Coca-Cola Fined for Monopolistic Practices

April 8, 2005

THE discerning soda drinker scoffs atthose who claim there’s no differencebetween Coke and Pepsi, and the CostaRican government appears to agree.Last week, the Competition PromotionCommission (CPC), an entity of theMinistry of the Economy, announced itsruling on a complaint against Costa Rica’sCoca-Cola bottling company, filed byPepsi’s subsidiary.The commission ordered the companyCoca-Cola FEMSA, S.A., formerlyEmbotelladora Tica, the Costa Rican subsidiaryof the company that bottles andsells Coca-Cola throughout Latin America,to put a stop to what commission memberssay are monopolistic practices. FEMSAmust also pay a ¢68 million ($145,610)fine.“The company must stop requiringexclusive contracts with vendors,” commissiondirector Isaura Guillén told TheTico Times. She added the commission’sdecision is final, since FEMSA’s appealshave already been heard and rejected.THE case began in 2001, whenEmbotelladora La Mariposa, S.A., whichrepresents the Pepsi soda brand in CostaRica, and other small soft-drink bottlingcompanies denounced FEMSA before thecommission for trying to build a monopoly.Among the questioned practices wereexclusivity contracts that prohibited Coca-Cola vendors from selling Pepsi, andreleasing lists with suggested prices for itsproducts, according to Guillén.In addition, the firm did not allow vendorsto place other soft-drink brands inrefrigerators bearing the Coca-Cola logo.THE commission determined that allof these practices violate the Law for thePromotion of Competition and ConsumerDefense, passed in 1995, with one exception.The company is allowed to requirethat supermarkets, or other large vendors,display only Coca-Cola products in thebrand’s loaner refrigerators.Small businesses where the Coca-Colarefrigerator is the only one, however, suchas restaurants or pulperías, can store a varietyof products in the Coca-Cola fridges,Guillén said.Although other media have reported thevendors must pay for the Coca-Cola refrigerators,Guillén said this is not the case.THE commission ordered FEMSA tosuspend these practices and imposed thefine in June 2004, but the company presentedvarious appeals in August. Thecommission rejected those appeals Feb. 8this year, but did not notify the parties ofthe decision until March 30.Guillén said she has not received anyresponse from FEMSA, nor has the companypaid the fine at press time. She addedthat a similar complaint was filed againstFEMSA in Mexico, and others againstCoca-Cola’s bottling companies in Europe.Local boards ruled against Coca-Cola in allcases, she added.The Tico Times attempted to contactFEMSA for a response to the ruling, butreceived no response.According to the company’s Web site,FEMSAis the largest beverage company inMexico and Latin America.The company operates a strategic businessdivision that includes packing andlogistical services; Latin America’s largestchain of convenience stores (the OXXOCommercial Chain, which is also one ofthe largest chains in North America);FEMSA Cerveza, which owns six breweries,produces and distributes Tecate, DosEquis, Bohemia and other brands; andCoca-Cola FEMSA, which distributesproducts in Guatemala, Costa Rica,Nicaragua, Venezuela, Panama, Colombia,Brazil and Argentina.THE commission, under the aegis ofthe Minister of the Economy, is empoweredto make decisions regarding commercialcompetition independently. It was createdin 1995 by the same law that, accordingto the commission, FEMSA violated.It has two divisions, a technical boardand the regulatory commission, each with10 members. Its purpose is to hear complaintsabout any actions that “unnecessarilyobstruct the fluidity of the market,” andto control and investigate possible monopolies,according to the Ministry’s Web site,www.meic.go.cr.

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