April 12, 2006
Killer Coke? - Part I
Posted by Elizabeth Brown

It must be tough to be a Coca-Cola executive nowadays. Two recent news stories have alleged that Coca-Cola was responsible for killing people but for very different reasons. One argues that Coca-Cola has supported human rights abuses in Colombia and Turkey and environmental pollution in India that have resulted in deaths in those countries. The other argues that sugary drinks, like Coke, are a significant part of the obesity crisis in the United States. Obesity leads to health problems that kill 112,000 Americans annually. This post will deal with the first allegation and I will follow up with another post that deals with the second.

The first allegation arises out of attempts to hold Coca-Cola liable for the alleged actions of its subsidiaries and affiliated companies in Colombia and Turkey. AP and several other media outlets recently reported that Macalester College, a small liberal arts college located in St. Paul, Minnesota, is considering joining a boycott against Coke products based on allegations that Coca-Cola through its local subsidiaries abuses human rights, labor and the environment in Columbia, India and Turkey. An editorial in The University of Minnesota’s newspaper urged the UofM to follow Macalester’s lead. New York University and the University of Michigan instituted boycotts of Coca-Cola last year.  The Chronicle of Higher Education also has an article on this campaign to boycott Coke that will be published in the April 14th issue (although it is already available online).  (Note: This boycott is not at issue at the University of St. Thomas (UST), where I teach, because Pepsi already has an exclusive contract to supply soft drinks to UST.)

Yesterday, according to the Ann Arbor News, the University of Michigan, however, announced that it would allow Coca-Cola back on campus.  What was the reason for this change of heart at Michigan? Coca-Cola and a federation of labor organizations got the United Nations International Labour Organization to agree to conduct an independent, third-party investigation of the human rights abuse allegations in Colombia. Coke is talking with TERI, a NGO based in Delhi, to conduct a third party assessment of Coke’s environmental record in India. In addition, Coca-Cola joined the UN Global Compact on March 8, 2006. The Global Compact asks companies to embrace and enact ten core principles in the areas of human rights, labor, the environment, and anti-corruption measures.

Unfortunately for Coke, the organizer of this campaign and some activists supporting this campaign have not welcomed these developments and continue to call for boycotts against Coke.  Some of these activists feel that the ILO investigation is tainted by conflicts of interest even before it has begun.  The Macalester Social Responsibility Committee, which originally recommended that the college ban Coke at the end of March, has refused to reconsider its recommendation in light of the recently announced ILO investigation.

The fact that the organizer of the campaign hasn’t welcomed these developments is not surprising. The organizer behind the Killer Coke campaign is SINALTRAINAL, the Colombian National Union of Food Industry Workers, which filed a lawsuit against Coca-Cola and its Colombian bottler in the U.S. District Court for Southern District of Florida in 2001.  In 2003, the District Court dismissed Coca-Cola and Coca-Cola Colombia from the suit.  In dismissing Coca-Cola and Coca-Cola Colombia from the suit, the District Court noted:

The Bottler's Agreement does not give Coca-Cola U.S.A. or Coca-Cola Colombia the duty or right to control all aspects of the Bebidas plant operation as alleged; rather, it is the type of agreement typically found in a franchise relationship. It permits Coca-Cola U.S.A. to require Bebidas, as a Coca-Cola bottler, to meet certain standards necessary to protect Coke's product in the marketplace (i.e. use of the trademark, packaging, quality control, etc.). Nothing in the agreement gives Coca-Cola U.S.A. the right, obligation, or much less the duty, as Plaintiffs argue, to control the labor policies or ensure employees' security at Bebidas. The Bottler's Agreement clearly refutes Plaintiffs' allegation that Coca-Cola U.S.A. had total control. Without such control, Plaintiffs cannot tie the Coca-Cola Defendants with their alleged alter egos or agents (Kirby, Kielland, Bebidas and Mosquera). Hence, Plaintiffs cannot prove that the Coca-Cola U.S.A. or Coca-Cola Columbia violated international law by conspiring or acting jointly with the paramilitary in Carepa to murder Gil under color of law.

The owners of the Bebidas bottling plant in Colombia, Richard Kirby and his son, are both residents of Florida. The District Court allowed SINALTRAINAL to pursue its case against them and Bebidas.  Nevertheless, SINALTRAINAL is not satisfied with just these defendants.  Since it couldn't hold Coca-Cola liable in court, SINALTRAINAL commenced the Killer Coke campaign.

In pleading its case to the student activists and others, SINALTRAINAL wants to ignore fundamental aspects of contract and agency law, such as the rule that an entity contracting with an independent contractor is not automatically liable for the actions of the independent contractor just because it has a contract with them.  On the Killer Coke website, SINALTRAINAL cites the fact the Coca-Cola was the largest shareholder in Panamerican Beverages Inc., one of Coca-Cola's largest bottlers in Latin Amerca (Panamco), as grounds for finding that Coca-Cola had sufficient control over Panamco to be held responsible for the alleged human rights abuses committed at the bottling plant owned and operated by Bedidas.  SINALTRAINAL doesn't disclose that Bebidas is a small, closely held corporation, which is owned and managed by Richard Kirby and his son, Richard Kirby Kielland, not Coca-Cola or Panamco.  The only control that Coca-Cola and Panamco had over Bebidas was through the Bottling Agreement, which, as the District Court noted, did not give them a say in the labor policies or practices of Bebidas.

I doubt that the student activists fully appreciate the extent to which their goodwill is being manipulated by SINALTRAINAL to force a settlement from Coca-Cola, which the law says SINALTRAINAL is not legally entitled.   In addition, I doubt that the undergraduate students pushing these boycotts understand the legal principles involved and why they are important.  If every corporation that wanted to operate in or make an investment in a developing country knew that it would be held 100% liable for everything that went on within the businesses with which it dealt, there would be considerably less foreign investment and trade with developing countries and the people in those developing countries would be worse off than they are now.  If 100% liability was the rule, corporations that did business in developing countries with weak legal regimes would have substantially higher monitoring costs than their competitors, which they may not be able to pass along to consumers.  Except in limited circumstances, consumers have not show a willingness to pay higher prices for goods made by companies that act more socially responsible. 

Campaigns like Killer Coke, which target some firms in an industry but not all of them, put the targeted firms at a competitive disadvantage relative to their peers.  In order to quell the negative publicity, such firms frequently spend more money and resources trying to monitor their affiliates and subcontractors than their competitors do.  If they can, such firms try to push these added expenses off on their subcontractors, which puts many developing country companies in a Catch-22 situation. If they don't comply with the labor and environmental standards demanded by Western companies, then they might lose their contracts.  If they do comply with the labor and environmental standards demanded by Western companies, then they might lose their contracts to a lower cost producer.

In addition, I doubt that the students would be willing to sponsor a boycott against both Coca-Cola and Pepsi, even though both Pepsi and Coca-Cola are facing allegations of polluting the environment in India.  At the time of the alleged human rights abuses in Colombia (1996), Pepsi was subject to student boycotts for operating in Myanmar (Burma). SINALTRAINAL had attempted to start a student boycott of Coke in 1996-97 when the students were boycotting Pepsi, I think that it would have had considerable difficulty finding supporters. Students might not mind switching from Coke to Pepsi or vice versa, but I don't think that they could easily be convinced to give up both.

| Bookmark

TrackBacks (0)

TrackBack URL for this entry:

Links to weblogs that reference Killer Coke? - Part I:

Recent Comments
Popular Threads
Search The Glom
The Glom on Twitter
Archives by Topic
Archives by Date
January 2019
Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    
Miscellaneous Links