Power, Structure and Fairness: When One Payment Serves Multiple Purposes

In ATO v PepsiCo [2025] HCA 30, the High Court held that part of the concentrate price paid by an Australian bottler was, in substance, consideration for the use of PepsiCo and SVC’s intellectual property. The Court found the concentrate supply and IP licences formed a single integrated product, and part of the payment “must to some extent” have moved the grant of the licences. Because that portion of the consideration related to brand and formulation rights, it was treated as a royalty for Australian tax law purposes. For clients, the case highlights a structural risk: when payments serve multiple commercial functions, regulators may recharacterise them, shifting the dispute’s trajectory and cost exposure. Cost-alignment (one-path funding) helps clients navigate these shifts by ensuring they fund only the pathway they ultimately take, not both settlement work and litigation preparation simultaneously.