Texas Case Law

COCA-COLA COMPANY v. HARMAR BOTTLING COMPANY, 03-0737 (Tex. 10-20-2006) THE COCA-COLA COMPANY ET AL., Petitioners, v. HARMAR BOTTLING COMPANY ET AL., Respondents. No. 03-0737 Supreme Court of Texas. Argued November 9, 2004. October 20, 2006.

On Petition for Review from the Court of Appeals for the
Sixth District of Texas.

Justice HECHT delivered the opinion of the Court, in which
Justice WILLETT joined.

Justice BRISTER filed a dissenting opinion in which Chief
Justice JEFFERSON, Justice O’NEILL, and Justice MEDINA


Five carbonated soft drink bottlers with franchises to
distribute Royal Crown Cola in various territories within
the Ark-La-Tex region (a four state region including parts
of Arkansas, Louisiana, and Texas where the three borders
meet, and also nearby southeast Oklahoma) sued The
Coca-Cola Company and several distributers of both
Coca-Cola and Dr Pepper in the same area for using calendar
marketing agreements (“CMAs”) with retailers to
unreasonably restrain trade, monopolize the market, and
attempt and conspire to monopolize the market in violation
of the Texas Free Enterprise and Antitrust Act of 1983
(“TFEAA”)[fn1] and the antitrust laws of the other three
states. The district court rendered judgment on the jury’s
verdict for the plaintiffs, awarding damages incurred
throughout the region and permanently enjoining, in
specified counties in each of the four states, certain
conduct that it determined to be anticompetitive. The court
of appeals affirmed.[fn2]

We address two issues. One is whether Texas courts can
adjudicate and remedy an anti-competitive injury occurring
in another state, either under the TFEAA or the law of that
state. We hold that the TFEAA will not support
extraterritorial relief in the absence of a showing that
such relief promotes competition in Texas or benefits Texas
consumers. We also hold that Texas courts, as a matter of
interstate comity, will not decide how another state’s
antitrust laws and policies apply to injuries confined to
that state. The other issue is whether the plaintiffs have
shown substantial harm, real or threatened, to competition
in the relevant market as a result of the defendants’
conduct. We conclude that there is no evidence of such harm
and that the lack of evidence is fatal to all of the
plaintiffs’ claims. Accordingly, we reverse the judgment of
the court of appeals, dismiss the plaintiffs’ claims of
injury occurring in other states, and render judgment that
the plaintiffs take nothing on their claims of injury
occurring in Texas.


Coca-Cola, Dr Pepper, Pepsi-Cola, Royal Crown Cola, and
other carbonated soft drinks (“CSDs”) are distributed
wholesale by “bottlers” and sold retail to the public in
supermarkets, convenience stores, small grocery stores, and
other outlets. In the Ark-La-Tex region in the 1990s, the
Coca-Cola bottler, Coca-Cola Enterprises, Inc., and five of
its affiliates[fn3] (collectively “CCE”) also distributed
Dr Pepper and held about 75-80 percent of the market for
nationally branded CSDs.[fn4] (Worldwide, Coca-Cola
Enterprises, Inc. was responsible for 77 percent of
Coca-Cola sales.) The Pepsi-Cola bottler had about 13-15
percent of the market, leaving five Royal Crown Cola
franchisees with the remainder. Each of the five RCC
franchisees was restricted to operating in an assigned
territory,[fn5] some of which overlapped: one, Harmar
Bottling Company, in Texas and Oklahoma;[fn6] two, O-Mc
Beverages, Inc. and Bolls’ Distributing Co., in Texas and
Arkansas;[fn7] one, Hackett Beverages, Inc., in Arkansas
only;[fn8] and one, Royal Crown Bottling Co., in Louisiana
only.[fn9] None of the five operated entirely within Texas,
and two operated entirely outside Texas.

These five RCC franchisees sued CCE and The Coca-Cola
Company, which manufactures Coca-Cola (collectively,
“Coke”), complaining of their use of CMAs with CSD
retailers in the territories plaintiffs served. (The RCC
franchisees also sued the manufacturer of Pepsi-Cola, the
Pepsi-Cola Company, its parent, Pepsico, Inc., and two
bottlers, but these defendants settled before trial, and
therefore we do not discuss the allegations against them.)
Generally speaking, a CMA provides that during stated
periods of time a retailer will promote a wholesaler’s
products in preference to competing products in exchange
for payments and price discounts from the wholesaler.

For CSDs, price and prominent retail display are critical
marketing factors. Thus, the promotional preferences called
for in CMAs used by CSD wholesalers include outside and
in-store advertising, prominently located displays in
“impulse zones” such as near checkout stands where purchase
decisions are often made, enlarged shelf and cooler space,
and reduced prices. Typically, CMAs do not prohibit
retailers from selling competing products but do require
more favorable promotion of the wholesaler’s products and
limited or no promotion of competing products. CMAs may
also require retailers to price the wholesaler’s products
below competing products, even if the differential is
achieved by pricing competing products higher than they
otherwise would be. CMAs typically cover only specific time
periods during the year, not the entire year, and are
terminable at will by either the retailer or the
wholesaler. Retailers receive price discounts and direct
payments and bonuses for their promotional efforts.

The RCC franchisees concede, as they must, that CMAs are
used throughout the country and have repeatedly withstood
antitrust challenges,[fn10] and that CMAs, including CMAs
previously used by Coke, are not in themselves
anti-competitive. But they complain that Coke used CCE’s
dominant position in the Ark-La-Tex region aggressively to
negotiate CMAs with terms that suppressed competition from
other bottlers. Specifically, the RCC franchisees complain,
and the evidence shows, that in the Ark-La-Tex region:

  • Coke had CMAs with most retailers, including
    virtually every major retailer other than Wal-Mart, since
    most could not afford to refuse a CMA with Coke given the
    market dominance of Coca-Cola and Dr Pepper.
  • Coke’s CMAs generally covered 42-52 weeks per
    year, even though their CMAs in other areas often covered
    only 26 weeks.
  • Coke’s CMAs prohibited or limited retailer
    advertising of competing national brands during the
    covered periods.
  • Coke’s CMAs sometimes required retailers to
    price featured packages (six-pack cans, for example) below
    competing products during a promotional period, or to
    always price certain packages below competing products
    (sometimes requiring prices as much as 30 cents less per
    ounce), even when competitors’ wholesale prices were below
    CCE’s, so that retailers had to charge higher prices for
    competing products than they otherwise would have in order
    to comply with the CMAs.
  • For a few retailers, Coke’s CMAs paid bonuses
    for not carrying competitive flavors of root beer and
    orange and grape drinks at all, thus driving competing
    products from stores in some areas and allowing CCE to
    raise the prices of its drinks.
  • CCE increased its prices at times in some
    locations, even though sales were increasing.
  • Some of Coke’s CMAs required that in
    refrigeration units its products be displayed in
    horizontal sets at thigh-to-eye level so as to be most
    easily seen by consumers, and that no other refrigerated
    products be located near a store check-out area.
  • Although Coke did not require retailers to give
    its products more shelf space, refrigerated area, or floor
    displays than was commensurate with its 75-80 percent
    share of the CSD market, it sometimes required that part
    of that space be used for soft drinks sold by CCE that had
    no market share at all (like Barq’s Root Beer (versus
    A&W), Minute Maid orange and grape drinks (versus Sunkist
    and Welch’s), and Sprite (versus 7-Up)). This left little
    space for competing drinks.
  • Because of the limited retail display space, the
    RCC franchisees could not introduce two other products, RC
    Edge and Diet Rite, into the market without diverting
    space already occupied by their other products.
  • Bottlers had no difficulty getting shelf space
    at Wal-Mart, where there were no Coke CMAs, and Coca-Cola
    often sold for more than competing CSDs, reflecting the
    difference in the wholesale prices.

An economist testified for the RCC franchisees that Coke’s
use of CCE’s market share to force retailers into CMAs
inhibited competition and negatively impacted the RCC
franchisees’ sales.[fn11] He also testified that Coke was
monopolizing or attempting to monopolize the CSD markets
served by the parties and, if left unchecked, would
succeed.[fn12] But he offered no opinion on how the CMAs
affected price and output in any relevant market as a
whole[fn13] and made no attempt to quantify to what extent,
if at all, Coke had foreclosed competition in the relevant

Coke offered evidence that the promotional efforts
encouraged by their CMAs resulted in higher volumes of CSDs
sold and lower prices generally, that the RCC franchisees’
products were available in all areas to any consumers who
wanted them, and that the RCC franchisees could have
attempted to negotiate CMAs with retailers or increase
their own promotional efforts but intentionally chose not
to do so. There was also evidence that CCE competed
vigorously with the Pepsi-Cola bottlers. But the jury found
none of this evidence persuasive.

The RCC franchisees alleged that throughout the 1990s Coke
had engaged in an unreasonable restraint of trade and had
monopolized, attempted to monopolize, and conspired to
monopolize the CSD market in their exclusive territories in
the Ark-La-Tex region, all in violation of the TFEAA[fn14]
and the antitrust laws of Arkansas, Louisiana, and
Oklahoma. Coke did not dispute the RCC franchisees’
assertion that the laws of the other three states were
identical to Texas law, and accordingly the district court
presumed they were. The court did not define the relevant
geographic market for the jury but instructed the jury that
they could consider various factors in determining the
relevant market or markets. The jury found that CCE had
engaged in monopolization or attempted monopolization, that
CCE and The Coca-Cola Company had engaged in an
unreasonable restraint of trade and a conspiracy to
monopolize, that CCE and The Coca-Cola Company had acted
willfully or flagrantly, and that in so doing CCE and The
Coca-Cola Company had wrongfully interfered with the RCC
franchisees’ existing and future business relationships
with retailers. The jury was asked to find actual damages
for both antitrust and tortious interference claims,
including past and future lost profits and lost franchise
value, separately as to each of the five RCC franchisees.
For the three operating in two states, the verdict did not
distinguish between damages incurred inside and outside
Texas. The court trebled the total actual antitrust damages
of $5,153,898.80 as required by statute,[fn15] credited
$817,000 paid by the Pepsi defendants in settlement, and
rendered judgment against Coke for $14,644,696.40, plus
$500,000.00 attorney fees. The court also enjoined Coke
from prohibiting any retailer from engaging in any form of
advertisement or promotion of any nationally branded CSD,
prohibiting any retailer from displaying or placing cold
equipment for any nationally branded CSD, prohibiting any
retailer from selling any nationally branded CSD or flavor,
requiring or suggesting that any retailer use horizontal
sets, or requiring or suggesting any retailer use a ratio
to allocate space in cold equipment, through any contract
or incentive program, in any county or parish where the RCC
franchisees operated, in Arkansas, Louisiana, Oklahoma, and
Texas, for a period of seven years. The text of this broad
and detailed injunction is set out in the appendix.[fn16]

The court of appeals affirmed.[fn17] It rejected Coke’s
argument that the district court should not have awarded
damages and injunctive relief under the TFEAA for conduct
that occurred outside Texas. Quoting from section 15.04 of
the Act, the Court concluded that “[t]he language of the
Texas statute is clear in its intent to cover monopolistic
practices in commerce `occurring wholly or partly within
the State of Texas.'”[fn18] Further, because CMAs had been
executed in Texas and provided that Texas law would govern
disputes, the court stated that Coke could not “avoid the
protections to Texas consumers provided by that same
law.”[fn19] The court did not explain how Texas consumers
were protected by relief granted the RCC franchisees for
Coke’s conduct in other states. Alternatively, the court
determined that the judgment could be based on the RCC
franchisees’ alleged violations of Arkansas, Louisiana, and
Oklahoma antitrust statutes, and absent any contention that
those statutes differed from Texas law, “we presume that
the laws of those states are the same as ours.”[fn20]

With respect to liability, the court rejected Coke’s
argument that the absence of any evidence showing a
foreclosure of competition in any relevant market was fatal
to each violation claimed by the RCC franchisees. The court
did not take issue with Coke’s assertion that such evidence
was lacking but reasoned instead that liability could be
based on evidence that enforcement of any of several CMA
provisions — “ranging from limitations on shelf
space and placement, to advertising requirements and
limitations on both external and in-store advertising of
competitors’ products, to exclusive-flavor provisions, to
pricing requirements that ensured Coke products would have
a price advantage over other soft drinks” — “could
be read to restrict trade and impact competition”.[fn21]
The court concluded simply that “[a]lthough any one of
the[se] factors . . . might be insufficient to allow the
jury to conclude Coke had acted to restrain trade, due to
the numerous factors presented in evidence, it is not
appropriate to take this determination out of the hands of
the jury.”[fn22] As for the RCC franchisees’ monopolization
claims, the court rejected Coke’s argument that there was
insufficient evidence to define the relevant geographic
market, and held that there was sufficient evidence for the
jury to find monopolization, citing testimony that a
bottler with 80 percent market share “could impose its
market terms on retailers, that at least one retailer felt
compelled to accept CMA terms . . . [and] that Coke targeted
one Bottler with the intention of taking it out of

We granted the petition for review.[fn24] In this Court,
as in the court of appeals, Coke raises a number of issues.
We find it necessary to address only two.