Coca-Cola Moves to Protect Ability To Get Exclusive Mexican Contracts

Dow Jones Newswires 19dec00

MEXICO CITY -- Coca-Cola Co's Mexican unit has asked for an injunction protecting its exclusivity contracts at major sporting and entertainment events, spokesman Rodrigo Calderon said Monday.

Mexico's Federal Competition Commission, or CFC, is currently investigating Coke's sales and marketing practices among small retailers, or "mom and pop" stores, after PepsiCo Inc. and two Mexican beverage companies charged Coke with monopolistic practices in the crucial market sector.

When it received notification of the CFC's probe in November, Coke was ordered not to renew or make any new exclusivity contracts, according to Mr. Calderon.

Coke is now trying to halt that order.

"The official notification of the investigation was accompanied by a preventive measure, which is separate, and that's the one we have sought an injunction against," said Mr. Calderon.

Mr. Calderon said the injunction aims to protect so-called image contracts, which are exclusivity contracts with sales rights such as the ones Coke has at Mexico City's Azteca Stadium and at major concerts.

"The preventive measure is general enough so that the image contracts could be included," he said.

The other 91 independent bottling and distributing companies within the Coke system in Mexico also have joined Coke in filing injunctions but each must decide how to respond to the CFC's investigation independently.

Mr. Calderon said Coca-Cola de Mexico has already presented arguments defending its commercial practices to the CFC.

He also harshly criticized the investigation, which includes roughly half of Coke's 900,000 points-of-sale in Mexico, calling the charges of monopolistic practices "totally unsubstantiated."

Mr. Calderon acknowledged that Coke offers "incentives" to small retailers such as volume discounts, store decoration, and basic accounting and marketing training, but that these didn't squeeze competitors out of the market.

"None of the incentives are conditioned to the exclusive sale of our product, it's just better marketing," he said.