Coca-Cola Company

For Release

The Coca-Cola Company has agreed not to acquire any rights to the Dr Pepper brand in the United States without first obtaining Federal Trade Commission antitrust clearance. Coca- Cola also will notify the FTC before acquiring any entity that has annual branded carbonated soft-drink sales over 10 million 192-ounce case equivalents. These provisions, which would be in effect for 10-years, are designed to permit the FTC to review certain soft-drink acquisitions that might substantially reduce competition and raise consumer prices, and are part of a proposed settlement of nine-year-old litigation between the FTC and Coca- Cola.

The settlement involves modifying the prior-approval and prior-notification provisions contained in an order issued by the Commission last June, and which Coca-Cola appealed to the U.S. Court of Appeals for the D.C. Circuit. Both Coca-Cola and the FTC will ask the D.C. Circuit to dismiss the appeal and send the case back to the Commission to allow the agreed upon changes to be made.

Coca-Cola is based in Atlanta, Georgia.

The modified order stems from charges filed by the FTC in federal district court in Washington, D.C. in 1986, alleging that Coca-Cola's planned acquisition of one of its largest competi- tors, the Dr Pepper Company, would violate the antitrust laws. The order would ensure that the FTC has the opportunity to review and, if necessary, to seek a court order to block potentially problematic acquisitions by Coca-Cola. Specifically, it would require Coca-Cola, for 10 years, to obtain Commission approval before acquiring:

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Coca-Cola--05/18/95)

  • any rights to the Dr Pepper or diet Dr Pepper brand in the United States or any brand, name or trademark associated with producing, marketing, selling or distributing these brands in the United States; or
  • any interest in any entity that holds, owns or otherwise controls the Dr Pepper or diet Dr Pepper brand, name or trademark in the United States.

In addition, the modified order would require Coca-Cola, for 10 years, to give the FTC advance written notice before acquiring certain large branded carbonated soft-drink manufacturers. The floor for this provision would be acquisitions by Coca-Cola of companies with sales exceeding 10 million, 192-ounce case equivalents in each of the three years preceding the transaction. Under the Hart-Scott-Rodino Act (HSR Act), Coca-Cola is required to notify the FTC and the Department of Justice before acquiring more than $15 million in assets or voting securities from an entity worth more than $10 million. Thus, the ceiling for the modified order's prior-notification requirement would also meet HSR Act filing thresholds.

As was the case with the June 1994 order, the modified order would not affect acquisitions of bottlers by Coca-Cola. Finally, the order would include various reporting provisions designed to assist the FTC in monitoring Coca-Cola's compliance

The modified order will end the litigation that began in 1986 when the federal district court, at the FTC's request, issued a preliminary injunction to prohibit Coca-Cola from acquiring Dr Pepper pending an administrative hearing. Coca-Cola later abandoned the transaction, but refused to agree that it would not attempt the same or a similar transaction in the future. On grounds that future Coca-Cola acquisitions of branded concentrate firms could raise competitive concerns given the conditions in the soft-drink market, the Commission issued a complaint charging that Coca Cola's agreement to acquire Dr Pepper violated the antitrust laws and sought an order requiring prior-approval for certain transactions. Although Administrative Law Judge Lewis F. Parker upheld the FTC charges, he refused to enter a prior-approval order. Both complaint counsel and Coca- Cola appealed his decision to the full Commission, which again upheld the charges in a June 1994 decision. The Commission order accompanying that decision required Coca-Cola, for 10 years, to obtain Commission approval before acquiring:

  • any interest in an entity that manufactures or sells branded concentrate or syrup, or that licenses the brand, name or trademark for a branded concentrate or syrup, in the United States; or
  • any brand, name or trademark associated with the production, sale or distribution of branded concentrate, branded syrup or branded carbonated soft drinks in the United States.

Coca-Cola appealed the Commission decision and order to the D.C. Circuit on Aug. 26, 1994. Under the settlement, Coca-Cola and the FTC will ask the D.C. Circuit to dismiss Coca-Cola's petition for review and to remand the case back to the FTC so that the FTC can modify the June 1994 order.

The Commission vote to accept the proposed settlement for filing in court was 3-0, with Commissioners Mary L. Azcuenaga and Roscoe B. Starek, III recused.

NOTE: This agreement is for settlement purposes only and does not constitute an admission by The Coca-Cola Company that it violated the law. When the Commission issues the modified order, it will carry the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000.

Copies of proposed settlement agreement and other documents associated with this case are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

 

(FTC Docket No. 9207)

(Nos. 94-1595, 94-1596, 95-1086, 95-1087 (D.C. Cir.))

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