EU probes Coca-Cola

The European Commission is investigating Coca-Cola & Schweppes Beverages for possible anti-competitive marketing practices involving discounts to distributors.

The director-general of competition has asked several soft drink companies, including Canada's Cott and its UK partner, Richard Branson's Virgin Cola, to make formal submissions including their concerns about CCSB's rebates, sometimes called "overrider discounts".

The directorate had complaints from pub companies, supermarkets and CCSB's rival bottlers during its review of the pounds 1.1bn takeover of the company by Coca-Cola Enterprises.

Three weeks ago, it extended that investigation for four months without giving any explanation. More than 90 per cent of deals looked at by the directorate are approved after a month-long inquiry.

The joint venture was set up a decade ago because the Coca-Cola Company and Cadbury Schweppes - which had 51 per cent of CCSB's shares - felt Britain's bottling industry was too fragmented. The sale was seen as a return to their core businesses of supplying concentrated syrup to bottlers and supporting their brands. The main business of Coca-Cola Enterprises is the bottling of Coke and related soft drink brands in the US. It has a separate listing on the New York Stock Exchange but the Coca-Cola Company is its largest shareholder, owning more than 40 per cent.

A licensing agreement gives Coca-Cola Enterprises the right to sell Schweppes brands in the UK for 15 years. There are concerns that CCSB's discounts may discourage distributors from carrying other brands by insisting that they stock the company's complete product range.

One complainant said in a letter to the directorate that it believed CCSB's overrider discounts lasted for as long as 12 months and covered not only Coke and its related brands but all Schweppes products, including Dr Pepper, Oasis, Canada Dry and Schweppes tonic.

CCSB dominates the UK soft drink market with 51 per cent of Cola sales and 37 per cent of total carbonated drinks by volume.