The Coca Cola Company is one of the biggest companies in the world. The company has manage to overcome several market forces for several decades in the beverage industry. This firm has been able to manage the increasing competition from various firms around the world, and is currently the market leader in the beverage industry. The company has developed a very strong brand in the market. According to Kotabe and Helsen (2009), the brand Coca Cola is one of the best and widely known brands in the market. The company operates globally, with a very strong ground in all the continents around the world. The company produces and distributes non-alcoholic drinks in various markets around the globe.
In the recent past, Coca Cola has faced a serious challenge with its products in the market because of health concerns that have been raised about the products. The report by Bodden (2009) says that health specialists have observed that the cola products are not healthy for consumption. This scholar notes that the health concerns about the cola products starts from the preservatives used in these products. Although the findings are yet to be concluded, Fernando (2009) says that there is a very strong link between cancer and some of the preservatives used in these drinks. The ingredients that are used in coming up with this product are also considered as health risks. These findings have had a huge negative impact on Coca Cola. This firm has been forced to look for a way of stopping the massive exodus of customers from its products. It is clear that individuals who are health conscious are drifting away from the cola drinks. This causes a massive drop in the profitability of the firm. This company was therefore, forced to come up with alternative products that would be appealing to the health conscious market segment.
Coca Cola Faces a Law Suit over its Product Safety in the Market
In its quest to appeal to customers who had drifted away from its products in the market, this company has come up with products that are considered healthy. This company therefore, came up with products such as fruit juices and bottled water as a form of attracting health conscious customers. After a comprehensive market research, this company came to realize that the market for bottled water was sharply on the rise, both in the local and international market. In the United States, customers preferred water to cola products. The fact that youths were also considering bottled water as a form of showing a class and as a new trend convinced this company that this product was highly valued. The company started a subsidiary firm called Glaceau which produced vitamin water. It is through this company that Coca Cola Company faced a lawsuit as discussed below.
Case: James Koh vs. Coca Cola Company of January 15, 2009
James Koh has been residing in San Francisco, California for several years. Mr. Koh, and others who were not before the court, have been consuming products of Coca Cola Company for several years. Before it was reported that cola products are not good for health, Koh and his family consumed a lot of the cola products. However, when this finding came out, Mr. Koh was one of the customers who drifted away from the cola products. He was determined to get other forms of beverages that were not hazardous to his health and that of his family. When Glaceau, a subsidiary firm of Coca Cola Company, came up with vitamin water, the move was welcome to Mr. Koh and many other residents of San Francisco. They knew that this product would not only quench their thirst, but also help them with the much needed vitamin in their body. Mr. Koh knew that this product will be helpful even to his children in getting the much needed nutrients in the body. He and his family started consuming the product on January 15, 2005.
It was therefore, shocking news when Mr. Koh came to realize that the vitamin water that was thought to offer good health to consumers was no different from the hazardous cola products. In the advertisements, the company had stated that this drink reduces the risk of various chronic diseases, promotes eye sights, eliminates joint pains, and promotes the function of the immune system. Every time Mr. Koh bought a bottle of water, he was actually buying these health benefits that the firm claimed that this drink offered. The fact that each bottle of the vitamin water had about 33 g of sugar which promotes diabetes, obesity and other health complications was shocking. He therefore felt cheated by this company, and wanted to be paid damages. Center for Science in the Public Interest was a co-counsel in this case.
On May 20th, 2009, James Koh withdrew his claims against the company without any duress or prejudice from any person or groups. Judge Vaughn Walker therefore, ordered the case closed. The plaintiff (Mr. James Koh) stated that he was not willing to press on with the case against the defendant (Coca Cola Company). This voluntary dismissal witnessed by Michael Reese of Reese Richman LLP, Patrick Sheehan of Whatley Drake & Kallas LLC, and Stephen Gardner of Center for Science in the Public Interest.
Legal Theories Used by the Plaintiff to Recover in this Lawsuit
When Coca Cola was first arraigned in courts, it fought against the allegations that were made by the plaintiff. The company stated that the claims made against it were unfounded. The company defended their advertisement and stated that on the package was clear indication of the ingredients of the drink (Bodden, 2009). This, according to the company, was not a violation of law, and therefore, the claims made by the plaintiff were unfounded. Before the case could officially be withdrawn by the plaintiff, the company had to come up with means through which it could defend itself. As Fernando (2009) says, not only would the firm be forced to pay for damages if it lost the case, but the name of the company would also be tainted grossly. The strong brand the Coca Cola had built globally would be eroded, and this may bring down their business. The firm had to come out strongly from the legal front, to explain itself and ensure that the public is convinced that the allegations were wrong.
Bodden (2009) says that this company had to find a way of using the natural law to its advantage. In its advertisement, Coca Cola Company was trying to reach out for the market that was drifting away from its products. The company was popularizing a product that it considered was needed in the market. In the process of doing this, the firm ended up stating some of the qualities of this product that the plaintiff considered as untrue. The firm stated that the container used to package the drink had a clear labeling of all the ingredients that were in that water. Naturally, an individual who is concerned of the ingredients would first read the labels before taking the product. When one realizes that the ingredients are not meeting his or her standards, he or she has the liberty not to consume the products. In various stores where this product is sold, the company stated that customers are always at liberty to examine the products before making the purchase. When a customer reads the ingredients of this water and realizes that it has a substance that is toxic, the first action would always be to stop the purchase. That is very natural. Such a customer can then consider taking legal action against the company for selling products that are toxic to the public.
In this case however, the plaintiff acted differently. He had been consuming this product for about five years. All the ingredients that Coca Cola uses to make this product are approved by relevant authorities, and then they are clearly indicated in the label. The plaintiff had been reading this, but ignored it for all this period. In the claims, the plaintiff is not suffering from any health complication that may be directly related to this drink. It is natural that the complainant had no clear basis of accusing this firm after all this time of consuming this product. This is what this firm held in its defense against the accusations. Luckily, the plaintiff withdrew the case before its completion.
Changes that Have Taken Place in the Company after the Litigation
This company has been keen to ensure that it does not face any similar case of litigation. The management of this firm has made an effort to ensure that its products meet the required standards so that it may not be accused of any wrong doing in the competitive market. According to Halbert and Ingulli (2012), the beverage market has become so competitive that firms must use every available strategy to ensure that they stay above the competition. This scholar notes that when a firm faces litigation about its products, this can easily be used by competitors as a tool to fight it in the market. This may be even more complex in cases where the firm is a market leader as Coca Cola is today. The management of this company has therefore, made a series of changes, both to ingredients of its products, and the marketing strategy it uses in the market. The first step was to change the advertisement it was using in the market. The purpose of doing this was because the advert was already tainted when it was taken to court. The firm then moved with speed to reduce the amount of sugar in this drink from 33 grams, to a bare minimum. In so doing, the company had to explain to the public the reason for doing this. This was important to make the public feel that the adjustment was to increase the quality of the product, and not to eliminate the poison that was in the previous product. The advertisement was keen to emphasize on the ingredients in the drink, and what the ingredients offer the body.
This litigation had a massive effect on this firm in its American and part of the European market. The market became very sensitive of the products that this firm offered. A portion of the market developed some phobia towards the product during, and even after the litigation. According to Fernando (2009), the withdrawal of the case by the plaintiff may not have been good news to Coca Cola Company as many would have thought. This scholar notes that many people were waiting to hear about this case and confirm or dispel their fears towards this product. By withdrawing the case, it was clear that both sides were denied chances to explain themselves to the public. The plaintiff may not have achieved his goal of getting paid for the damages, but if he was working for a rival firm, the objective was achieved. The image of this company was already tainted, and the company was not given a chance to clear it. It was not offered an opportunity to convince the market that its products are safe for consumption. This firm therefore, lost a portion of the market. The changes made on the product, and advertising was meant to bring back these customers.
Regulatory Agency Responsible in this Industry
The Coca Cola Company operates in the beverage industry. According to Bodden (2009), business cannot run in an environment that lacks laws and regulations. Lawlessness would always bring down a business unit. For this matter, various authorities are always established to ensure that firms operate in an environment where law is observed by everyone. This way, it becomes easy to monitor how different players are operating. Food and beverage industry is very sensitive. As such, there are always a number of agencies that are always tasked with ensuring that firms comply with the set regulations. Food and Drug Administration is the main regulatory agency that ensures that firms are operating within the specifications (Prentice & Bredeson, 2010). They check the standards of the beverages, and the content they have to ascertain that they are safe for public consumption. There are other regulatory agencies that work hand in hand with the department of health to ensure that beverages that are circulated in the market are of the right standards.
Recommendations for the Coca Cola Company to Avoid Lawsuit in Future
Lawsuits always damage the image of a firm, especially if the firm loses the case. This firm must therefore, commit itself to avoiding any litigation that may face it from all possible fronts. The flowing are some of the ways in which this firm can avoid litigation.
- The firm should avoid stating features that they products do not have in their advertisement.
- The firm should clearly indicate all the ingredients that are in their products in a clear manner that can easily be read.
- The management should consider undertaking corporate social responsibility to create awareness about some of the diseases that the public fear could be caused by some of its products. This will avoid cases where people rush to court for lack of information.
- The management should ensure that there is easy communications with customers, to allow them reach out to the firm over any issue they may have before rushing to courts.
Bodden, V. (2009). The story of Coca-Cola. Mankato: Creative Education.
Fernando, A. C. (2009). Business Ethics: An Indian Perspective. New York: Prentice Hall.
Halbert, T., & Ingulli, E. (2012). Law & ethics in the business environment. Mason: South-Western Cengage Learning.
Kotabe, M., & Helsen, K. (2009). The SAGE handbook of international marketing. Los Angeles: SAGE.
Prentice, R. A., & Bredeson, D. (2010). Student guide to the Sarbanes-Oxley Act. Mason: South-Western Cengage Learning.