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Date: January 24, 2020
Posted by: CPDMA Team

Coca-Cola goes to court against Heineken for 'corporate fraud'

Company requests cancellation of the purchase of Brasil Kirin by the Dutch group.

Coca-Cola Brasil and its national associations of manufacturers have filed a request with the Court of Justice of the State of São Paulo (TJSP) to annul the purchase of Brasil Kirin by Heineken and to condemn the Dutch group, together with Cervejarias Kaiser Brasil and Bavaria SA, to pay compensation for fraudulent “corporate manoeuvres”. The case was revealed by the newspaper Valor Econômico. Read the entirety of the initial.

Coca-Cola's claim is that there was an alleged breach of the Dutch exclusivity agreement for the distribution of alcoholic beverages with Coca-Cola bottlers. The deal, according to Coca-Cola's lawyers, was signed in 1993.

According to the initial petition, signed by the law firms Sergio Bermudes and E.Munhoz Advogados, the purchase of Brasil Kirin by Heineken, through its subsidiary, Bavaria, was an “illicit” act that broke the exclusivity agreement previously signed and brought financial losses to Coca-Cola.

“This action represents another chapter in the saga of the Coca-Cola Distribution System to prevent the realization of the opportunistic maneuver engineered by the Heineken Group, in an attempt to evade the clear contractual provisions freely agreed (and fulfilled) by the defendants themselves for many decades” , asserts the petition.

The case was also discussed in an arbitration procedure at the Brazilian Center for Mediation and Arbitration (CBMA), as a way of preventing the dispute from taking place in the Judiciary. According to the initial petition, the arbitration award unanimously condemned Heineken to fully comply with all contractual terms agreed between the parties, including the right of exclusivity. 

Despite the decision, the arbitration court found itself incompetent to analyze the scope of the exclusivity right provided for in the contracts and assess whether Heineken and its subsidiaries acted unlawfully to circumvent the exclusivity right provided for in the contractual instruments.

According to Coca-Cola, Bavaria would not have a real business purpose, that is, it would only serve to facilitate the acquisition of Brasil Kirin. This facilitation would occur through a process known as goodwill, which consists of the creation of an intermediary holding company, which would be Bavaria, with the objective of only reducing the incidence of taxes during the purchase transaction. 

For the lawyers, “the vehicle that currently serves as an instrument to circumvent the authors' exclusive rights is Bavaria itself”. 

Alaska Project

Part of the conflict between the two beverage brands centers on the so-called “Alaska Project”, a negotiation between Heineken and Brazilian Coca-Cola makers for the joint purchase of Brasil Kirin. 

However, in 2016, according to the initial petition, there was an “attempted corporate coup”. This is because, on the eve of the approval by the Administrative Council for Economic Defense (Cade) of the purchase of Brasil Kirin, the lawyers claim that there was a radical change in posture on the part of the Dutch company. 

The Heineken Group would have broken with the product distribution relationship originally maintained with distributors, starting to distribute all its products through the Brasil Kirin network.

“It so happens that, maliciously, at the same time that they sought the support of the Coca-Cola Distribution System for the acquisition of Brasil Kirin, the defendants began to jointly orchestrate a corporate maneuver against the authors of this action”, they allege. the lawyers in the initial petition. 

For the lawyers, the stance, in addition to violating the principles of good faith and contractual loyalty, also violates “the most rooted principles of our corporate law”.

Cervejaria Kaiser Brasil SA stated that “it is not in a position to comment on the points raised by the report, since it has not received any citation about the alleged action and, therefore, is completely unaware of the existence of the case. In any case, the arguments brought by the report seem to be a mere repetition of the discussions that took place in the arbitration, which is not subject to any type of appeal.”

The case is being processed under number 1004486-07.2020.8.26.0100.

Source: Alexandre Leoratti via Jota.

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