Abstract
Coca-Cola is a large international company that owns several brands in the market of non-alcoholic carbonated beverages and produces and sells its goods on a global scale. Its recent market performance in Ethiopia has become a trigger of significant legislative, economic, and ethical concerns for the international community. The core of the issue is the unethical and unfair competitive strategy used by the Coca-Cola company in Ethiopia that yielded inequality in market share obtainment opportunities for new entrants. Since price stipulation is a violation of Ethiopian competition law, such conduct of Coca-Cola has triggered several ethical concerns.
Firstly, the persistent dominance in the market of non-alcoholic beverages of such a developing country as Ethiopia discourages small businesses and good competition. Secondly, price fixation imposes unequal distribution of opportunity for development among other competitors, leading to Coca-Cola’s monopoly. Thirdly, the company outperforms the manufacturers of healthy drinks by promoting sweetened beverages, which are harmful to human health if consumed in non-moderated quantities. The paper explores and analyzes these ethical issues with reference to legal publications and research to validate Coca-Cola’s unethical conduct.
Introduction
Coca-Cola is a company with a recognizable brand and a reputation of a large corporation with a global market presence. Its share in the market of non-alcoholic carbonated beverages is the largest in the world, with approximately “1.90 billion of Coca Cola lovers in 200 countries consume coca cola every day” (Grewal & Grewal, 2018, pp. 725-726). The company now has about 500 brands that are promoted and sold under the inspirational marketing campaign that “attracts all its customers and encourages them to share coke with their loved ones” (Grewal & Grewal, 2018, p. 726).
However, despite the ethical goals, the company’s operations in Ethiopia have been characterized by unfair competition practices, which contradicted the country’s legal provisions. The company has been involved in including price-maintenance clauses in its agreements with distributors, which has impaired the legal grounds of competition in Ethiopia according to its antitrust law. The investigation into the violation of fair competition rules has triggered significant ethical concerns in relation to the performance of Coca-Cola, which is the subject of this paper’s analysis.
Coca-Cola’s Dominance as a Threat to Healthy Competition
Ethiopia, as a developing African country, is undergoing a significant economic shift toward development. It attracts foreign investment and promotes internal economic advancement by means of fair competition for equal market share opportunities for both local and international entities (Stargard, 2019). However, after it had been revealed that Coca-Cola had price stipulation clauses in its agreements with distributors and dominated the market of beverages with its multiple brands, an investigation followed. The legal authorities found that “although barriers to entry in the relevant markets are not prohibitive,” Coca-Cola continued to dominate the market “notwithstanding the entry of new products over time” (COMESA Competition Commission, 2018, p. 2).
Coca-Cola and its distributors were in vertical relationships where the profit margins benefited from distributors. Thus, the company’s conduct was evaluated as a violation of the law since “the stipulation of prices may have anti-competitive effects in the market” (COMESA Competition Commission, 2018, p. 2). Thus, such unfair competition provokes several ethical concerns that require analysis.
One of the ethical issues relevant to the problem at hand is the deliberate dominance of a large international corporation like Coca-Cola in a developing economy. Having a power of influence in the market of carbonated non-alcoholic beverages, Coca-Cola imposes rules on other competitors who are unable to withstand the competition. Indeed, due to the vertical distribution practices, the company obstructs the fairness of profit-making in the market and eliminates competitive opportunities for local companies (Stargard, 2019). With the majority of market share concentrated in one large company, it is unfair to other competitors who might lack similar resources and brand reputation but should be equally represented in the domestic economy. It poses a significant ethical concern of fairness since the opportunity of entering the market for local companies is hindered.
Price Stipulation as a Determinant of Unethical Monopoly
A significant ethical concern is associated with the fixation of prices that Coca-Cola imposes on the market of beverages through its contracts with distributors. Stipulated prices are a characteristic of monopolistic economic tendencies, which are discouraged by Ethiopian competition law. Indeed, it might be considered as discrimination against consumers due to the burden of high costs as a result of the fixation of prices by Coca-Cola. The unfair competition that follows from the stipulation of prices is both unlawful and unethical since the company disregards the law and provokes injustice in the market for both competitors and consumers. Moreover, the investigation of the case of Coca-Cola “fails to make any mention of the relevant legal standard,” as well as the company fails to incorporate Ethiopian law into its practices (Stargard, 2019, para. 8). Thus, such conduct is a vivid example of unethical economic performance.
Profit-Making Using Unhealthy Products
Moreover, another ethical concern is related to the designated market in which Coca-Cola dominates. Indeed, it is formulated as the market of non-alcoholic carbonated drinks, which include sparkling water alongside sweetened drinks produced by the analyzed company (Stargard, 2019). In such a manner, the company obstructs the availability of healthy choices of drinks for consumers by overloading the market with sweetened drinks. As it has been mentioned, Coca-Cola owns approximately 500 brands, among which “Coke Diet, Sprite, Fanta, Coca Cola Zero, PowerAde, Minute Maid” and others are presented in the Ethiopian market (Grewal & Grewal, 2018, p. 725).
All these products belong to one company but formally compete with one another on the shelves of shops and supermarkets. The abundance of sweetened drinks produced by Coca-Cola that unfairly dominates the market of non-alcoholic carbonated beverages excludes healthy drinks’ potential competitive advantage. As a result, consumers are disproportionately exposed to unhealthy beverages, which has negative long-term outcomes for the population’s health.
Conclusion
In conclusion, the analysis of the ethical premises of Coca-Cola’s unfair competition in Ethiopia has revealed a number of concerns that might harm the local economy and consumers. The company engaged in vertical distribution practices and included the stipulation of prices in its agreements, which contradicts the provisions of Ethiopian competition law. Coca-Cola’s conduct is unethical due to the limiting of competing opportunities for local companies, monopolistic approaches, and the promotion of unhealthy beverages. Thus, the investigation of the case should be extended beyond mere economic and legal realms and include ethical considerations as well.
References
COMESA Competition Commission. (2018). Decision of the 49th (forty-ninth) committee responsible for initial determination in the investigation into the distribution agreements between Coca Cola Beverages Africa and distributors in the common market. Web.
Grewal, S., & Grewal, D. (2018). Understanding the concept of customer perceived value from both organizations perspective and customers perspective – a case study on Coca Cola. International Journal of Research in Engineering, Science and Management, 1(12), 725-730.
Stargard, A. (2019). Competition enforcer terminates RPM investigation into Coca-Cola. African Antitrust and Competition Law. Web.