PepsiCo. Inc. won approval from the Federal Trade Commission today to buy its two largest independent bottlers and distributors for $7.8 billion.
But the FTC attached minor conditions to the deal. Because the facilities make and distribute soft drinks for Dr. Pepper Snapple Group, Inc. in addition to Pepsi products, the FTC will require Pepsi to put a "firewall" in place to limit access to confidential information about the rival brands.
“Without adequate safeguards, PepsiCo could misuse that information,” the FTC stated in its analysis of the consent order agreement. The FTC was concerned such conduct could eliminate competition between the two companies and “increase the likelihood that PepsiCo may unilaterally exercise market power, and facilitate coordinated interaction in the industry. In turn, that conduct could lead to higher prices for consumers.”
The firewall allows only employees who “perform ‘traditional bottler functions’” access to Dr. Pepper Snapple information. The consent agreement also calls for the appointment of a monitor to assure Pepsi’s compliance.
The deal for Pepsi to buy Pepsi Bottling Group, Inc. in Somers, NY and PepsiAmericas, Inc. in Minneapolis was announced in August. Together, the two facilities account for about 75% of all United States bottler-distributed sales of Pepsi’s carbonated drinks.
After the deal was announced, Pepsi sought a license from Dr. Pepper Snapple Group to continue to bottle and distribute the Dr. Pepper, Crush and Schwepps brands. In December, the two companies struck a deal that calls for Pepsi to pay $900 million for a 20-year license to distribute and sell those brands.
“We’re pleased that the FTC has cleared this merger so PepsiCo can begin to implement consolidation benefits that will flow to consumers from these transactions,” said Arnold & Porter partner Michael Sohn, who represented Pepsi along with partner Deborah Feinstein.
The pair previously represented Pepsi when FTC staff recommended challenging the company’s $14 billion purchase of The Quaker Oats Co. in 2001. The merger was ultimately approved by the commission.
Pepsi Bottling Group was represented by Mayer Brown partner Richard Steuer and counsel Jay Brown.
PepsiAmericas retained Michael Knight of Jones Day in Washington and James Long of Briggs and Morgan in Minneapolis.
Dr. Pepper Snapple turned to Jonathan Rich, a partner at Morgan Lewis & Bockius in Washington.
FTC lawyers who worked on the case include Joseph Brownman, Warren Stephen Sockwell, Jr., Joan Heim, Matthew Reilly, Norman Armstrong and Richard Feinstein.