Coca-Cola Co. v. Harmar Bottling Co.

• Decision Date: 17 July 2003
• Docket Number: No. 06-01-00120-CV.,06-01-00120-CV.
• Parties: THE COCA-COLA COMPANY, et al., Appellants, v. HARMAR BOTTLING COMPANY, et al., Appellees.
• Court: Texas Court of Appeals

111 S.W.3d 287

THE COCA-COLA COMPANY, et al., Appellants, v. HARMAR BOTTLING COMPANY, et al., Appellees.

No. 06-01-00120-CV.

Court of Appeals of Texas, Texarkana.

Submitted April 16, 2003.

Decided July 17, 2003.

Jerry L. Beane, Strasburger & Price, LLP, Tyler A. Baker, Carrington, Coleman, Sloman & Blumenthal, L.L.P., Dallas, for appellants.

Thomas M. Stanley, William A. Durham, Eastham, Watson, Dale & Forney, L.L.P., Warren W. Harris, Jacalyn A. Hollabaugh, Karen A. Lister, Bracewell & Patterson, L.L.P., Houston, C. Cary Patterson, Nelson J. Roach, Jeffrey J. Angelovich, Nix, Patterson & Roach, L.L.P., Daingerfield, for appellees.

Before MORRISS, C.J., ROSS and CARTER, JJ.

OPINION

Opinion by Chief Justice MORRISS.

This appeal is brought by The Coca-Cola Company, Coca-Cola Enterprises, Inc., Coca-Cola Bottling Company of North Texas, Ouachita Coca-Cola Bottling Company, Inc., Coca-Cola Bottling Company of Shreveport, Paris Coca-Cola Bottling Company, Inc., and Sulphur Springs Coca-Cola Bottling Company, Inc. (hereafter collectively "Coke"). Harmar Bottling Company, Royal Crown Bottling Company, Inc., O-Mc Beverages, Inc., Bolls Distributing Company, and Hackett Beverages, Inc. (hereafter collectively "Bottlers") sued Coke for restraint of trade, monopolistic practices, and interfering with existing and prospective business relationships. After a two-month trial, the jury awarded the Bottlers approximately $14.6 million in damages.¹

After the verdict and a subsequent hearing, the trial court enjoined Coke from prohibiting retailers from a number of specified actions in marketing competitive soft drinks, requiring particular placement of Coke's products, or requiring particular ratios of display or marketing between Coke's products and competing brands of soft drinks. The injunction applies to retail outlets in the "Relevant Geographic Territory"² (hereafter "Territory") and to a retailer with outlets both inside and outside the Territory, but has no application to retailers solely outside the Territory. The injunction has a seven-year life span and allows a request for reconsideration when half that period has elapsed. The trial court also awarded attorneys' fees of $500,000.00, apportioned among the various Bottlers.

BACKGROUND

This lawsuit was brought by several different carbonated soft drink (hereafter CSD) bottlers who sell (or sold) soft drinks in competition with Coke. The Bottlers alleged Coke was engaging in unlawful business practices through "Calendar Marketing Agreements" (hereafter CMAs) that were directed at marketing Coke's CSDs by effectively preventing retailers from selling competitors' CSDs. Coke holds the franchises for Coca-Cola, Dr. Pepper, and other beverages for the Territory at issue, and Coke's own information shows Coke maintained a seventy-five to eighty percent share of the area CSD market during the relevant times.

The Bottlers focused their claims on the content and nature of the CMAs used by Coke in contracting with retailers. The CMAs do not just provide price breaks for quantity purchases, but also require specific retailer marketing practices in order to obtain Coke incentives. Through a combination of those marketing practices, the CMAs limit retailers' ability to market competitive products. Testimony established the importance of visibility and accessibility in marketing soft drinks. The contracts required retailers to place Coke products in "impulse zones" or "point of purchase" areas, where decisions to make such purchases are often made. Such areas include coolers or ice buckets near checkout stands and "endcaps" in high traffic areas funneled toward checkout stands. Supermarket contracts required that, for every competitor's endcap, Coke was contractually entitled to two or three endcaps. Coke contracted in a number of cases for "horizontal sets" in which Coke products were placed in coolers between eye and thigh level and competitive products were placed out of the line of sight. Retailers were also restricted from in-store advertising of competitive brands through banners or "stand-ups."

The evidence shows that, after Coke obtained its area, it broke with prior policy and refused to allow cooperative advertising. Various of Coke's CMA retailers could not advertise or promote any competitive national brand, including newspaper ads, in-store circulars, and signs, banners, and signs reflecting the price of a competitor's product. A number of the CMAs barred retailers from offering competitive CSDs at prices lower than Coke's prices. For example, under the contract with Circle K, a retailer could not sell Pepsi twelve packs for less than Coke's twelve packs. Every convenience store contract in the Paris market in 1997 and 1998 contained price restrictions similar to the Circle K contract.

Coke argues that the types of restrictions applied to only certain weeks during the calendar year. Yet, under the terms of those agreements, those "certain weeks" devoured much of the calendar year and all of the prime time slots for selling cold drinks. The agreements required promotional periods of forty-two to forty-six weeks, with Coke's stated goal being to obtain multi-year agreements with the retailers.

Some CMAs also contained terms requiring retailers to carry only Coke flavors. In addition, Coke offered bonus funding to pay retailers who did not carry competitive brands. Effectively, therefore, many customers could only purchase Barq's Root Beer, rather than A & W, or Minute Maid Orange drink, rather than Sunkist or Welch's. Before Coke assumed its area and began enforcing those marketing provisions in the Territory, Barq's and Minute Maid were not sold locally, and A & W, Sunkist, and Welch's sodas were sales leaders.

The jury found the conduct constituted an unreasonable restraint of trade, monopolization or attempted monopolization, and a conspiracy to monopolize, as to all of the Bottlers, and that it interfered with existing or prospective business relationships between the Bottlers and retailers. The jury then awarded damages for lost profits and future lost profits, and for lost franchise value. The jury found Coke's conduct was a willful or flagrant violation of Texas Antitrust Laws, but did not find that Coke acted with malice.

I. THE ACT'S REACH

Coke contends the trial court erred in its extraterritorial application of the Texas Free Enterprise and Antitrust Act (hereafter the Act) in both awarding damages and rendering injunctive relief. Coke takes the position that none of these agreements—to the extent they were implemented in retail establishments outside the State of Texas—were actionable under that state statute.

The damages and injunctive relief were awarded for actions taken both in Texas and outside the state (but within the regional territories of Coke). Coke's argument is based on the language of the Act. TEX. BUS. & COM.CODE ANN. § 15.04 (Vernon 2002) reads as follows:

The purpose of this Act is to maintain and promote economic competition in trade and commerce occurring wholly or partly within the State of Texas and to provide the benefits of that competition to consumers in the state. The provisions of this Act shall be construed to accomplish this purpose and shall be construed in harmony with federal judicial interpretations of comparable federal antitrust statutes to the extent consistent with this purpose.

However, the Act also states:

(b) No suit under this Act shall be barred on the grounds that the activity or conduct complained of in any way affects or involves interstate or foreign commerce. It is the intent of the legislature to exercise its powers to the full extent consistent with the constitutions of the State of Texas and the United States.

TEX. BUS. & COM.CODE ANN. § 15.25(b) (Vernon 2002).

Coke directs us to no cases so limiting the Act. It quotes only a part of Section 15.04 ("within the State of Texas ... benefits of that competition to consumers in the state"), while ignoring the declared purpose of the Act, that is, maintaining and promoting competition in trade and commerce occurring wholly or partly within the State of Texas. See Tex. Bus. & Com.Code Ann. § 15.04.

Coke cites Destec Energy, Inc. v. S. Cal. Gas Co., 5 F.Supp.2d 433 (S.Dist.Tex.1997), aff'd, 172 F.3d 866 (5th Cir.1999), in support of its position that Act does not apply to any activity outside of Texas. The trial court in Destec Energy did rule the Act inapplicable in that case, but we have no doubt the Act would have been applied if any part of the commerce in question had occurred inside Texas.

The TFEAA states that it applies to commerce occurring in whole or in part in Texas. Tex. Comm & Bus. [sic] Code Ann. § 15.04. Section 15.25(b) of the TFEAA does not provide that any conduct that has some effect on a Texas entity is subject to Texas antitrust laws. Tex. Comm & Bus. [sic] Code Ann. § 15.25(b). Rather, Section 15.25(b) states that conduct is not to escape application of the TFEAA merely because it occurs in Texas and also affects or involves interstate commerce. The conduct complained of in this case occurred in California. SoCalGas has taken no action affecting the ability of Texas consumers to obtain the benefits of competition. The application plaintiffs seek is inconsistent with the stated purpose of the TFEAA.

Id. at 464 (emphasis added).

Coke also cites Oce Printing Sys. USA, Inc. v. Mailers Data Servs., Inc., 760 So.2d 1037 (Fla.Dist.Ct.App.2000), in its attempt to exclude Act coverage to activity outside Texas. That case refused certification of a national class action based on the language of the Florida Antitrust Act, Florida Statutes Section 542.19, yet that statutory language differs from the Texas language. See Fla. Stat. § 542.19.

The trial court's order certifies nationwide classes seeking relief pursuant to the Antitrust Act. We conclude that the plain language of the Antitrust Act bars certification of a...