Beverage Management v. Coca-Cola Bottling Corp.

• Decision Date: 29 August 1986
• Docket Number: No. C-1-84-1300.,C-1-84-1300.
• Citation: 653 F. Supp. 1144
• Parties: BEVERAGE MANAGEMENT, INC., Plaintiff, v. COCA-COLA BOTTLING CORP., Defendant.
• Court: U.S. District Court — Southern District of Ohio

653 F. Supp. 1144

BEVERAGE MANAGEMENT, INC., Plaintiff, v. COCA-COLA BOTTLING CORP., Defendant.

No. C-1-84-1300.

United States District Court, S.D. Ohio, W.D.

August 29, 1986.

Michael K. Yarbrough, Columbus, Ohio, for plaintiff.

Glenn V. Whitaker, Cincinnati, Ohio, Thomas M. Green, Dayton, Ohio, for defendant.

OPINION; PRELIMINARY FINDINGS OF FACT AND CONCLUSIONS OF LAW SET FORTH; PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION OVERRULED (DOC. # 2); PROCEDURES REQUESTED OF PLAINTIFF'S COUNSEL

RICE, District Judge.

After hearing the evidence presented by the parties, the Court advised the parties orally of its decision that Plaintiff had failed to establish its entitlement to a preliminary injunction. The Court now sets forth its written opinion, together with preliminary findings of fact and conclusions of law.

I. FINDINGS OF FACT

1. Plaintiff Beverage Management, Inc. ("BMI") filed a Complaint on August 31, 1984, against Defendant Coca-Cola Bottling Corporation ("Coca-Cola") seeking injunctive and declaratory relief and damages for alleged violations of Sections 1 and 2 of The Sherman Act, 15 U.S.C. §§ 1 and 2; Section 2(a), 2(d) and 2(e) of Robinson-Patman Act, 15 U.S.C. §§ 13(a), 13(d) and 13(e); and Ohio Revised Code § 1331.01 et. seq. On the same date, Plaintiff filed a Motion for Preliminary Injunction against Defendant Coca-Cola seeking an order enjoining Coca-Cola from offering and from continuing with any agreement which is conditioned upon the unreasonable exclusion of Plaintiff or any other national soft drink manufacturer from advertising in chain supermarkets. (Doc. # 2). Plaintiff also sought to enjoin Defendant from offering or continuing with any discriminatory promotional allowance or price discrimination.

2. Plaintiff BMI is an Ohio corporation engaged in the bottling and distribution of a variety of soft drinks — primarily 7-Up — in a multi-state area including Ohio. BMI has divisions located in Greater Cincinnati and in Dayton, among other cities in Ohio, Michigan and Pennsylvania. Defendant Coca-Cola is a Delaware corporation with its principal place of business in Cincinnati, Ohio. Coca-Cola is engaged in the bottling and distribution of Coca-Cola brand and related soft drinks in and around the Cincinnati, Dayton, Northern Kentucky and Southwestern Ohio areas.

3. The specific agreement which Plaintiff seeks to enjoin is entitled "Cooperative Merchandising Agreement" ("CMA") and was signed by Coca-Cola and The Kroger Company ("Kroger"), through its merchandising manager for the Cincinnati-based Kroger marketing district, a district which encompasses Northern Kentucky, parts of Western Indiana, Dayton and Cincinnati. The term of this CMA is for the period January 2, 1984 through December 30, 1984. It was signed by representatives of Coca-Cola and Kroger on December 13, 1983.

4. Pursuant to the CMA offered to Kroger by Coca-Cola, Kroger may earn advertising allowances on a sliding scale ranging from $.08 to $.15 per case. These allowances are offered to Kroger in return for feature advertising in the various advertising media utilized by Kroger. The maximum allowance of $.15 per case is offered to Kroger in return for 27 ads featuring Coca-Cola brand products during the calendar year 1984. In order to qualify for the allowances, Kroger ads featuring Coca-Cola products in 16 oz. returnable and/or 2 liter packages are to be exclusive of any other ads for either 16 oz. returnables or 2 liter packages of directly competing national brand soft drinks.

5. The CMA which was signed by Kroger does not commit it to any specific number of weeks of feature advertising. Kroger is free to decide which soft drinks it will feature on a week to week basis, although it has made its decisions about feature advertising on a quarterly basis. Kroger is free to take advantage of the promotional offer or to not do so as it chooses. Kroger's decision as to which soft drink it will feature in any advertising is based entirely upon Kroger's business interests and needs.

In March of 1984, representatives of Coca-Cola and Kroger met and determined that Kroger would receive the quarterly payments specified in the CMA on the basis of an estimate that Kroger would run from 24-26 feature ads in its flyers and that it would equal its 1983 sales of Coca-Cola in 1984.

6. Plaintiff has failed to establish, at least for purposes of injunctive relief, that Cincinnati is the relevant market from which it has been foreclosed by the allegedly unlawful conduct of Defendant Coca-Cola.

7. It is undisputed that among the leading national brand soft drinks sold within the time relevant to this suit in the Cincinnati/Dayton area, Pepsi-Cola is the market leader with approximately 40 to 45 percent of the relevant market, while Coca-Cola is second with approximately 30 to 35 percent of the relevant market and BMI's 7-Up has approximately 10 percent of the market.

8. All of the bottlers which produce national brand soft drink products offer competitive promotional offers to chain supermarkets in the Cincinnati/Dayton area.

9. The current program offered by Pepsi-Cola to Kroger provides for a volume incentive rebate of as much as $.10 per case plus certain advertising support which can amount to $.50 per case if Kroger agrees to run six feature ads per quarter on Pepsi-Cola products which are exclusive of feature ads on other competing soft drinks in the same package.

10. Both James Schultz of Coca-Cola and Paul Corden, General Manager of Plaintiff's Cincinnati Division, testified that from a marketing standpoint feature advertising exclusivity is something that is to be desired by soft drink bottlers. Competition in the soft drink industry is extremely intense in the Cincinnati/Dayton area. All of the bottlers in these areas utilize various marketing devices to sell their products. Moreover, all of the bottlers have competed vigorously with one another to obtain sales to retailers such as Kroger by offering price discounts and promotional allowances for feature advertising. These discounts are often passed along to the consuming public by Kroger and other retailers.

11. Although Plaintiff has established that it has been unsuccessful in obtaining feature ads from Kroger in the Cincinnati area and that partly as a result of its inability to obtain feature ads, its sales to Kroger in Cincinnati have decreased in 1984, Plaintiff has not shown that Defendant's success in obtaining Kroger feature advertising is the result of any coercive, predatory, or unlawful means. Defendant's promotional program is one which could have been offered by Plaintiff, and in fact, a more lucrative proposal has been offered by Pepsi-Cola. Moreover, in meetings with Kroger, Plaintiff has attempted to explain to Kroger that it could obtain more promotional money from Plaintiff than from Coca-Cola or from Pepsi-Cola if Kroger chose to feature Plaintiff's 7-Up products.

12. Plaintiff has suffered from management difficulties in its Cincinnati division. Plaintiff's key account promotions manager has developed a personality problem with an important Kroger representative, and there have been shifts in personnel responsible for the Kroger account. In 1984, a new general manager was placed in charge of the BMI Cincinnati division, and there is evidence that the previous Cincinnati general manager who also controlled the Dayton division was successful in obtaining feature advertising with Kroger.

13. Although Plaintiff has presented evidence to show that Defendant's CMA offer to Kroger has resulted in Coca-Cola's obtaining feature advertising for Defendant's soft drinks, there has been no showing that Defendant's program is coercive. In fact, the evidence establishes that Defendant's CMA was offered to other chain supermarkets such as Thriftway, Larry's Finer Foods and Marsh Supermarkets, and that there have been no alleged coercive effects at such other establishments.

14. Despite the fact that Plaintiff competes with Defendant for feature advertising with Thriftway Supermarkets, the evidence establishes that Plaintiff's 7-Up products have actually increased their sales at Thriftway in 1984. Moreover, Plaintiff has obtained feature advertising from Larry's Finer Foods, another supermarket chain, while Defendant's CMA has been rejected by Larry's.

15. Although Plaintiff has established that its sales to Kroger have dropped in 1984, Plaintiff has been unable to establish that the drop in sales is entirely the result of its inability to obtain feature advertising. For example, Plaintiff has testified through its general manager that the pricing of Plaintiff's products by Kroger has been high in 1984 and, as a result, sales have been down. Soft drinks are price sensitive products, and their sales are influenced substantially by the price at which they are offered by chain supermarkets. The evidence establishes that Defendant has no control over pricing by Kroger or other chain stores.

II. CONCLUSIONS OF LAW

1. The parties have not contested Plaintiff's standing under 15 U.S.C. §§ 15 and 26 to pursue its claims under Sections 1 and 2 of The Sherman Act, 15 U.S.C. §§ 1 and 2.

2. Plaintiff has not as yet made a sufficient showing of its standing to pursue relief under the Robinson-Patman Act, or under Ohio's Valentine Act. The Court does not consider either of these claims for relief in its ruling upon Plaintiff's Motion for Preliminary Injunction.

3. In the Sixth Circuit, four factors must be considered by the district court in determining whether to issue a preliminary injunction:

a) whether Plaintiff has shown a strong or substantial likelihood or probability of success on the merits b) whether Plaintiff has shown irreparable injury;

c) whether the issuance of a preliminary injunction would cause substantial harm to others;

d) whether the public interest would be served by issuance of a preliminary injunction.

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