Coke settles European antirust suit
While Coca-Cola is the leading soft-drink company in the US, it gets some real competition from Pepsico and Cadbury-Schweppes. In the us, Coca Cola carbonated beverages have about a 45% market share, Pepsi has 32%, and Cadbury-Schweppes (7-Up, Doctor Pepper) has 13%. In Europe, however, it is even more dominant, owning some 50% of the carbonated soft drink market. Pepsi has only about 13% and Cadbury-Schweppes a mere 6%. Others have evn smaller shares.
Its situation approaches monopoly power in the $21 billion European market, and it has use this advantage to hog the refrigerated display space, give big volume discounts, and generally hurt the competition. But that much market share attracts regulators, and the European antitrust commission has been after Coca-Cola for six years in a massive antitrust suit.
That lawsuit was settled recently, when Coca-Cola made concessions to the regulators. Among them:
- It has to cede at least 30% of its refrigerated display case and vending machine space to rival brands.
- It is prohibited from linking rebates to sales volume.
- It cannot offer discounts on its most popular brands: Coke and Fanta Orange.
- It cannot sign exclusive deals with retailers.
The agreement reportedly has teeth, with major monetary penalty if Coca-Cola is found breaking it.
Coke's European operations have made some key blunders over the last few years (from product contamination to an unsuccessful campaign to sell its tap water brand (Dasani). Nevertheless, it has maintained its overwhelming market position.
As a Wall Street Journal article (EU Limits Coke's Sales Tactics In Settlement of Antitrust Case", 6/21/05) points out, Coke caved in because it realized that European antitrust actions still have some teeth:
By deciding to settle rather than contest the allegations, Coke has avoided years of legal wrangling and a potentially costly fine. Last year, the Commission fined Microsoft Corp. €497 million ($605 million) and ordered it to produce a slimmed-down version of its Windows operating system and license some crucial software code.
