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Nestlé offered stores financial incentives to stop carrying rival's products, claims lawsuit

Nestlé Waters North America engaged in ‘deceptive, fraudulent and predatory behavior’ says Nirvana Inc in unfair competition lawsuit

By Elaine Watson+

21-Aug-2014
Last updated on 21-Aug-2014 at 16:40 GMT2014-08-21T16:40:00Z

2011-12 takeover talks were a 'ruse to get access to Nirvana's confidential information' claims bottled water co.
2011-12 takeover talks were a 'ruse to get access to Nirvana's confidential information' claims bottled water co.

Nestlé Waters North America engaged in “deceptive, fraudulent and predatory behavior” in a bid to drive a small competitor out of business, alleges New York-based Nirvana Inc in a lawsuit accusing the world’s biggest bottled water company of illegal anti-competitive practices.

The lawsuit - which echoes a complaint filed against Nestlé by ice cream maker Clemmy’s (click HERE ) - alleges that Nestlé Waters NA offered retailers financial incentives to stop carrying Nirvana bottled water products and broke a non-disclosure agreement by sharing confidential information about the smaller firm with trading partners.

In a complaint* filed in New York on Wednesday (August 20), Nirvana Inc claims that relations with Nestlé soured in 2011 after it switched its strategy from primarily co-packing other firms’ bottled water brands and launched its own branded products, which started taking market share from Nestlé Waters' brands Poland Spring and Deer Park.

Takeover approach a ‘ruse to get access to Nirvana's confidential information’, alleges NY-based bottled water co

Shortly afterwards, alleges Nirvana Inc, Nestlé approached it about a takeover, and in February 2012, signed a Non-disclosure Agreement (NDA) as the talks involved the exchange of sensitive information including financial records and projections.

But this was merely a “ruse to get access to Nirvana's confidential information”, claims Nirvana, which alleges that Nestlé broke the NDA by telling wholesale purchasers that Nirvana was up for sale and in financial trouble.

Defendants acted with specific intent to exclude competition in the relevant market

Nestlé then brought several supermarkets a letter showing that Nirvana was approaching Nestlé about selling out, and offered firms including Stew Leonard's and A&P financial incentives to stop carrying Nirvana products, alleges the lawsuit.

Lawsuit: 'Defendant [Nestlé Waters North America] pursued its anti-competition goal of restraining trade, and putting Nirvana out of business, by means of unfair and improper tactics, in order to substantially lessen competition in the relevant market'

“When Nestlé learned that Nirvana was attempting to secure a new customer. Nestlé would offer that buyer a better price on its water in exchange for not carrying Nirvana. Defendant engaged in predatory and/or anti-competitive conduct.  

“Defendants acted with specific intent to exclude competition in the relevant market. Defendant pursued its anti-competition goal of restraining trade, and putting Nirvana out of business, by means of unfair and improper tactics, in order to substantially lessen competition in the relevant market.”

Remsen, NY-based attorney Richard Pertz , who is representing Nirvana, said Nirvana had suffered as a direct result of Nestlé's allegedly anti-competitive behavior.

He added: “Anti-competitive practices have real victims. When a big company strangles a small competitor, it doesn’t just hurt consumers, it costs people their jobs and sends shockwaves throughout a community.”

Asked by FoodNavigator-USA this morning about why Nirvana had decided to take action given the costs and challenges associated with legal action against a company the size of Nestlé, he added:"The risk in front of us is not as significant as the harm that has already been accrued and will continue to be accrued by Nirvana owing to Nestlé's actions."

While much of the evidence will be in the form of oral statements from buyers that were purchasing Nirvana products and subsequently changed their programs, there were also written statements showing that Nestlé "did show some materials that ought not to have been disclosed", he claimed.

Nestlé Waters North America: We plan to defend ourselves vigorously

Jane Lazgin, director of media and corporate communications at Nestlé Waters North America told FoodNavigator-USA: “We’ve not received a copy of the filing. We intend to review it closely, once it is received. We’ve seen the press release.  If the claims are what the press release states, there is no merit to the claims, and we plan to defend ourselves vigorously.

Founded in 1998 in Forestport, New York, Nirvana Inc bottles its water at source from an Ordovician aquifer in the foothills of the Adirondack Mountains. The company says it is capable of bottling 25 million cases per year and employs between 100-150 people.  

*The case is Nirvana Inc v Nestlé Waters North America Inc, filed in New York State Supreme Court (CA2014-001807). The causes of action cited in the complaint include unfair competition, breach of contract, and tortious interference with contractual relations and prospective business relations.