Judge Grants FTC Request for Restraining Order Pending Review : Coke Dealt Another Setback in Dr Pepper Bid
Coca-Cola Co.’s bid to buy Dr Pepper Co., which last month was temporarily blocked by a federal court in Georgia, was handed a second major setback Thursday.
U.S. District Judge Gerhard Gesell in Washington, acting at the request of the Federal Trade Commission, granted a preliminary injunction to block the $470-million deal until the FTC can conduct a full administrative review of the merger--a lengthy process.
The ruling comes about six weeks after a U.S. District Court judge in Columbus, Ga., sided with lawyers for Royal Crown Cola Co.--a far smaller soft-drink competitor--and issued an order in June also temporarily blocking the purchase. An Aug. 25 hearing has been set in that case.
In Atlanta, Coca-Cola Vice President Randy Donaldson said the company had not seen the latest court decision, but added: “We are very disappointed with the court’s decision. We will continue to pursue our options.”
As for the Georgia hearing Aug. 25, Donaldson noted that “we’ll be proceeding with that, too, as far as I know.”
Thursday’s ruling was applauded by Jeffrey Zuckerman, director of the FTC’s Bureau of Competition.
“It will help to ensure continuing competition in the carbonated soft drink industry to the benefit of American consumers,” he said in a statement. “We will now continue with the administrative proceedings for a final determination of the legality of the merger.”
An FTC spokesman said representatives of Coke and the agency will meet Sept. 18 for a pre-hearing conference, after which a hearing date will be set for sometime in the fall.
It could not be determined Thursday how the Washington ruling might affect the earlier Georgia court order.
James W. Harrralson, executive vice president of Royal Crown, also said he was pleased with Thursday’s ruling. “The injunction . . . confirms not only the decision by the U.S. District Court in Columbus, Ga.,” he said, “but also the judgment of the Federal Trade Commission to file enforcement proceedings.”
The Georgia decision came in June after lawyers for Royal Crown alleged in court papers that Coke’s proposed deal with Dr Pepper and the now canceled agreement for Pepsico Inc. to buy Seven-Up Co. for $380 million were illegal under federal antitrust laws. The parties agreed after the restraining order was issued to argue the merits of the case Aug. 25.
Emanuel Goldman, an analyst for Montgomery Securities in San Francisco, said Thursday that he believes that Coke will continue to pursue Dr Pepper “with full force.”
“I don’t think Coke would be too displeased should they lose,” Goldman said. “They know their quest won’t be an easy one.”
In his ruling Thursday, Gesell said: “The immediate effect of the proposed acquisition is clear. It will mute, if not wholly eliminate, the competition between Coca-Cola Co.’s carbonated soft-drink products and those of Dr Pepper Co. . . . Coca-Cola Co.’s suggestion that this destruction of competition will not occur and in any event is not substantial is patently without merit.”
