[Federal Register Volume 75, Number 45 (Tuesday, March 9, 2010)]
[Notices]
[Pages 10795-10798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4894]
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FEDERAL TRADE COMMISSION
[File No. 091 0133]
PepsiCo, Inc.; Analysis of Agreement Containing Consent Order To
Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint and the terms of the consent order--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before March 26, 2010.
ADDRESSES: Interested parties are invited to submit written comments
electronically or in paper form. Comments should refer to ``PepsiCo,
File
[[Page 10796]]
No. 091 0133'' to facilitate the organization of comments. Please note
that your comment--including your name and your state--will be placed
on the public record of this proceeding, including on the publicly
accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm).
Because comments will be made public, they should not include any
sensitive personal information, such as an individual's Social Security
Number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. Comments also
should not include any sensitive health information, such as medical
records or other individually identifiable health information. In
addition, comments should not include any ``[t]rade secret or any
commercial or financial information which is obtained from any person
and which is privileged or confidential. . . .,'' as provided in
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which
confidential treatment is requested must be filed in paper form, must
be clearly labeled ``Confidential,'' and must comply with FTC Rule
4.9(c), 16 CFR 4.9(c).\1\
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\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR
4.9(c).
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Because paper mail addressed to the FTC is subject to delay due to
heightened security screening, please consider submitting your comments
in electronic form. Comments filed in electronic form should be
submitted by using the following weblink: (https://public.commentworks.com/ftc/pepsico) and following the instructions on
the web-based form. To ensure that the Commission considers an
electronic comment, you must file it on the web-based form at the
weblink: (https://public.commentworks.com/ftc/pepsico). If this Notice
appears at (http://www.regulations.gov/search/index.jsp), you may also
file an electronic comment through that website. The Commission will
consider all comments that regulations.gov forwards to it. You may also
visit the FTC website at (http://www.ftc.gov/) to read the Notice and
the news release describing it.
A comment filed in paper form should include the ``PepsiCo, File
No. 091 0133'' reference both in the text and on the envelope, and
should be mailed or delivered to the following address: Federal Trade
Commission, Office of the Secretary, Room H-135 (Annex D), 600
Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is requesting
that any comment filed in paper form be sent by courier or overnight
service, if possible, because U.S. postal mail in the Washington area
and at the Commission is subject to delay due to heightened security
precautions.
The Federal Trade Commission Act (``FTC Act'') and other laws the
Commission administers permit the collection of public comments to
consider and use in this proceeding as appropriate. The Commission will
consider all timely and responsive public comments that it receives,
whether filed in paper or electronic form. Comments received will be
available to the public on the FTC website, to the extent practicable,
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of
discretion, the Commission makes every effort to remove home contact
information for individuals from the public comments it receives before
placing those comments on the FTC website. More information, including
routine uses permitted by the Privacy Act, may be found in the FTC's
privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm).
FOR FURTHER INFORMATION CONTACT: Joan Heim (202-326-2014) or Joseph S.
Brownman (202-326-2605), Bureau of Competition, 600 Pennsylvania
Avenue, NW, Washington, D.C. 20580.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 the
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that
the above-captioned consent agreement containing a consent order to
cease and desist, having been filed with and accepted, subject to final
approval, by the Commission, has been placed on the public record for a
period of thirty (30) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for February 26, 2010), on the World Wide Web, at (http://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington,
D.C. 20580, either in person or by calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. All comments should be filed as
prescribed in the ADDRESSES section above, and must be received on or
before the date specified in the DATES section.
Analysis of Agreement Containing Consent Order to Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Order from
Respondent PepsiCo, Inc. (``PepsiCo''), to address concerns in
connection with PepsiCo's acquisitions of two of its bottlers and the
subsequent exclusive license from Dr Pepper Snapple Group, Inc.
(``DPSG''), to bottle, distribute and sell the Dr Pepper, Crush, and
Schweppes carbonated soft drink brands of DPSG in certain territories.
The Consent Agreement requires, among other things, that PepsiCo limit
the persons within the company who have access to commercially
sensitive confidential information that DPSG will provide to PepsiCo to
enable PepsiCo to carry out the distribution functions contemplated by
the license.
The DPSG - PepsiCo license agreement followed PepsiCo's announced
proposed acquisitions of its two largest bottler-distributors, Pepsi
Bottling Group, Inc. (``PBG''), and PepsiAmericas, Inc. (``PAS'').
These two bottler-distributors had been licensed by PepsiCo and by DPSG
to bottle and distribute many of their carbonated soft drink brands.
Following the acquisitions, PepsiCo will take on the bottling and
distribution functions previously performed by PBG and PAS.
The Complaint alleges that, as a result of PepsiCo's acquisition of
PBG and PAS, PepsiCo will have access to DPSG's commercially sensitive
confidential marketing and brand plans. Without adequate safeguards,
PepsiCo could misuse that information, leading to anticompetitive
conduct that would make DPSG a less effective competitor or would
facilitate coordination in the industry. To remedy this problem, the
proposed Consent Agreement allows only PepsiCo employees who perform
traditional carbonated soft drink ``bottler functions'' access to the
DPSG commercially sensitive information. It prohibits PepsiCo employees
involved in traditional ``concentrate-related functions'' from seeing
that information.
II. Respondent PepsiCo, Inc.
PepsiCo is a corporation organized, existing, and doing business
under and
[[Page 10797]]
by virtue of the laws of the State of North Carolina, with its office
and principal place of business located at 700 Anderson Hill Road,
Purchase, New York 10577. PepsiCo in 2009 had total worldwide revenues
from the sale of all products of about $43 billion. PepsiCo's United
States sales in 2009 of carbonated soft drink concentrate totaled about
$3 billion. United States sales of all of PepsiCo's carbonated soft
drink brands are over $20 billion.
PepsiCo is a food and beverage company that includes PepsiCo
Americas Beverages (a beverage arm), Frito-Lay (a snack food arm), and
Quaker Foods (a cereal arm). Among other products, PepsiCo produces the
concentrate for the PepsiCo carbonated soft drink beverage brands that
are distributed by its bottlers. Some of those brands are Pepsi-Cola,
Diet Pepsi, Mountain Dew, Diet Mountain Dew, Sierra Mist, Slice, and
Mug Root Beer.
III. Licensor Dr Pepper Snapple Group, Inc.
DPSG is a corporation organized, existing and doing business under
and by virtue of the laws of the State of Delaware, with its office and
principal place of business located at 5301 Legacy Drive, Plano, Texas
75024. Among other things, DPSG produces the concentrate for the DPSG
carbonated soft drink brands that are distributed by its bottlers. Some
of those brands are Dr Pepper, Diet Dr Pepper, Crush, Schweppes, Canada
Dry, Vernor's, A&W Root Beer, 7-UP, Hires Root Beer, IBC, RC Cola, Diet
Rite, Welch's Grape Soda, Sunkist, and Squirt. DPSG in 2009 had total
revenues of about $6 billion. DPSG's United States sales in 2009 of
carbonated soft drink concentrate totaled about $1.5 billion.
IV. The Bottlers
A. Pepsi Bottling Group, Inc.
PBG is a corporation organized, existing and doing business under
and by virtue of the laws of the State of Delaware, with its office and
principal place of business located at One Pepsi Way, Somers, New York
10589. PBG is the nation's largest bottler and distributor of PepsiCo
beverages and accounts for about 56% of PepsiCo's total U.S. bottler-
distributed volume of carbonated soft drink beverages. PBG's United
States sales in 2009 of carbonated soft drinks totaled about $6
billion. PBG is the bottler-distributor for many PepsiCo and DPSG
carbonated soft drink brands. The geographic areas or territories in
which PBG is licensed to distribute PepsiCo brand carbonated soft
drinks include all or a portion of 41 states and the District of
Columbia.
B. PepsiAmericas, Inc
PAS is a corporation organized, existing and doing business under
and by virtue of the laws of the State of Delaware, with its office and
principal place of business located at 4000 RBC Plaza, 60 South Sixth
Street, Minneapolis, Minnesota 55402. PAS is the nation's second
largest bottler and distributor of PepsiCo beverages. PAS's United
States sales in 2009 of carbonated soft drinks totaled about $2.5
billion. PAS accounts for about 19% of PepsiCo's total U.S. bottler-
distributed volume of carbonated soft drinks. PAS is the bottler-
distributor for many PepsiCo and DPSG carbonated soft drink brands. The
principal geographic areas or territories in which PAS is licensed to
distribute PepsiCo brand carbonated soft drinks include all or a
portion of 19 states, primarily in the Midwest.
V. The Two Transactions
A. The Bottler Acquisitions
On August 3, 2009, PepsiCo entered into agreements with PBG and
PAS, the two largest independent bottlers and distributors of its
carbonated soft drink brands, to acquire all of their remaining
outstanding voting securities. The total value of the acquired shares
for both bottlers would be approximately $7.8 billion. At the time of
the agreements, PepsiCo owned about 40% of PBG and about 43% of PAS.
Together, PBG and PAS have been responsible for about 75% of all United
States bottler-distributed sales of PepsiCo carbonated soft drink
brands and about 20% of all United States bottler-distributed sales of
DPSG carbonated soft drink brands.
B. The DPSG-PepsiCo License Agreement
Following the agreements to acquire PBG and PAS, PepsiCo sought a
license to continue to bottle and distribute the DPSG brands that the
bottling companies had distributed. (The DPSG licenses held by PBG and
PAS were terminated by DPSG as a result of the proposed acquisitions.)
In the DPSG-PepsiCo license agreement, dated December 7, 2009, PepsiCo
agreed to bottle and distribute DPSG's Dr Pepper, Crush, and Schweppes
carbonated soft drink brands in the former PBG and PAS territories,
where those bottlers had been producing and distributing those
products. PepsiCo agreed to pay DPSG $900 million for a non-exclusive
license to produce\2\ and an exclusive, twenty-year\3\ license to
distribute and sell those brands.
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\2\ The production right is not exclusive to allow DPSG to
produce carbonated soft drinks in the former PBG and PAS territories
for sale by DPSG outside those territories.
\3\ The license agreement is for an initial term of twenty (20)
years, with automatic renewal for additional twenty (20) year
periods, unless terminated pursuant its terms.
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Under the license agreement, PepsiCo has agreed, among other
things, to (a) distribute the Dr Pepper brand in all classes of trade
based on the Pepsi brands; (b) grow the Dr Pepper brand based on the
sales of other carbonated soft drink brands; (c) promote the DPSG
beverages and provide sales support for such promotions, based on
PepsiCo's promotions of its other soft drink beverages, and (d) in
connection with price-off promotions and media advertising, promote and
advertise the Dr Pepper brand based on rates of promotion and
advertising of the PepsiCo brands.
VI. The Proposed Complaint
The Commission's Complaint alleges that PepsiCo and DPSG are direct
competitors in the highly concentrated and difficult to enter markets
for (a) branded concentrate and (b) branded and direct-store-door
delivered carbonated soft drinks. The concentrate markets are both
national and local, and the branded carbonated soft drink markets are
local. Total United States sales of concentrate are about $9 billion,
and total United States sales of carbonated soft drinks, measured at
retail, are about $70 billion.
By acquiring PBG and PAS, PepsiCo will be bottling and distributing
both its own products and those of its competitor DPSG. Concentrate
manufacturers like DPSG share commercially sensitive information with
bottlers so that bottlers can effectively carry out their
responsibilities; DPSG currently provides this sort of information to
PBG and PAS. As DPSG's bottler, PepsiCo will need this type of
information.
At the same time, Pepsico remains a competitor of DPSG. PepsiCo
could use the information in ways that undermine competition. The
Complaint alleges that PepsiCo's access to DPSG's confidential
information could eliminate competition between PepsiCo and DPSG,
increase the likelihood that PepsiCo may unilaterally exercise market
power, and facilitate coordinated interaction in the industry. In turn,
that conduct could lead to higher prices for consumers.
[[Page 10798]]
VII. The Proposed Consent Order
To remedy the alleged competitive concern associated with access to
the DPSG commercially sensitive confidential information, the consent
decree prevents that information from reaching PepsiCo employees who
could use it to either harm DPSG or to facilitate collusion. PepsiCo
must set up a firewall to prevent persons responsible for
``concentrate-related functions'' - the kinds of functions in which
PepsiCo engaged as a competitor of DPSG when both had their brands
distributed by PBG and PAS - from access to the DPSG information.
Persons at PepsiCo who are assigned to perform traditional ``bottler
functions'' - the kinds of functions that PBG and PAS historically have
performed for DPSG - will be permitted access to that information.
The proposed Consent Agreement also provides for the appointment of
a monitor to assure PepsiCo's compliance with the Consent Agreement.
The monitor will have a fiduciary responsibility to the Commission. The
monitor will be appointed for a five (5) year term, but the Commission
may extend or modify the term as appropriate.
The order, like the DPSG-Pepsi license agreement, will have a term
of twenty (20) years.
VIII. Opportunity for Public Comment
The Consent Agreement has been placed on the public record for
thirty (30) days for receipt of comments from interested persons.
Comments received during this period will become part of the public
record. After thirty days, the Commission will again review the
proposed Consent Agreement, as well as the comments received, and will
decide whether it should withdraw from the Consent Agreement or make
final the Decision and Order.
By accepting the Consent Agreement subject to final approval, the
Commission anticipates that the competitive problem alleged in the
Complaint will be resolved. The purpose of this analysis is to invite
and facilitate public comment concerning the Consent Agreement. It is
not intended to constitute an official interpretation of the proposed
Consent Agreement, nor is it intended to modify the terms of the
Decision and Order in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2010-4894 Filed 3-8-10; 11:48 am]
BILLING CODE 6750-01-S