The Spanish National Competition and Markets Commission (CNMC) has closed an investigation of Schweppes, S.A., the Spanish subsidiary of the Orangina Schweppes Holding B.V. group (“OSHBV”) in relation to restrictions of parallel trade.
The CNMC opened an investigation in September 2015 after receiving a complaint against agreements between Schweppes S.A. and several distributors including a clause preventing the distributors from selling Schweppes branded tonic water that had not been produced in Spain.
The Cola-Cola group owns the trademark “Schweppes” in the UK and ten other EU Member States whereas OSHBV owns the trademark in Spain and twenty other countries, 16 of which are EU Member States. Schweppes S.A is the exclusive licensee of the trademark in Spain.
In 2013 Schweppes S.A. learnt that some distributors were selling Schweppes-branded tonic water that had been produced in the UK and in other European countries under the Coca Cola owned trademark. Schweppes S.A. initiated judicial proceedings against said distributors for violation of its trademark “Schweppes “ rights in Spain. Several proceedings were settled on the basis of agreements prohibiting the distributors from selling in Spain any Schweppes branded tonic water that had not been produced in Spain itself.
The CNMC considered that prohibition went beyond what was necessary to protect Schweppes S.A.’s trademark rights since it prevented parallel trade of Schweppes-branded tonic water produced under the OSHBV-owned trademark in other EU countries. Nevertheless, the CNMC agreed to settle the case based on the following commitments:
- A change in the wording of the existing contracts so as to prohibit the import, commercialization and sale only of the Schweppes tonic water manufactured in the UK by Coca-Cola;
- An undertaking that future agreements would only prohibit the import, commercialization and sale of Schweppes tonic water manufactured in the UK by Coca-Cola; and
- For future judicial proceedings claims to be limited to Schweppes tonic water manufactured in the UK by Coca-Cola and OSHBV will request the judges to modify pending claims accordingly.
The CNMC can close investigations based on commitments under article 52 of the Spanish Competition Law, a possibility that was introduced in 2007 and in 2011 the former Spanish National Competition Commission published a notice describing the different aspects of the procedure and the kind of cases that can be closed by offering commitments. However, the procedure is seldom used in practice: in recent years only two or three cases per year.
At the same time, Commercial Court No. 8 in Barcelona has made a preliminary reference to the Court of Justice of the European Unión (CJEU) for a ruling in relation to one of the cases where OSHBV is litigating against a number of independent distributors for a possible infringement of its trademark rights. Specifically, the national court is asking whether a trademark right can be relied on to prevent parallel trade in a case where the trademark is under separate ownership in different Member States and the owners have promoted a global brand image in all the European market, thus creating confusion for consumers as to the origin of the products sold under the trademark.