Coke contract shrouded in secrecy
Published: Monday, May 31, 2010
Updated: Friday, June 15, 2012 22:06
Coca-Cola's formula for its sugary sweet soda is under lock and key, guarded by Coke as a trade secret. Now, Ohio State and Coke say that parts of the exclusive contract between the beverage giant and OSU, which was renewed in 2008, are also trade secrets and should be kept from public view, even though contracts at comparable universities are not.
OSU's current contract is worth at least $33.95 million, said Jim Lynch, director of Media Relations. Payments made to OSU from Coke come from royalty fees and vending commissions on Coke products sold on campus. In exchange, Coke receives the exclusive right to sell its products on campus as well as sponsorship opportunities and the ability to use OSU trademarks in Coca-Cola advertising.
Specific numbers beyond that are unknown because OSU and Coke contend that they are trade secrets.
On April 27, The Lantern requested copies of both the 2008 contract and the 1998 contract. Nearly all dollar amounts in both of the contracts provided were blacked out.
At the time the contracts were provided, Lynch said in an e-mail that those numbers fall under the scope of trade secrets and were exempt from Ohio's public records laws.
Under Ohio law, information qualifies as a trade secret if it "derives independent economic value, actual or potential, from not being generally known to … other persons who can obtain economic value from its disclosure or use."
The actual figures for royalty fees and vending commissions could be used by Coke's competitors to "undercut them in contracts and renewals," Lynch said in an e-mail on May 11. Other schools could demand the same kind of deal as OSU even though they wouldn't "bring the same name recognition and market size to the table," he added.
Fred Gittes, a Columbus attorney who specializes in First Amendment issues, is skeptical of OSU's claims of secrecy.
OSU and Coke's reasoning "doesn't make any sense," he said.
"The other universities will have no way to know what OSU's arrangement is," Gittes said. "They'll just know how much money it generated."
And, it turns out, other universities are more forthcoming about their contracts.
After a Lantern request, Dan Wolter, the University of Minnesota's director of news service, provided an unredacted copy of Minnesota's Coca-Cola contract, worth an estimated $38 million.
Similarly, no material was blacked out in the University of Arizona's contract, worth $15 million, said Johnny Cruz, from the University of Arizona's Office of Communications.
Rachel Webber, a reporter with Washington State University's student newspaper, The Daily Evergreen, reported on the negotiations surrounding the renewal of WSU's Coke contract earlier this year. She said that at that time, the university provided her with an unredacted copy of its Coke contract.
OSU's blacked-out contract was prepared at Coca-Cola's request, Lynch said. After being informed of other universities' willingness to share details of their contracts, he said he was "looking into why Coke made the redactions to our contract, but not those others."
In an e-mail on Wednesday, he said, "I may consider asking the company to revisit the redactions they have made, or ask them to articulate why they made the redactions to our contract, but not the others."
As of Saturday, Lynch said OSU and Coke were still in talks and that it might be possible to release a less-redacted version of the contract by today or Wednesday.
A Coke spokeswoman did not return phone calls or respond to e-mails about why OSU's contract was redacted.
Gittes said that because contract details are not secrets at other schools, it undercuts OSU and Coke's claims even further.
"One of the things about trade secrets is there has to be a proven track record of keeping the information confidential," Gittes said. "If Coca-Cola is signing deals with other universities, allowing them to disclose those deals, then the royalty figures and the percentages are not a trade secret."
Other secret deals at OSU have recently come under scrutiny. The Columbus Dispatch reported Sunday that OSU will not release details of the recent deal that will allow OSU to manage both the Schottenstein Center and Nationwide Arena because the university contends they are also trade secrets.
As for the Coke contract, there are inconsistencies between redacted material across both the 1998 and 2008 contracts. Some information dealing with the number of vending equipment and liquidated damages is redacted in the current contract but not in the previous one, and vice versa.
Also, around the time the 1998 Coke contract was signed, numerous Lantern articles described specific numbers such as royalty fees and earned vending commissions.
Edward J. Ray, who was then the provost at OSU and is now president of Oregon State University, was quoted in an article listing some of those numbers in 2000 as saying, "I think people should feel free to ask questions about the contract and get straight answers."
Lynch said he assumed that Coke made the redactions of the current contract "because they were unhappy with how the pricing had been divulged in the previous deal and did not want to make the same mistake again."
Nevertheless, Gittes said the public has a fundamental right to know.
"The public has got a right to know how much money the university is making off private deals with private companies," he said. "And that trumps the university's interest, apparently, and even Coca-Cola's interest in trying to keep this a secret."