The Federal Trade Commission today approved Coca Cola Co's $12.3 billion acquisition of its largest North American bottler, provided the company restricts access to confidential information about rival Dr Pepper Snapple Group Inc., whose products are also made at the facility.
The firewall arrangement is similar to the one the FTC crafted with PepsiCo after it bought its two largest bottlers and distributors in February.
Coca Cola reached an agreement to buy the bottler, Coca-Cola Enterprises Inc. of Atlanta, on Feb. 25. Coke already owned 34% of the plant, which will be re-named Coca-Cola Refreshments USA Inc. In 2009, the bottler’s sales of carbonated soft drinks totaled about $21 billion, according to the FTC.
In addition to Coke products, the bottler makes and distributes Dr Pepper and Canada Dry drinks. After Coke made a deal to buy the bottler, it paid Dr Pepper Snapple $715 million for a 20-year distribution license to continue the arrangement.
The FTC was concerned that the two companies are “direct competitors in the highly concentrated and difficult-to-enter markets for branded soft drink concentrate and branded carbonated soft drinks sold in stores.”
As part of the bottling arrangement, Dr Pepper provides commercially sensitive information to Coca Cola. According to the FTC, Coca-Cola’s access to this information could harm consumers by eliminating competition between Coca-Cola and Dr Pepper Snapple.
The solution: As a result of an administrative complaint filed and settled today, the FTC will require Coca-Cola to set up a “firewall” so the sensitive information cannot be accessed by anyone at Coca-Cola who may be in a position to use it against Dr Pepper Snapple. The order will expire in 20 years.
Coca Cola was represented by its general counsel, Geoffrey Kelly, and Mark Leddy of Cleary Gottlieb Steen & Hamilton and Jonathan Jacobson of Wilson Sonsini Goodrich & Rosati.
FTC lawyers who worked on the case include Jill Frumin, Michelle Fetterman, and Samuel Sheinberg.