Coca Cola 2004 Annual Report Download - page 17

interpretation of the agreements and believes it has no past, present or future obligation to Aqua-Chem in this
regard. This led to the filing of the Georgia Case.
The Wisconsin Case initially was stayed, pending final resolution of the Georgia Case, and later was
voluntarily dismissed without prejudice by Aqua-Chem. The parties have agreed to stay the Georgia Case
pending the outcome of new insurance coverage litigation filed by certain Aqua-Chem insurers, described in the
following paragraph. The Company believes it has substantial legal and factual defenses to Aqua-Chem’s claims.
On March 26, 2004, five plaintiff insurance companies filed an action (Century Indemnity Company, et al. v.
Aqua-Chem, Inc., The Coca-Cola Company, et al., Case No. 04CV002852) in the Circuit Court, Civil Division of
Milwaukee County, Wisconsin against our Company, Aqua-Chem and 16 insurance companies. Several of the
policies that are the subject of this action were issued to the Company during the period (1970 to 1981) when
our Company owned Aqua-Chem. The complaint seeks a determination of the respective rights and obligations
under the insurance policies issued by the insurance companies with regard to asbestos-related claims against
Aqua-Chem. The five plaintiffs issued insurance policies with aggregate remaining limits of coverage of
approximately $145 million. The action also seeks a monetary judgment reimbursing any amounts paid by the
plaintiffs in excess of their obligations. Aqua-Chem and the Company have reached an agreement in principle to
settle with five of the insurers in the Wisconsin insurance coverage litigation, and those insurers will pay funds
into an escrow account for payment of costs arising from the asbestos claims against Aqua-Chem. Aqua-Chem
and the Company will continue to litigate their claims for coverage against the 16 other insurers that are parties
to the Wisconsin insurance coverage case. The Company believes that there are substantial legal and factual
arguments supporting the position that the insurance policies at issue provide coverage for the asbestos-related
claims against Aqua-Chem, and both the Company and Aqua-Chem have asserted these arguments in response
to the complaint.
Since 1999, the Competition Directorate of the European Commission (the ‘‘Commission’’) has been
conducting an investigation of various commercial and market practices of the Company and its bottlers in
Austria, Belgium, Denmark, Germany and Great Britain. On October 19, 2004, our Company and certain of our
bottlers submitted a formal Undertaking to the Commission, and the Commission accepted the Undertaking.
The Undertaking will potentially apply in 27 countries and in all channels of distribution where our carbonated
soft drinks account for over 40 percent of national sales and twice the nearest competitor’s share. It will take
more than 12 months to fully implement the Undertaking and for the market to react to any resulting changes.
The commitments we made in the Undertaking relate broadly to exclusivity, percentage-based purchasing
commitments, transparency, target rebates, tying, assortment or range commitments, and agreements
concerning products of other suppliers. The Undertaking will also apply to shelf space commitments in
agreements with take-home customers and to financing and availability agreements in the on-premise channel.
In addition, the Undertaking includes commitments that will be applicable to commercial arrangements
concerning the installation and use of technical equipment (such as coolers, fountain equipment and vending
machines). The commitments set forth in the Undertaking have been published for third-party comments.
Following the comment period, the Commission presented to the Company certain comments it had received
from third parties, as well as certain additional comments from the Commission’s legal staff. The Company is in
the process of addressing these comments with the Commission. The Company anticipates that the formal
Undertaking will form the basis of a Commission decision pursuant to Article 9, paragraph 1 of Council
Regulation 1/2003 to be issued in the second quarter of 2005, bringing an end to the investigation. The
submission of the Undertaking does not imply any recognition on the Company’s or the bottlers’ part of any
infringement of Commission competition rules. We believe that the Undertaking, while imposing restrictions,
clarifies the application of competition rules to our practices in Europe and will allow our system to be able to
compete vigorously while adhering to the Undertaking’s provisions.
The Company is also discussing with the Commission issues relating to parallel trade within the European
Union arising out of comments received by the Commission from third parties. The Company is fully
cooperating with the Commission and is providing information on these issues and the measures taken and to be
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