America-Israel Patent Law Blog

Coca-Cola has been sold in Israel for a long time; while its main
competitor was still complying with the Arab boycott, Coke was not only
marketing its product here, but even set up a bottling plant (via a local
bottler) in Bnei Brak, today home to many meticulously religiously observant
Jews.  Needless to say that Coke products
sold in Israel are under rabbinical supervision to ensure that they are kosher.  And that Coke has many trademarks registered
in Israel.

Fast forward to 2013.  Coke, like
any successful business enterprise, wants to expand its markets.  So it should come as no surprise that Coke
has a bottling operation in Bitounia in the PA (via an authorized partner*).  It should also not come as a surprise that some
of the PA-produced Coke product makes its way into Israel. 

I don’t know how long Coke has been produced in the PA, and I don’t
know how long some of that Coke has been finding its way onto the shelves of Israeli stores.  What is clear is that the PA-produced product
costs less to consumers than the brown gold made in Israel, the price of which
is tightly controlled by the bottler. 
This makes the PA stuff attractive to Israelis who can get their hands
on it – and at least an annoyance to the local bottler, although probably not a
threat.  

The bad news for the Israeli bottler is that it doesn’t really have
legal recourse against the PA-produced Coke. 
That’s because it’s been long established in Israel that trademark law
provides no relief against parallel importation of genuine goods.  In the particular case that set that
precedent, the local authorized importer of Parker pens, who had an exclusive
contract with Parker, sued a third party who purchased Parker pens elsewhere, imported
them into Israel and sold them.  The
court held that since the pens in question were genuine Parker pens, there was
no infringement of Parker’s mark.  In the
present situation, the PA drink is genuine Coke, authorized by HQ in Atlanta
and legitimately bearing the Coca-Cola mark.

So what do you do when you want to protect monopoly rents but IP law
isn’t on your side?  You could try to
tell the public that the imported Coke is inferior, like the Israeli importer of
Huggies did two years ago when someone started importing
Huggies from Turkey and selling them for less.  But people can easily decide
for themselves about the quality of the PA Coke, and you’d probably annoy the
Mother Ship if you started bad-mouthing one of her other colonization teams.  

Personally, I suspect that if I were the bottler, my reaction
would be to go to the Coca-Cola Company and ask it to tell the PA bottler to
put a cap on his production, or to tell him that he’s not authorized to sell
outside the PA, since I’m assuming that the larger mark-up on Coke in Israel
means greater profits for the Coca-Cola Company. But since I'm not privy to the details, and there may be other variables at play in CCC’s calculus, I don’t
know if that approach would work.

What other options are open? 
Here’s where things take an Israeli twist.  The PA Coke is not under rabbinical
supervision.   So recently the Chief Rabbinate (a state
institution) issued a statement
warning people against buying the PA-produced Coke because it lacked such
supervision (see English-language article here).  It refrained from explicitly saying that the
Coke wasn’t kosher – after all, the same concentrate is used in Coke around the
world, sugar is sugar is water is water, so chances are the PA Coke is
kosher – but noted the importance of educating kashrut-observing people to only
buy rabbincally-supervised products.

I’ve no idea if the Chief Rabbinate discovered this “problem” on its
own or if it was informed of the matter by someone else, like the Israeli
bottler or one of the outfits that certifies the kashrut of the Coke from Bnei
Brak.  But since Bitounia is close to
Jerusalem, it seems to me that some enterprising kashrut agency could come to
the rescue and explain to the PA bottler the benefits of kosher
certification.  And then maybe the
Israeli bottler would have to drop its prices.  Or not.  It's hard to believe that the PA bottler has access to a distribution system in Israel as good as the Israeli bottler's; one suspects the competition would be limited to the Jerusalem area. 

*From http://www.coca-colacompany.com/contact-us/coca-cola-rumors-facts
(statement undated): “For example, in the Palestinian Authority, The National
Beverage Company, our Company's authorized local bottling partner, is an
independent, privately held company, managed by local Palestinian
businesspeople, who operate a Coca-Cola bottling
facility located in Ramallah and distribution centers in Gaza, Hebron and
Nablus. The National Beverage Company employs 200 local people and generates
employment for hundreds of others in related industries.”  Also look here.