Cablegate: Ambassador Raises Coke, Nike Complaints with Trade

Published: Mon 24 Nov 2008 01:49 PM
DE RUEHEG #2406 3291349
R 241349Z NOV 08
E.O. 12958: N/A
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1. (SBU) SUMMARY: Ambassador met November 23 with Minister of
Trade Rachid Rachid to discuss two ongoing complaints by US firms,
Coca Cola and Nike. In Coke case, which Rachid described as a
commercial dispute rather than a trade mark issue, he gave his
assurances that his ministry would not intervene on the side of
either party to the dispute as long as the case was in the courts.
Rachid was well aware of Nike's concerns about the Egyptian
requirement that labels be sewn into items imported into Egypt, and
said the labels were for the protection of the exporters, but said
he would be willing to discuss other options with Nike. END
2. (SBU) The Ambassador asked Minister of Trade Rachid about the
status of an ongoing dispute that Coca Cola is having with its
former bottler, SONUT, a prominent Egyptian bottling company. She
said that while she understands that the case is in the courts, that
it is important that Coca Cola get some immediate, short term legal
relief as the case could drag on for some time. Rachid responded
that he was very familiar with the case, and, having been a licensed
bottler himself in the 1970s, knew both the Coke and the SONUT
officials personally. He said Egypt is pleased to have Coke
operating in Egypt, and that the company has been a very successful
one. At the same time, he said, SONUT is a very distinguished
Egyptian firm. He was disappointed that the two sides had not been
able to reach an amicable agreement and that they had wound up in
court. He is also concerned that Coke appears to be turning to the
301 process for redress, when the case is not a trademark case but
in fact a commercial, contractual dispute. He said that his
ministry would provide all reasonable protection to Coke but would
not step into the legal case.
3. (SBU) If, Rachid said, a third company had started bottling
beverages using one of the Coke trademarks, Egypt would not hesitate
to enforce the case as a trademark infringement. In this case,
however, SONUT had been the licensed bottler for the products in
question and that the two companies disputed whether or not the
contract was still in force. Coke says that they have cancelled the
contract, and awarded it to another bottler, which is now producing
under license. SONUT claims that the contract has not, in fact,
been cancelled and that they still have the exclusive right to
produce Coke products in Egypt. Coke says the syrup is adulterated
that SONUT is using is adulterated; SONUT says it is from their
legitimately-acquired Coke stocks. Rachind said that he had had
both sides in his office and tried to work out a compromise but had
been unsuccessful, and that the dispute had turned "ugly."
4. (SBU) In response to Coke's charged that the SONUT production is
adulterated and unfit for human consumption, Rachid said that this
was something his labs were capable of addressing. What they could
not do, he said, was determine if the SONUT production was a
legitimate Coke product, from a chemical point of view, or not. The
Ambassador noted that the ministry's own enforcement officers had
been to the new bottling company with which Coke had signed a
contract, had shut them down and confiscated their stocks. Rachid
acknowledged that this had happened, but that as soon as he had
heard about it he had overturned the action. The ministry had since
returned everything that had been seized, and Rachid had written to
the judge noting that the action had been in error. Now, Rachid
said, his ministry is under orders to not to interfere with Coke's
bottling operations, or on behalf of SONUT, and to await the outcome
of the legal process. For this, he said, he is taking some heat
politically as the Egyptian Federation of Industry and others have
tried to intercede on SONUT's behalf. In the meantime, the case has
been assigned to one of the economic courts and he is hoping for a
quick resolution of the case.
5. (SBU) The Ambassador also raised concerns expressed to us by
Nike about Egypt's labeling laws, which require importers to sew a
permanent label into textiles. The manufacturers have complained
that this adds time and cost to shipments into Egypt. Rachid said
that he had discussed this rule with Nike, and said that the purpose
of the law is to protect legitimate suppliers. He said that the
label prevents others from flooding the market with counterfeit, or
unlicensed goods. What can happen, according to Rachid, is that
sub-contract manufacturers in China, for example, gather up all the
production at the end of the year that hasn't been shipped for Nike
including products rejected by Nike, and sell it as legitimate Nike
production. To address Nike's concerns, Rachid agreed that any
permanent label or sticker would serve the same purpose, "as long as
it isn't something they can put on in the store" and that he would
be happy to talk to Nike if they had some other proposal.
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