Sponsorship Injunction Avoided but Legal Battle Continues

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NEW YORK ( -- While a judge last week declined to grant a restraining order blocking New York's controversial Snapple sponsorship deal, the continuing
New York Mayor Michael Bloomberg's Snapple deal moves forward but the court wrangling also continues.
legal proceedings may give other municipalities pause as they chase potential corporate sponsors.

State Supreme Court Justice Richard Braun refused to grant city Comptroller William Thompson an injunction to stop the $126 million marketing deal with Cadbury-Schweppes, whose Snapple brand would become the city's official beverage and sole vendor in city buildings. Mr. Thompson argued the city cut corners in the bidding process to give Snapple a sweetheart deal.

Court proceedings continue
Even though Judge Braun let the vending machines be installed, he ordered both sides back to court May 13 to argue whether the city awarded the contract in accordance with its charter.

Mr. Thompson earlier this month refused to register the contract -- the final step in the city's procurement process -- setting up a standoff with Mayor Michael Bloomberg, who ordered the contract to go ahead. Mr. Thompson argued that Interpublic Group of Cos.' Octagon, which represented the city in the contract negotiations, also does work for Cadbury-Schweppes.

The prospect of the marketing contract turning into political football gave observers pause. New York pundits were quick to note that Mr. Thompson is one of several potential rivals when Mayor Bloomberg comes up for re-election in 2005.

Politics involved
"There's politics involved here and that's a given," said William Chipps, senior editor of IEG Sponsorship Report. "It's going to make municipalities think twice about going down this road. It's a shame, because it's going to benefit the municipalities that need the money, and the marketers."

So far, Chicago, Cleveland, Los Angeles and Miami are either negotiating or considering setting up programs similar to New York's in order to remedy some of their budget shortfalls. Nextel Communications sponsors Las Vegas' municipal monorail, and San Diego has a $23 million deal with PepsiCo as exclusive soft-drink vendor and another with Verizon as its official telecom provider.

As the list of cities looking for sponsors continues to grow, stories of political wrangling may grow with them. Last December Comcast Corp., in the face of public outcry in Washington state, withdrew from a $7 million name sponsorship deal for the Tacoma Dome hours before the City Council was scheduled to vote on it. Local pundits blamed the dustup on the City Council's rush to approve the arrangement with minimal public input.

Respect the process
"You go in and you want to do a great deal, but you have to respect the political process," said Chris Lund, vice president for municipal marketing at Superlative Group, a Cleveland marketing agency that counseled Comcast and recommended the withdrawal.

That process can work to any city's advantage, by bringing larger bids, Mr. Lund said. With a contract the size of New York's, having had Coca-Cola Co. and PepsiCo, for instance, bid along with Cadbury-Schweppes could have only helped the city.

But municipal bureaucracies can be a turnoff to corporate marketers, who are not accustomed to the lengthy bidding process required in municipal contracts, Mr. Chipps said. "These deals can take such a long time. You have corporations that don't have that kind of patience."

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