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EU Plans Investigation of Coca-Cola, Cadbury Deal for Antitrust Actions.

EU competition commissioner Karel Van Miert said Coca-Cola Co. must notify its proposed acquisition of Cadbury Schweppes Plc's non-U.S. beverage brands to the EU, rather than national regulators. The commissioner also said failure to notify could result in "heavy penalties." The investigation stems from a plan by Coke to buy Cadbury brands, such as Dr Pepper and Canada Dry, in 120 countries outside the United States for about $1.85 billion.

Coke has claimed it does not need to notify the EU because the size of the deal falls below the EU's threshold for examining cases. (An alliance must be given EU antitrust scrutiny if the combined businesses have worldwide revenues in excess of $5.29 billion or European revenue of more than $265 million.) Whether bottling revenues should be included depends in part on how much control the soft drink companies have of their bottlers. One strong indication that the bottlers should be included is "if the [licensing] agreement goes further than normal, for example if there is influence over the business plan" of bottlers, an EU official said.

At issue is that the companies did not include revenues attributable to bottlers, as opposed to revenues directly attributable to Coke and Cadbury in their original calculations, and said that the deal is under the limit.

Van Miert said the commission feared the deal would reinforce dominant positions held by the U.S. soft drinks group in European markets. If the commission decides to conduct its own review, the EU ruling would override those of national regulators.

At the same time, the European Commission is consulting Coke and Cadbury's customers to help determine whether Coke's planned purchase is within EU antitrust rules. The EU will consult customers of Coke and Cadbury on their view of how sales should be measured.

Earlier, antitrust regulators in Belgium said they have prohibited Coke's proposed acquisition of Cadbury beverage brands for the Belgian market. Coke and Cadbury said they were withdrawing the proposal and would file a revised offer that allayed the Belgian regulators' concerns. But in a surprise twist, Belgium's Competition Council refused to allow the beverage firms to withdraw the proposal and cast doubt even on a modified proposal. Coke and Cadbury said they were "surprised and disappointed" by the regulators' decision and believed it to be "incorrect legally and factually." The two sides said they were studying the decision and "reviewing options," according to sources.

In related developments, late last week Mexican regulators were expected to announce that it has ruled against Coke's plans to sell Cadbury's soft drinks. Mexico is one of Coke's largest markets and growth leaders, with sales up 13 percent in 1998. Coke officials said they plan to submit a review to demonstrate the benefits of the deal. A formal announcement is expected today. A number of other countries, including Italy and Germany, currently are reviewing the transaction on antitrust grounds. Meanwhile, Australia's competition watchdog, the Australian Competition and Consumer Commission (ACCC), warned that a revised proposal for Coke to acquire some of Cadbury's soft-drink brands in Australia will face rigorous scrutiny.
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Comment:EU Plans Investigation of Coca-Cola, Cadbury Deal for Antitrust Actions.
Publication:Food & Drink Weekly
Geographic Code:1USA
Date:May 3, 1999
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