The Coca Cola Company / Cadbury Schweppes, plc

MEXICO, 1999

The Coca Cola Company (TCCC) and Cadbury Schweppes, Plc (CS) gave notice of their interest in carrying out a concentration. The transaction involved the purchase of several CS brands of carbonated drinks and bottled natural water. The FCC determined that the merger would affect two different markets, both having nation-wide dimension: the carbonated drinks market (including refreshments, carbonated mineral water and carbonated drinks) and the market for bottled natural water. To identify these relevant markets the FCC considered that alcoholic beverages, lacteous juices and nectars, tea and bottled natural water are not substitutes for carbonated drinks because they do not meet the same needs nor do they have similar characteristics (taste, presentation, ingredients, productive process, etc).

The following facts were relevant to assess TCCC� market power in the relevant market of carbonated drinks:

The carbonated drinks market is highly concentrated;

TCCC� market share of 64.4 percent would increase to 71 percent as a result of the transaction;

PepsiCo, the closest competitor of TCCC had a market share of 18 percent while the remaining market is divided among small and medium-size firms;

TCCC had a wide brand portfolio endowed with high market value. The brands owned by TCCC are well known in the Mexican carbonated drinks market;

Imported carbonated drinks have, in fact, very little presence in the country;繚 TCCC� distribution network is the largest in the country. This infrastructure would be of great strategic value in strengthening market power in the carbonated drinks market;

TCCC� market position is considerably reinforced by its remarkable capacity to advertise its brands;

In the bottled natural water market, the FCC considered that the joint market share of TCCC and SC is negligible.
Based on the above findings, the FCC determined that the TCCC/CS merger would substantially diminish competition in the carbonated drinks market. The merger would allow TCCC unilaterally fix prices and restrict supply foreclose competitors from the relevant market of carbonated drinks, and engage in monopolistic practices. On these grounds, the FCC decided to block the acquisition.TCCC filled an amparo in which they argued, among other things that:

Article 16 of the FLEC was not clear about the definition of a merger, so this gave the FCC faculty to determine it in a arbitrary way.
The district judge resolved to confirm the FCC resolution, due to the fact that the article 16 is clear enough about definition of a merger.