Reference ID: 08CAIRO2406

Created: 2008-11-24 13:49  

Released: 2011-08-30 01:44    


Origin:  Embassy Cairo




DE RUEHEG #2406 3291349


R 241349Z NOV 08










E.O. 12958:  N/A





Sensitive but unclassified.  Please handle accordingly.


¶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.