Italy Fines Coca-Cola $16 Million
Coca-Cola Co. said Friday that it will appeal a $16-million fine levied by Italy, which said the world’s largest soft-drink maker abused its market position to avoid competition.
The Italian Antitrust Authority set the fine, its second-highest ever levied, after investigating a complaint made by No. 2 soft-drink company PepsiCo Inc. in June 1998. The penalty amounts to 3% of the Atlanta-based company’s 1998 sales in the country. The authorities could have fined the company as much as 10% of last year’s sales.
This year, Coca-Cola was faced with a health scare in Europe over its sodas and an investigation by European Union officials for possible antitrust violations. The company’s profit has fallen four straight quarters on weak overseas sales. The problems led Chief Executive Douglas Ivester to announce his retirement Dec. 6. Australian Doug Daft will replace him next year.
“This is only a financial slap on the wrist for Coke, but it’s indicative of the challenges Coke faces with regulators throughout Europe,” said Marc Cohen, an analyst at Goldman, Sachs & Co., who has a “market perform” rating on Coca-Cola shares. “It’s a key issue Daft faces.”
Italy said Coca-Cola excluded PepsiCo, maker of Pepsi-Cola and Mountain Dew, by giving discounts and other incentives to retailers who switched to Coke from its main rival.
“The decision isn’t in line with Italian and European competition laws and with commercial practices widely accepted in Italy as well as other parts of the Europe Union and the world,” a spokesman for Coca-Cola’s Italian operations said.
Atlanta-based Coca-Cola has 46% of the Italian soft-drink market compared with PepsiCo’s 6%, according to Beverage Digest, a U.S. trade publication.
“The evidence in this case was overwhelming,” said Jeff Brown, a spokesman for Purchase, N.Y.-based PepsiCo, the world’s second-largest soft-drink maker. “We hope this decision will put an end to Coke’s efforts to restrain competition and bully retailers. Regulators throughout the world need to watch Coke closely.”
Italian regulators began investigating Coca-Cola in June 1998 after PepsiCo filed its complaint along with Italian supermarket chain Esselunga.
The decision by the Lazio regional court can be appealed by either side to the Italian Council of State. If Coca-Cola pays the fine, it will go to the Italian government.
The fine imposed by the authority is the regulator’s second largest. In October, Telecom Italia Mobile and Omnitel Pronto Italia, Italy’s two largest wireless telephone companies, were declared guilty of collusion and jointly fined almost $78 million. That decision is being appealed.
Coca-Cola rose $1.25 to close at $59.75 on the New York Stock Exchange on Friday.
