Coca-Cola proposes change of its conduct

Going Soft on Soft Drinks: The Croatian Competition Agency considering Coca-Cola’s commitments

In February 2019, the Croatian Competition Agency (the “Agency”) launched an official investigation against Coca-Cola HBC Hrvatska d.o.o. (“Coca-Cola”), in order to establish whether the company concluded prohibited restrictive agreements and/or abused its market dominance.

After reviewing the local market for distribution of non-alcoholic beverages in the Croatian HORECA channel, the Agency came across a business cooperation agreement where Coca-Cola obliged the customer to exclusively purchase all his requirements including fruit juices, ice teas, energy drinks and mineral waters exclusively from Coca-Cola’s range of products, simultaneously obliging him to offer the entire product portfolio of Coca-Cola, but also all of Coca-Cola’s new products in the soft drinks category. Apart from this, the Agency determined that some of Coca-Cola’s business cooperation agreements obliged the customers to keep only Coca-Cola’s products in their stock. Bearing in mind the likeliness of Coca-Cola’s dominant position in production and sale of non-alcoholic soft drinks in Croatia, the Agency believed to have sufficient evidence to initiate an official investigation.

Within six months after the launch of the investigation, Coca-Cola proposed to undertake certain measures in order to mitigate the negative impact of its conduct. These included the following changes to its business cooperation agreements:

  • concluding separate agreements for sale of dominant and non-dominant products;
  • formulation of exclusive sale provisions so that the customer may choose between (i) exclusively having Coca-Cola’s products in its offer, thereby excluding similar products of other manufacturers or (ii) having Coca-Cola’s products available in its offer, in which case there is no restriction in relation to products of other manufacturers;
  • maximum term of agreements with exclusive purchase clauses for five years;
  • separate calculation of market investments per each product category; and
  • deletion of the provision in new business cooperation agreements, whereby such agreements are also applicable to new products.

Apart from the mentioned amendments to the agreements, Coca-Cola proposed to implement a special competition law compliance program, as well as a special training programme for its employees. Coca-Cola undertook to implement the respective programmes within four months upon receiving the Agency’s greenlight.

The Agency seems to believe that Coca-Cola’s proposal is proportionate to the possible negative effects of the behaviour in question on the relevant market. Consequently, on 29 October 2019, it has published a notification stating that it intends to accept Coca-Cola’s proposal, and also requested all interested parties to deliver any objections and thoughts until 18 November 2019. Third party feedback may well prove to be a decisive factor in how the proceedings ultimately play out.

 

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.