PEPSICO FOODS AND BEVERAGES INTERNATIONAL-IBG SUD/COCA COLA ITALIA
PRESS RELEASE
PRESS RELEASE
Coca-Cola declared liable for abuse of dominant position
The Competition Authority has concluded the investigation that began on 11 June 1998 into the Coca-Cola Company’s subsidiaries operating in Italy, and a number of independent bottling companies in southern Italy and the islands, and has found them liable of commercial practices that constitute abuse of dominant position pursuant to section 3 of Law No 27/90 - the Competition Act. The Authority judges the section 3 infringement to be serious and has therefore handed down a fine of 30,607,950,000 lire on the Italian Coca-Cola Company, equivalent to 3% of the 1998 turnover from the sales of Coca-Cola products with the cola flavour.
The proceedings began as a result of a complaint from the competitor companies, Pepsico Foods and Beverages International Ltd - Italian branch - and IBG Sud S.p.A., alleging abuse of dominant position in the wholesale sector, and a subsequent complaint from ESSELUNGA alleging that Coca-Cola Italia was abusing its dominant position to the detriment of the Grande Distribuzione company. The companies under investigation were Coca-Cola Italia, Coca-Cola Bevande Italia and the following bottling companies: SOCIB (Società Calabrese Imbottigliamento Bevande), SOBIB (Società Barese Imbottigliamento Bevande), SOSIB Industriale e Commerciale (Società Sarda Imbottigliamento Bevande gassate), SIBEG (Società Imbottigliamento Bevande Gassate), SNIBEG (Società Napoletana Imbottigliamento Bevande Gassate). The Italian Coca-Cola companies and the 'authorized' bottling companies hold a dominant position on both the cola and the non-alcoholic sparkling beverages market. Taken together, these companies hold a nationwide market share of approximately 80 percent of the cola market in terms of volume.
More specifically, the Authority has ruled that the conduct of Coca-Cola Italia and Coca-Cola Bevande Italia, as parties to plans and programmes designed to keep their main competitor PepsiCo out of the draft beverage sector of the market by granting discounts and other incentives to convert the competitor company's draft beverage equipment to deliver Coca-Cola products, was a serious violation of section 3 of the Competition Act.
The Authority also ruled that it was a serious violation of the same section for Coca-Cola Italia and Coca-Cola Bevande Italia to provide a system of discriminatory discounts and loyalty bonuses based on a selective and non-transparent classification of wholesalers.
The Authority also discovered exclusive clauses in contracts concluded by SOCIB and SOSIB prior to 1998 with wholesalers working in their respective zones. The imposition of exclusive clauses in contracts with wholesalers by companies occupying a dominant market position constitutes a serious infringement of section 3 of the Competition Act, in that it restricts access to the distribution channels and ultimately to the end market. However, considering that both SOSIB and SOCIB had removed these exclusive clauses from their contracts before service of the Notification of the Findings of the Investigation, the Authority imposed the minimum fine as a penalty for this offence in the amount of 1% of the 1998 turnover from the sales of Coca-Cola products with the cola flavour. The actual amount of the fines imposed were lire 410,993,000 and 398,353,000, respectively.
Lastly, the Authority ruled that the application of loyalty discounts to wholesalers and the discounts offered by Coca-Cola Italia to the Grande Distribuzione and Distribuzione Organizzata chains in exchange for setting aside minimum display areas with and without shelving constituted an abuse of dominant position because it was designed to ensure prior occupation of display areas to the detriment of competitors.
The Coca-Cola Italia, Coca-Cola Bevande Italia, SOCIB, SOBIB, SOSIB, SIBEG, and SNIBEG companies have been ordered to desist immediately from the aforementioned conduct and any conduct having an equivalent effect, and are to submit a report on this issue within 120 days of the date of service of notification of the closure of the investigation.
Rome, 17 December 1999
NB: The full text of the Authority's ruling is posted on its Internet site: www.agcm.it