Coca-Cola’s bottling bid still under scrutiny

Date: 05/12/1996

By Elizabeth Wise

THE European Commission looks set to place hurdles in the way of Coca-Cola's plans to buy out partner Cadbury Schweppes and become the sole owner of a chain of six bottling plants in the UK.

The Commission has another month to study the proposal by Cadbury Schweppes to sell its 51&percent; stake in the joint venture Coca-Cola and Schweppes Beverages (CCSB).

The institution must deter-mine whether the planned sale to American firm Coca-Cola Enterprises Inc (CCE) would turn the company's already strong position in the UK market into a monopolistic one.

When the Commission opened a second stage in its investigation in September, the companies began to worry that the outcome might not be in their favour.

“There was surprise that this case went to the second stage,” said an official.

CCE's case cannot have been helped by competitor Virgin Cola, which two weeks ago lodged a formal complaint with the Commission claiming that CCSB was abusing its dominant position in the UK drinks market. Virgin called for an investigation into the practices of CCSB and opposed the sale to CCE.

CCSB, a joint venture set up by Coca-Cola and Cadbury Schweppes in 1987 to develop their distribution system in the UK, is not only a bottler but also the largest producer and distributor in the country, and is already believed to hold one-third of the British soft drinks market. It also distributes several mineral water brands.

A UK investigation several years ago ruled that CCSB did not have a dominant position in the fizzy drinks market as a whole.

But merger officials say that the Commission appears to be examining the sale's repercussions on a smaller market - that of colas - in which CCE would be more dominant.

Coca-Cola has received a statement of objections from the Commission, asking it to divest other assets before it can buy out CCSB, before the end of January, when the 875-million-ecu sale must either be approved or rejected.

The advisory committee on competition policy (made up of anti-trust representatives from each member state) has not yet discussed the deal, but hopes to do so before Christmas.

British officials, who stress that there are “enormous” UK interests involved, say they have not yet asked the Commission for bilateral talks - an option they may turn to as the deadline for a decision approaches.