|That's The Way Coke Bottlers Like It, Ah-Ha|
|Subject||Sources of Monopoly, Equilibrium, and Price Discrimination|
|Key Words||Antitrust, Distributor, Reseller, Prices, Sales, Exclusive Franchises, Competition, Retailers, Bulk-buying|
Coca-Cola Enterprises Inc. is Coca-Cola's largest bottler. It is facing a federal antitrust lawsuit filed by a Maryland beverage distributor and reseller which asserts that it is being hurt by the bottler's pricing and sales practices.
Bottlers of Coke and other soft drinks have exclusive franchises protected under the Soft Drink Interbrand Competition Act of 1980. As a result, beverage resellers, such as vending machine companies, must buy from the regional bottler. Indeed, if a bottler knowingly sells soft drinks to a customer who then resells it outside the region, the bottler has to pay a transshipping fine levied by the soft drink manufacturer. Thus bottlers are able to control prices and charge different prices to different types of customers such as discount stores and restaurants.
In addition, bottlers themselves have entered the vending business and can thwart the competition by increasing the price of soft drinks sold to other vending companies and discouraging retailers from selling large quantities of soft drinks to resellers.
Soft drink industry sources discount the complaint. They say that Coke's control over prices is constrained by competition with Pepsi, and that bottlers charge large discount chains less due to bulk-buying.
(Updated March 1, 1999)
|Source||Nikhil Deogun, "Antitrust Suit Focuses on Complaints About Bottlers' Pricing, Sales Practices", The Wall Street Journal, January 20, 1999.|
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