Competition: Commitments from Coca-Cola become legally binding

On 22 June 2005 theCommission adopted a decision under Article 9(1) of the Council Regulation no.1/2003 approving commitments offered by the Coca-Cola Company, Bottling Holding(Luxembourg), Coca-Cola Erfrischugsgetränke AG and Coca-Cola Hellenic BottlingCompany (hereinafter "Coca-Cola") on 19 October 2004. Theundertaking is designed to end a five-year probation period imposed onCoca-Cola by the Commission in earlier proceedings regarding abuse a dominantposition. Coca-Cola's objective in offering the commitments was to assure theCommission that it would observe effective competition on the carbonated softdrinks market. As a result of the Commission decision, Coca-Cola's commitmentsbecame legally binding and remain in force until 31 December 2010. Under theundertaking, Coca-Cola has an annual obligation to publish on its website, andthat of the Commission, a list of countries where its position is strong enoughfor the undertaking to apply. If Coca-Cola commits a breach of its undertakingduring the above period, the Commission can fine the company up to 10% of its aggregateworld-wide turnover.

The terms of theundertaking given by Coca-Cola to the Commission relate to both principaldistribution channels – the take-home and on-premise channels – and the companyhas offered specific commitments in respect of each distribution channel, and aseparate group of commitments common to both. Other commitments relate tosponsorship, public and private tenders and technical equipment placement.

The mostsignificant of the commitments involve a prohibition on use of exclusivityprovisions to ensure that potential customers can at all times buy carbonatedsoft drinks from the suppliers of their choice. Furthermore, Coca-Cola isprohibited from offering any payments or other incentives conditioned on acustomer's agreement to limit sales or refrain from selling of competingcarbonated soft drinks or the customer's agreement to refrain from placingcompeting vending machines or fountain dispensers on any sales premises.Coca-Cola is prohibited from incorporating provisions on growth or targetrebates, which are conditioned on a customer's achieving ever increasingpurchase thresholds, in any future distribution agreements. Other commitmentsrelate to a prohibition on use of best-selling brands to increase sales ofother, less popular brands either directly under tie-in provisions orindirectly by offering various rebates. Another commitment applies to use ofspace in beverage coolers that Coca-Cola offers to its customers. WhereCoca-Cola leases a beverage cooler or provides it free of charge and theretailer does not have capacity to install another beverage cooler on thepremises, to which the consumer has a direct access, such retailer will be freeto use at least 20% of the beverage cooler space for any products of hischoice. Where a customer purchases a beverage cooler from Coca-Cola, thecustomer must remain free to use the entire cooler space for any products ofhis/her choosing.

This Commissiondecision is only the second instance of a settlement between the Commission anda competitor whose competitive conduct has been held to be incompatible withthe rules of competition. Although settlements of this kind have been availableunder Community competition legislation (Council Regulation no. 1/2003) sinceMay 2004, this case is the first ever with Community wide application, sincethe afore-mentioned first settlement having been concerned with the jointpurchase of broadcasting rights to German Bundesliga matches (COMP/C.2/37.214).