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Italians accuse Coke
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August 13, 1999: 8:38 a.m. ET
Antitrust report pinpoints attempts to force Pepsi from Italian store shelves
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LONDON (CNNfn) - Coca-Cola's embattled European operations received a fresh blow Friday after Italian regulators said that the company and its bottlers abused their dominant position in one of the region's largest soft drinks market.
The Atlanta-based soft drinks giant is already reeling from a separate antitrust probe by the European competition authorities. This followed the tainted drinks scandal in which scores of children in the region fell ill after drinking Coke products, leading to millions of cases being pulled from the shelves. Coke's largest product recall.
Italian officials launched an investigation into Coke's marketing activities last year following complaints from Coke's arch-rival Pepsi Co. (PEP) and a domestic supermarket chain.
The investigation included Coke's local distributor, Coca-Cola Bevende, a unit of London-based Coca-Cola Beverages (CCB).
According to press reports, competition officials ruled in a preliminary finding that Coke and its bottler had offered illegal incentives and discounts to discourage competing products reaching retailers' shelves. It also unearthed evidence of a deliberate Coke strategy to drive Pepsi from the Italian market.
An Antitrust Authority spokeswoman confirmed that regulators have sent a letter to Coke outlining their objections to the company's practices. She refused to detail the nature and extent of the objections, however.
A final ruling is expected in December. If found guilty, Coke and its affiliate face a maximum fine of around $80 million, equivalent to 10 percent of their revenues in the Italian market.
Coke denied the charges and said it was co-operating with the Italian probe, whose findings come just a month after European officials raided five Coke offices across the European Union (EU) as part of their own investigation into Coke's marketing practices in Germany, Denmark and Austria.
CCB and Coke did not return phone calls seeking comment on the accusations.
The European Commission, the Brussels-based executive arm of the European Union, is continuing its own investigation. The company also faces antitrust investigations in Australia and Chile.
The health scare which started in Belgium in June and spread throughout Europe hit Coke's second-quarter earnings, which slipped 21 percent to $942 million.
The company said the problem stemmed from chemicals which found their way into drinks cans from packaging materials. It said the episode cut earnings by between $50 million and $75 million in the second quarter.
CCB shares shed 5.5 percent at 112 pence in midday trading in London Friday.
Coca-Cola (KO) shares closed up 11/16 at 60-1/8 in New York Thursday.
-- from staff and wire reports
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