Competition Law in Beverage Cooler Placement Agreements in China

Introduction

Beverage cooler placement agreements are commercial arrangements under which a beverage manufacturer or distributor supplies, leases, subsidizes, or finances refrigerators and coolers placed in supermarkets, restaurants, convenience stores, hotels, cinemas, cafés, and other retail outlets.

In return for supplying the equipment, the beverage company may require the retailer to:

stock the supplier's beverages in the cooler;

reserve a particular proportion of cooler space for its products;

place the cooler in a prominent location;

prevent competing beverages from being stored in the cooler;

meet minimum purchase requirements; or

in more restrictive arrangements, refrain from installing or using competitors' coolers.

Such agreements are not automatically unlawful under Chinese competition law. A beverage producer normally has a legitimate commercial interest in ensuring that a refrigerator carrying its trademark and supplied at its expense is used principally for its own products.

Competition concerns arise, however, when cooler arrangements materially prevent rival beverage companies from obtaining access to important retail outlets. The risk becomes particularly significant where a powerful beverage supplier provides most of the cooling equipment available to small retailers and uses exclusivity provisions to prevent those retailers from stocking competing drinks.

Chinese competition law would principally examine such arrangements under the Anti-Monopoly Law of the People's Republic of China (AML) and rules concerning monopoly agreements and abuse of market dominance.

Legal and Regulatory Framework

China's Anti-Monopoly Law prohibits agreements and conduct that eliminate or restrict competition.

Two different legal theories can be relevant to beverage cooler placement.

First, an agreement between a beverage manufacturer and an independent retailer is a vertical commercial arrangement because the companies operate at different levels of the supply chain.

Second, if the beverage supplier possesses a dominant position, restrictive cooler provisions may constitute an abuse of market dominance, particularly where the retailer is effectively required to deal exclusively with the supplier.

Article 22 of the current AML prohibits dominant undertakings, without legitimate justification, from engaging in conduct including restricting trading partners to dealing only with themselves or designated operators, tying products or imposing unreasonable transaction conditions, and treating equivalent trading partners differently.

The central competition-law inquiry is therefore not simply whether an agreement contains exclusivity. Authorities and courts would consider the supplier's market position, duration and scope of the restriction, availability of alternative retail space, foreclosure of competitors and any legitimate commercial justification.

Relevant Market

An antitrust investigation would ordinarily begin by defining the relevant market.

Depending on the products involved, potential markets could include:

carbonated soft drinks;

packaged drinking water;

energy drinks;

sports drinks;

fruit beverages;

ready-to-drink tea;

chilled non-alcoholic beverages; or

a broader non-alcoholic ready-to-drink beverage market.

Authorities would examine demand-side substitution. For example, they might ask whether consumers would switch from carbonated beverages to bottled water or tea following a small but significant deterioration in competitive conditions.

The geographic market might be national, regional or even local depending on distribution systems, transportation costs and retail characteristics.

Cooler access itself may also become economically significant. In convenience stores and small restaurants with limited floor space, refrigerated display capacity can represent a scarce route to consumers. Consequently, controlling a substantial percentage of available coolers could strengthen a beverage supplier's ability to exclude competitors.

Market Dominance

Exclusive cooler arrangements become particularly sensitive when imposed by a dominant beverage supplier.

Dominance is not established merely because a company is large or successful. Chinese competition analysis examines factors such as:

market share;

ability to control prices or other transaction conditions;

financial and technological strength;

control over distribution channels;

dependence of retailers;

barriers to market entry;

strength of competing suppliers; and

ability of retailers to switch suppliers.

A supplier controlling an unusually large percentage of chilled beverage sales and providing refrigerators to most small retail establishments in a particular market would face greater competition-law risk than a small beverage producer using branded refrigerators for promotional purposes.

Full Cooler Exclusivity

One common agreement requires a retailer to place only the supplier's products inside a supplier-owned branded refrigerator.

This restriction may often have a legitimate commercial explanation.

For example, Beverage Company A purchases a refrigerator, delivers it to a retailer free of charge, pays its maintenance expenses and uses the refrigerator as advertising for Brand A.

Requiring the retailer to keep only Brand A beverages inside that particular branded refrigerator does not necessarily prevent the retailer from selling competing products from shelves or other refrigerators.

Competition concerns are therefore relatively limited where competing beverage manufacturers remain capable of providing their own cooling equipment or obtaining alternative display space.

The position changes where the contract provides that the retailer cannot stock competing refrigerated beverages anywhere in the store.

That arrangement is considerably closer to exclusive dealing.

Outlet-Wide Exclusivity

Consider an agreement stating:

“In consideration for receiving the cooler, the retailer shall not sell, display or refrigerate competing beverages anywhere at the premises.”

The competitive effect is much broader than merely protecting the supplier's own branded refrigerator.

If imposed by a dominant supplier across thousands of commercially important outlets, the agreement could make it significantly harder for competing beverage companies to obtain retail distribution.

Authorities would examine:

the supplier's market power;

percentage of retailers covered;

duration of contracts;

penalties for switching;

importance of refrigerated displays;

ability of competitors to provide alternative coolers;

available space inside retail stores; and

whether retailers can realistically terminate the agreements.

The greater the share of commercially important outlets foreclosed to competitors, the stronger the potential antitrust concern.

Minimum Cooler-Space Requirements

A less restrictive agreement might provide:

“Retailer shall reserve at least 60% of the supplied refrigerator for Company A beverages.”

Such an arrangement does not completely exclude competitors.

Its legality would depend strongly on market circumstances.

Where Company A paid for the refrigerator, a requirement reserving reasonable space for its products may reflect legitimate investment protection.

However, if a dominant supplier requires 90% or 100% of all refrigerated display capacity in thousands of small stores, authorities could examine whether the agreement effectively eliminates competitors' access to chilled distribution despite formally allowing rival beverages.

Competition law generally looks at the economic substance of the arrangement rather than merely its contractual wording.

Loyalty Rebates Connected to Cooler Placement

Cooler arrangements can also be reinforced through financial incentives.

For example:

5% rebate for carrying the supplier's products;

10% rebate if 80% of cooler capacity is dedicated to the supplier;

20% rebate if no competing beverage is refrigerated.

Ordinary volume discounts are not inherently problematic.

However, incentives can produce effects equivalent to contractual exclusivity where losing a rebate would impose such a substantial financial penalty that retailers cannot realistically switch part of their purchases to a competitor.

For a dominant beverage supplier, authorities would therefore examine whether the rebate protects genuine efficiencies or functions as a mechanism for excluding competitors.

Tying Coolers to Beverage Purchases

Another issue arises where cooler supply is conditional upon purchasing unrelated or additional products.

Suppose a dominant soft-drink supplier tells a retailer:

“You may receive our essential refrigeration equipment only if you also purchase our bottled water, juice and energy-drink lines.”

Such conduct could raise issues concerning tying or unreasonable transaction conditions if the supplier's market power means that retailers cannot realistically obtain equivalent equipment elsewhere.

By contrast, requiring a retailer receiving a Coca-Cola-branded or other supplier-funded refrigerator to stock a reasonable quantity of that supplier's beverages would generally have a more evident commercial connection to the equipment supplied.

The distinction lies in whether the requirement is reasonably related to the supplier's investment or instead exploits market power to force purchases in another market.

Relevant Chinese Case Laws and Enforcement Principles

Because published Chinese antitrust jurisprudence specifically concerning beverage refrigerators is limited, the following authorities provide the closest principles for assessing cooler-placement restrictions.

1. Weihai Water Group Abuse of Dominance Case

Weihai Hongfu Real Estate Co. v Weihai Water Group Co., Supreme People's Court, (2022) Zui Gao Fa Zhi Min Zhong No. 395.

Weihai Water Group was the sole urban public water supplier in the relevant area. When customers required related water-supply construction services, its service materials provided contact information only for itself and its affiliated businesses.

The Supreme People's Court concluded that the arrangement effectively restricted customers' ability to choose alternative qualified providers. Importantly, the Court explained that restrictive dealing can be express or implicit. The relevant question is whether the conduct substantially limits the trading partner's freedom of choice.

Relevance to Cooler Placement

A beverage company does not need to write “you may not buy from competitors” for an arrangement to be exclusionary.

For example, a dominant supplier might:

provide all refrigeration capacity;

require its brands to occupy virtually all available space;

impose penalties for competitor products; and

control the retailer's replacement equipment.

The overall commercial arrangement could effectively restrict retailer choice even without an express exclusivity clause.

2. Agricultural Logistics Park “Choose One of Two” Case

In a 2026 Supreme People's Court antitrust typical case, an agricultural logistics park operator required a merchant to operate only in its market.

When the merchant also traded in a competing market, the operator increased the merchant's transaction-service fee to three times the normal amount and demanded that the merchant choose between the two markets.

The courts found restrictive dealing and discriminatory treatment by a dominant undertaking.

Relevance to Cooler Placement

This principle is highly relevant where a beverage supplier says:

“You may receive our cooler only if you stop stocking Brand B.”

An especially serious issue could arise if a dominant supplier punishes retailers for stocking competing drinks through:

higher wholesale prices;

withdrawal of refrigerators;

loss of rebates;

reduced deliveries; or

termination of commercial benefits.

The case demonstrates that economic penalties can constitute an effective mechanism for enforcing exclusivity.

3. Differential Treatment in Wastewater Services Case

Another 2026 Supreme People's Court typical antitrust case addressed a dominant service provider that imposed different trading conditions based essentially on the identity of its customers.

The Court emphasized that equivalent trading partners should not receive materially different conditions merely because of their status where there is no adequate objective justification.

Relevance to Cooler Placement

Suppose a dominant beverage supplier provides free refrigerators and favorable supply conditions to retailers agreeing to exclude competitors while charging substantially more to comparable retailers that carry competing beverages.

Authorities could investigate whether such differential treatment has an exclusionary purpose or effect.

Legitimate differences—including purchase volume, equipment cost, credit risk and distribution expenses—can justify different terms. Punishing retailers purely because they trade with competitors presents a more serious competition concern.

4. Basic Funeral Services Refusal-to-Deal Case

Quanzhou Licheng Lisheng Funeral Service Co. v Quanzhou Jiying Funeral Service Co., Supreme People's Court, (2021) Zui Gao Fa Zhi Min Zhong No. 242.

The defendant had an exclusive position in basic funeral services in the relevant geographical market.

After a downstream intermediary complained about the company's practices, the dominant provider refused to continue dealing with it.

The Supreme People's Court determined that the essential upstream service had no realistic substitute and that denying access completely excluded the claimant from the downstream intermediary market. The Court therefore found an unlawful refusal to deal and ordered restoration of the commercial relationship, together with compensation.

Relevance to Cooler Placement

The case demonstrates the importance of commercial dependence and availability of alternatives.

If refrigerated display equipment is readily obtainable from many suppliers, withdrawal of one company's cooler is less likely to exclude a retailer or competing manufacturer.

But if a dominant beverage company controls practically all commercially viable refrigeration equipment or another indispensable distribution facility, restrictions on access become much more significant.

5. Yangtze River Pharmaceutical Raw-Material Case

Yangtze River Pharmaceutical Group and related companies v Hefei Yigong Pharmaceutical and related companies, Supreme People's Court, (2020) Zui Gao Fa Zhi Min Zhong No. 1140.

The dispute concerned an active pharmaceutical ingredient supplied by companies possessing significant market power.

The plaintiff alleged restrictive dealing, excessive pricing, tying and unreasonable trading conditions.

Although the Supreme People's Court ultimately concluded that the evidence did not establish the alleged abuses, the judgment provides important guidance. The Court stressed the need to examine competitive foreclosure and legitimate justification rather than treating every exclusivity restriction imposed by a powerful undertaking as automatically unlawful.

Relevance to Cooler Placement

This is important for beverage companies because cooler exclusivity is not automatically anticompetitive.

If the beverage supplier:

owns the refrigerator;

paid all installation costs;

maintains the equipment;

uses branded refrigerator surfaces for advertising; and

permits competitors to sell through other refrigerators,

limiting the supplier's own refrigerator to its products may have a strong legitimate justification.

The crucial issue is whether restrictions go beyond what is reasonably required to protect that investment.

6. Chinese Super League Image Rights Case

The Supreme People's Court considered allegations of abuse of dominance arising from an exclusive licence for Chinese Super League photographic rights.

The relevant rights had been awarded through a competitive tender. Although the undertaking possessed dominance in the relevant market, the Court held that exclusivity itself did not establish unlawful abuse. The arrangement resulted from legitimate competitive tendering and had reasonable commercial justification.

Relevance to Cooler Placement

This case establishes a particularly important principle:

Exclusivity and monopoly are not synonymous with unlawful anticompetitive conduct.

A beverage manufacturer financing a branded cooler may legitimately reserve that equipment for its own products.

The analysis becomes different when exclusivity extends beyond the funded asset—for example, when the retailer is prohibited from installing a competitor's refrigerator elsewhere in the store.

7. General Motors Vertical Monopoly Agreement Case

General Motors vertical monopoly agreement dispute, Supreme People's Court, (2020) Zui Gao Fa Zhi Min Zhong No. 1137.

The litigation followed administrative findings concerning vertical restrictions in automobile distribution.

The Supreme People's Court addressed the treatment of vertical monopoly agreements and the relationship between an administrative antitrust finding and subsequent civil damages proceedings.

Relevance to Cooler Placement

Cooler agreements are normally vertical agreements between suppliers and retailers.

The case illustrates that vertical distribution restraints can fall within Chinese antitrust scrutiny and that businesses harmed by unlawful vertical restrictions may pursue civil remedies after competition-law violations are established.

Competitive Effects

Chinese competition authorities or courts would likely examine both harmful and beneficial effects.

Possible Anti-Competitive Effects

A widespread exclusive cooler programme could:

prevent rival beverage brands from entering retail outlets;

increase competitors' distribution costs;

restrict consumer choice;

prevent small beverage manufacturers from achieving minimum scale;

protect the dominant supplier's market position;

increase barriers to entry;

reduce competition for prime display space; and

weaken retailers' bargaining power.

The strongest case would normally involve a powerful supplier covering a large proportion of commercially significant outlets through long-duration agreements.

Potential Pro-Competitive Benefits

Cooler arrangements can also generate genuine efficiencies.

Beverage companies may provide expensive refrigeration equipment that small retailers could not otherwise afford.

Benefits can include:

increased refrigerated beverage availability;

lower retailer investment costs;

maintenance services;

improved product quality;

lower energy consumption through modern equipment;

increased retail capacity; and

stronger inter-brand competition.

Competition law therefore needs to distinguish investment-protecting arrangements from market-foreclosing arrangements.

Duration of the Agreement

Contract duration is particularly important.

A six-month or one-year arrangement that retailers can easily terminate is generally less restrictive than a five- or ten-year exclusive arrangement carrying substantial termination penalties.

Automatic renewals may also matter where retailers have only short periods in which they can cancel.

Authorities would consider whether competing beverage suppliers receive realistic opportunities periodically to compete for the outlet.

Percentage of Market Foreclosure

Suppose a dominant beverage company has exclusive cooler contracts with:

5% of convenience stores — foreclosure risk may be limited;

30% — competitive effects become more relevant;

70–80% of strategically important outlets — substantial competition concerns may arise.

There is no universal percentage that automatically determines legality. Competitive assessment requires examining the actual ability of rivals to reach consumers.

Small Retail Outlets

Restrictions may have especially significant effects in small convenience stores, kiosks and restaurants.

A large supermarket may have ten or twenty refrigerators. Reserving one supplier-funded refrigerator for one brand may therefore have little effect on rivals.

A small shop may physically accommodate only one refrigerator.

Giving that refrigerator to a powerful beverage supplier subject to full-outlet exclusivity could effectively remove competing chilled beverages from the store.

Consequently, authorities may consider physical retail-space limitations when evaluating foreclosure.

Compliance Approach

Beverage companies operating in China can reduce competition-law risk by structuring cooler programmes carefully.

Safer arrangements generally involve:

restricting exclusivity principally to the supplier-funded cooler itself;

allowing retailers to install competing suppliers' coolers;

avoiding prohibitions on selling competing drinks elsewhere;

using reasonable contract durations;

avoiding excessive early-termination penalties;

allowing genuine retailer choice;

documenting investment and maintenance costs;

applying objectively justified commercial conditions;

periodically reviewing market coverage; and

imposing stronger internal review where the supplier has substantial market power.

A clause stating that “this refrigerator remains the property of Company A and shall principally display Company A products” is generally easier to justify than:

“Retailer shall not stock, sell, display or refrigerate any competing beverage anywhere at the premises.”

Remedies and Liability

Where cooler placement arrangements infringe China's Anti-Monopoly Law, consequences can include:

orders to cease the restrictive arrangement;

administrative fines;

invalidity or unenforceability of problematic provisions;

civil damages claims by affected businesses;

reimbursement of losses caused by anticompetitive conduct; and

requirements to modify distribution agreements.

Chinese courts have also demonstrated that private antitrust plaintiffs can recover losses or reasonable expenses where abuse of dominance is established, as illustrated by the Weihai Water Group and basic funeral-services cases.

Conclusion

Beverage cooler placement agreements are not inherently prohibited under Chinese competition law. Supplying free or subsidized refrigeration equipment can enhance distribution and benefit retailers and consumers.

The principal legal question is whether cooler restrictions reasonably protect the beverage supplier's investment or instead operate as a mechanism for excluding rival suppliers.

A requirement that only the supplier's beverages be stored in a refrigerator that the supplier owns and finances may have a legitimate commercial justification, particularly where retailers remain free to install rival refrigerators and sell competing products elsewhere.

Competition-law risk rises significantly where a dominant supplier extends the restriction beyond its own refrigerator and requires retailers to exclude competitors from the entire outlet, penalizes retailers for dealing with rivals, ties unrelated purchases to cooler access, controls most available refrigerated display capacity, or uses long-term contracts to prevent competitors from obtaining commercially important retail distribution.

The Weihai Water Group case demonstrates that exclusive dealing can be indirect as well as explicit. The 2026 agricultural logistics park case shows that dominant firms cannot force trading partners to “choose one of two.” The wastewater differential-treatment case addresses unjustified discriminatory conditions. The basic funeral-services case illustrates exclusion caused by denial of access to indispensable services. The Yangtze River Pharmaceutical case emphasizes foreclosure analysis and legitimate justification, while the Chinese Super League case confirms that commercially justified exclusivity is not automatically illegal. The General Motors case further demonstrates that vertical distribution restrictions can be subject to Chinese antitrust enforcement.

Accordingly, the central principle for beverage cooler arrangements in China is proportionality: a supplier may reasonably protect its investment in refrigeration equipment, but a dominant supplier should not use that investment as a means of substantially eliminating competitors' access to retailers and consumers.