Antitrust Law Daily Wrap Up, ANTITRUST NEWS: PepsiCo charged with price fixing, predatory pricing by independent bottler, (Apr 18, 2016)

By Linda O’Brien, J.D., LL.M.

Multi-national food and beverage corporation PepsiCo and its bottling subsidiary have unlawfully colluded to set prices for its carbonated soft drink products and to drive competing independent bottlers out of the market, according to a complaint filed in the federal district court in Des Moines, Iowa (Mahaska Bottling Company. v. PepsiCo, Inc., April 15, 2016).

Mahaska Bottling Company is a local, family-owned independent bottler. PepsiCo is an American multi-national food, snack, and beverage corporation. Bottling Group LLC is a former independent bottling company that was acquired by PepsiCo in 2009.

The complaint states that, in 1948, Mahaska entered into an exclusive bottling appointment (EBA) with Pepsi that granted Mahaska the exclusive right to use the Pepsi trademark and sell Pepsi soft drinks in Iowa, Nebraska, and Kansas. Under the EBA, Mahaska must purchase the concentrate for carbonated soft drinks from PepsiCo and market PepsiCo products in its territories. In return, Mahaska has full discretion to set prices of PepsiCo products to its customers. In 1990, Mahaska claims, PepsiCo adopted a strategy to undermine the exclusive rights of independent bottlers and sought to increase control over relationships with customers.

First, PepsiCo implemented Customer Development Agreements (CDAs), which set uniform pricing for large retail chains. Since PepsiCo cannot force Mahaska or other independent bottlers to sell PepsiCo products at a particular price under a CDA, Pepsi offers a rebate to account for the difference in price between the price charged by the bottler and the national agreed upon price with the retailer. Mahaska does not agree to participate in any CDA arrangements. However, PepsiCo sought to coerce Mahaska to assume responsibility for the pricing agreed to between PepsiCo and national discount retailers Dollar General and Family Dollar stores by disparaging Mahaska with statements that Mahaska was unwilling to serve its long-standing customers, the complaint alleges.

According to the lawsuit, PepsiCo and Bottling Group has engaged in unlawful price discrimination by selling soft drinks below cost to the detriment of competitors of Dollar General and Family Dollar, and in an effort to force Mahaska out of the market.

The plaintiff asserts claims for tortious interference with contracts and prospective economic advantage, civil conspiracy, business defamation or disparagement, and breach of fiduciary duty. The complaint also asserts claims for unlawful price fixing, predatory pricing, attempted monopolization, and price discrimination in violation of Sections 1 and 2 of the Sherman Act, the Robinson-Patman Act, and the Iowa Competition Law. The action seeks damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 4:16-cv-00114-REL-SBJ.

Attorneys: Johannes H. Moorlach (Whitfield & Eddy, PLC) and Jason H. Friedman and Mazin Sbaiti (Friedman & Feiger) for Mahaska Bottling Company, Inc.

Companies: Mahaska Bottling Company, Inc.; PepsiCo, Inc.; Bottling Group, LLC

News: Antitrust FranchisingDistribution IowaNews