Competition: Commitments from Coca-Cola become legally binding
Commission decision in Case No. COMP/39.116/B-2 – Coca-Cola issued pursuant to Article 9(1) of the Council Regulation 1/2003 On 22 June 2005 the Commission 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 Bottling Company (hereinafter "Coca-Cola") on 19 October 2004. The undertaking is designed to end a five-year probation period imposed on Coca-Cola by the Commission in earlier proceedings regarding abuse a dominant position. Coca-Cola's objective in offering the commitments was to assure the Commission that it would observe effective competition on the carbonated soft drinks market. As a result of the Commission decision, Coca-Cola's commitments became legally binding and remain in force until 31 December 2010. Under the undertaking, Coca-Cola has an annual obligation to publish on its website, and that of the Commission, a list of countries where its position is strong enough for the undertaking to apply. If Coca-Cola commits a breach of its undertaking during the above period, the Commission can fine the company up to 10% of its aggregate world-wide turnover. The terms of the undertaking given by Coca-Cola to the Commission relate to both principal distribution channels – the take-home and on-premise channels – and the company has offered specific commitments in respect of each distribution channel, and a separate group of commitments common to both. Other commitments relate to sponsorship, public and private tenders and technical equipment placement. The most significant of the commitments involve a prohibition on use of exclusivity provisions to ensure that potential customers can at all times buy carbonated soft drinks from the suppliers of their choice. Furthermore, Coca-Cola is prohibited from offering any payments or other incentives conditioned on a customer's agreement to limit sales or refrain from selling of competing carbonated soft drinks or the customer's agreement to refrain from placing competing vending machines or fountain dispensers on any sales premises. Coca-Cola is prohibited from incorporating provisions on growth or target rebates, which are conditioned on a customer's achieving ever increasing purchase thresholds, in any future distribution agreements. Other commitments relate to a prohibition on use of best-selling brands to increase sales of other, less popular brands either directly under tie-in provisions or indirectly by offering various rebates. Another commitment applies to use of space in beverage coolers that Coca-Cola offers to its customers. Where Coca-Cola leases a beverage cooler or provides it free of charge and the retailer does not have capacity to install another beverage cooler on the premises, to which the consumer has a direct access, such retailer will be free to use at least 20% of the beverage cooler space for any products of his choice. Where a customer purchases a beverage cooler from Coca-Cola, the customer must remain free to use the entire cooler space for any products of his/her choosing. This Commission decision is only the second instance of a settlement between the Commission and a competitor whose competitive conduct has been held to be incompatible with the rules of competition. Although settlements of this kind have been available under Community competition legislation (Council Regulation no. 1/2003) since May 2004, this case is the first ever with Community wide application, since the afore-mentioned first settlement having been concerned with the joint purchase of broadcasting rights to German Bundesliga matches (COMP/C.2/37.214).