Originally created 07/24/99

Pepsi behind complaint that prompted Coke raids in Europe

ATLANTA -- PepsiCo has acknowledged filing the complaint that prompted a European investigation into whether Coca-Cola is illegally trying to force competitors out of the market.

While Pepsi refrained from beating up on its rival during the recent Coke contamination scare in Belgium, analysts say the No. 2 soft-drink maker is trying to gain a competitive edge by distracting Coke with regulatory and legal challenges.

The European Union suspects Coke may have offered rebates to retailers to shut out competition in markets Coke already dominates. The EU confirmed this week that raids were conducted at Coca-Cola offices in four European countries to seize documents from the world's largest soft-drink manufacturer.

Pepsi said it first complained to European regulators about Coke's business practices last year and formally filed its complaint June 1.

"We did file a complaint with the commission regarding trade practices by the Coca-Cola system," Pepsi spokesman Richard Detwiler said. He said Pepsi has "a very strong interest in fair and lawful competition."

Coca-Cola again denied wrongdoing while declining to comment directly on Pepsi's role.

"We definitely believe we're within full compliance of all competition laws and regulations," said Coke spokesman Ben Deutsch. "We believe that the investigation as it continues will prove that."

Some analysts viewed the complaint as the latest attempt by Pepsi to unsettle Coke.

"Pepsi has done this before and obviously if they can throw Coke off stride, distract them or in any way cause them disruption competitively, it will be worth it," said Martin Romm, an analyst for Credit Suisse First Boston. "Basically this is all competitive posturing on their part."

In trading Friday on the New York Stock Exchange, Coke fell 1.6 percent, or $1, to $61.12« a share. PepsiCo was off 18† cents at $39.62«.

Pepsi refrained from beating up Coke during the June health scare in which fears of contamination and complaints of illness by hundreds of consumers led Belgium, France, Luxembourg and the Netherlands to ban Coca-Cola products for more than a week.

Since the bans were lifted, Coke had less than a month of breathing space before Pepsi's complaint caused investigators this week to comb through files at Coke offices in Britain, Austria, Germany and Denmark.

If a full-blown investigation of Coke's trade practices in Europe is pursued by regulators, it could take a year. Companies found guilty of violating EU competition rules could face fines of up to 10 percent of their revenue.

Analysts say Pepsi is trying to increase its market share in European countries where its products sell a distant second to Coke's.

In Germany, Denmark and Austria, Coke controls between 43 percent and 57 percent of the market. Pepsi's share is between 5 percent and 9 percent.

It isn't the first time Pepsi has turned to legal and regulatory powers to gain leverage against Coke.

Last year, PepsiCo Inc., based in Purchase, N.Y., filed suit in federal court in New York accusing Coca-Cola Co. of violating antitrust laws by cornering the market for fountain drinks sold through U.S. theaters, restaurants and stadiums. The suit is pending.

Pepsi was also involved in trying to block Coke's beleaguered efforts to buy Cadbury Schweppes brands in Australia and to buy Orangina, the most popular soft drink in France, said John Sicher, editor and publisher of Beverage Digest.

"Pepsi has stepped up its legal efforts against Coke in a number of markets," Sicher said. "What's happening right now is not just one isolated circumstance."


Trending this week:


© 2018. All Rights Reserved.    | Contact Us