Coca Cola 2005 Annual Report Download - page 97

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: COMMITMENTS AND CONTINGENCIES (Continued)
In 1999, the Competition Directorate of the European Commission (the ‘‘Commission’’) began 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, the Company and certain of its bottlers submitted
a formal Undertaking to the Commission, and the Commission accepted the Undertaking, subject to formal
review by third parties. Following the comment period, the Commission presented to the Company certain
comments it had received from third parties, as well as certain additional comments of the Commission’s legal
staff. The Company addressed those additional comments, revised the Undertaking accordingly and submitted
the final Undertaking to the Commission. On June 22, 2005, the Commission adopted a decision pursuant to
Article 9(1) of Regulation (EC) 1/2003. The decision renders legally binding the commitments set forth in the
Undertaking submitted by the Company and certain of its bottlers on October 19, 2004, as such Undertaking was
revised following consultations with national competition authorities of European Economic Area Member
States and industry participants. The final Undertaking is substantially similar to the Undertaking initially
submitted on October 19, 2004. In light of the commitments, the Commission declared that there were no
further grounds for action on its part and, without prejudice to Article 9(2) of Regulation (EC) 1/2003, that the
proceedings in the case should therefore be brought to an end. The Undertaking potentially applies in 27
countries and in all channels of distribution where the Company’s carbonated soft drinks account for over
40 percent of national sales and twice the nearest competitor’s share. The commitments the Company 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 also applies 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
are applicable to commercial arrangements concerning the installation and use of technical equipment (such as
coolers, fountain equipment and vending machines). The Undertaking does not imply any recognition on the
Company’s or the bottlers’ part of any infringement of European Union competition rules. The Company
believes that the Undertaking, while imposing restrictions, clarifies the application of competition rules to its
practices in Europe and will allow the Coca-Cola system to be able to compete vigorously while adhering to the
Undertaking’s provisions.
The Spanish Competition Service (the ‘‘Service’’) made unannounced visits to the Company’s offices and
those of certain of its bottlers in Spain in 2000. In December 2003, the Service suspended its investigation until
the Commission notified the Service how the Commission would proceed in its commercial and market practices
investigation referred to above. On June 22, 2005, the Commission informed the Service that the Commission
had adopted the above referenced decision pursuant to Article 9(1) of Regulation (EC) 1/2003. On
June 24, 2005, the Company received an Order from the Service, informing us of the Service’s proposal to
discontinue its investigation and dismiss the proceedings. On July 15, 2005, the Service issued its decision
discontinuing its investigation and dismissing the proceedings, and this decision has become final.
The French Competition Directorate (the ‘‘Directorate’’) has also initiated an inquiry into commercial
practices related to the soft drink sector in France. This inquiry has been conducted through visits to the offices
of the Company; however, no conclusions have been communicated to the Company by the Directorate. As a
result of the Undertaking given by the Company and certain of its bottlers to the Commission referenced above,
the Company believes the investigation has been discontinued.
The Company is 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 cooperating
fully with the Commission and is providing information on these issues and the measures taken and to be taken
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