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Antitrust Regulators Raid Coca-Cola Offices in London, Brussels

May 19, 2000|From Reuters

ATLANTA — Coca-Cola Co., embarrassed last year by a series of mishaps in Europe, again found itself under a cloud in the region Thursday as antitrust regulators raided the London and Brussels offices of the beverage giant's main bottler.

The early-morning raids were part of a widening probe into whether Coca-Cola and its 40%-owned bottler, Coca-Cola Enterprises Inc., had breached European Union competition laws by offering retailers illegal incentives to buy Coke products at the expense of rival brands.

Atlanta-based Coca-Cola Co. is the world's largest soft drink company. Coca-Cola Enterprises is the largest bottler of Coca-Cola.

The new investigation focuses on the British and Belgian markets, where Coca-Cola brands, including Coke, Fanta and Sprite, enjoy a commanding lead over those of archrival PepsiCo Inc. .

PepsiCo and other companies have complained about Coca-Cola's competitive practices in Europe.

The new investigation will assess whether the bottler's distribution practices "may constitute an abuse of a dominant position in violation of EU competition rules," EU Competition Commissioner Mario Monti told a news conference.

Companies found guilty of anti-competitive practices in breach of European Union law can be fined up to 10% of their global turnover.

In practice, such onerous fines have never been levied.

Coca-Cola Enterprises said the raids, which came about a year after European regulators seized more than 10,000 pages of documents from several bottlers in the Coca-Cola distribution system, were a disappointment but not a surprise.

"We are fully cooperating with the authorities in this investigation and we are confident that we are in full compliance with all relevant national and European Commission competition laws and regulations," the bottler said.

Coca-Cola Co. also said it believed it was in full compliance with all European laws and regulations.

Although European consumers have rewarded Coca-Cola with sizable and, in some cases, huge market leads in many countries, it is clear that both the beverage giant and its main bottler have stumbled in the region during the past year.

Earlier this week, Coca-Cola Enterprises stunned investors when it announced earnings this year would fall well below estimates mainly because of currency-induced weakness in the British market.

Coca-Cola Enterprises shares plummeted more than 30% following the profit warning. They closed down 13 cents at $15.87 on Thursday on the New York Stock Exchange.

Coca-Cola Co. gained $1.19 to close at $49.44 and PepsiCo gained 75 cents to close at $39.75 on the exchange.

Coca-Cola Enterprises took a $103-million charge in the second quarter of 1999 after a contamination scare in Belgium and France prompted the recall of millions of bottles and cans of Coke products.

Several hundred people, including children, claimed they became sick after drinking Coke products in the two countries.

Coca-Cola Co. also was fined $16.1 million by Italian authorities late last year for allegedly abusing a dominant market position. The company said at the time that it would appeal the ruling.

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