A New York State ruling, dated March 5, 2004, requires that school districts strictly comply with the competitive bidding laws relating to the procurement of beverages at public schools.

The decision requires that the contract be awarded to the lowest bidder, without regard to some "branded" preference. Larry Alibrandi of American Quality Beverages ("AQB") explains: "When a school district complies with the competitive bidding law, the policy question whether a school district should receive what some have called 'Kickbacks for Coke' is never reached. The beverage contract must go to the lowest bidder. The school district never has the opportunity to get a slice of an inflated, monopolistic price." As a result, students pay less for beverages. The proceeding was brought by AQB, a maker of nutritionally engineered sports drinks located in Syracuse, New York.

In the matter, in which Coca-Cola Bottling Company was named as Respondent, the Oswego County Board of Cooperative Educational Services in Upstate New York State had issued a cooperative bid for 13 school districts. The bid notice requested the best price for Coca-Cola and separately, the best price for Pepsi. Under the competitive bidding laws, however, the sodas are known as "equivalents." Similarly, sports drinks are equivalent, the Commissioner held, and must be awarded to the lowest bidder, except to the extent there are added vitamins in one that are not in the other.

Commissioner Richard P.  Mills  of the New York State State Education Department issued his ruling on March 5, 2004 - taking almost two years in the matter involving a contract that expired June 30, 2003. Although recognizing his ruling was academic and moot by reason of his delay, he emphasized the rule that governs future contracting: "I am compelled to further comment on the record in this case. It is a violation of General Municipal Law Section 103 to Manipulate specifications of a bid to assure the award of the contract to a specific bidder or to shut out competitive bidding or permit favoritism, in the absence of a showing that it is essential to the public interest. A brand name may be used as standard or example, but the bid cannot discriminate in favor of the specific brand name if there is a product that is equal to or better than the brand name available at a lower price."

The Commissioner concluded:

"Therefore I strongly caution respondent BOCES and its counsel to ensure compliance with General Municipal Law Section 103 in all future competitive bidding and contracting." A related proceeding expected to be decided shortly is pending in Supreme Court in Albany, New York. The court reviews the decisions of the State Education Department Commissioner. In that matter, AQB is joined by taxpayers, residents and parents who argue that the commercial signage on the vending machines violates the New York State Constitution and an applicable state regulation.  Petitioners argue that the machines must be changed to noncommercial signage. Petitioners also argue that the Education Law expressly requires that a contract be nonexclusive to the extent it governs non-school use of school property, such as after-school use by the community. Petitioners further contend that a contract is invalid where it purports to bind or in any way impinge on the discretionary authority of a future board to go soda free. With respect to competitive bidding, Petitioners argue that the respondent school district had not met its burden to demonstrate that it was "essential to the public interest" to require that a vendor sell soda before it is allowed to compete to sell healthful beverages on school property.

Alibrandi comments:

"Under these pouring rights agreements, any group or concessionaire using school property -- a stand serving a summer league or Brownies having a meeting -- must purchase from the soda company. The only vendors who can sell beverages on school property are the soda companies. A milk vendor who wants to sell sports drinks, juices and water is excluded. A juice company that does not sell soda is excluded. A sports drink company that does not sell soda is excluded. Who does that leave? Pepsi and Coca-Cola pretty much. Indeed, it was a representative of Coca-Cola who went to the State Education Department to work out the details of these contracts at their first launch. The so-called 'Model Contract' was the contract drafted by Coca-Cola and one of the first school districts -- with the names whited out."

Alibrandi emphasizes: "There simply is no way that requiring a company to sell soda to kids is essential to the public interest. As the Atlanta Journal Constitution headline proclaimed today, 'For cleaning off rust, Coke is it.'"

Larry Alibrandi

American Quality Beverages