already ruled that these claims can proceed to discovery. Hagens Berman anticipates damages associated with Nespresso’s actions to be in the hundreds of millions of dollars.
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