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Coke, EU settle antitrust case with deal to boost competition

BRUSSELS, Belgium — The Coca-Cola Co. has agreed to change sales practices that helped it win roughly half of the soft drink market in Europe as part of a settlement of a long-running antitrust investigation by the European Union.

Coke's biggest rival, PepsiCo Inc., applauded the deal, which was aimed at creating more competition in the $21 billion European soft drink market.

EU Competition Commissioner Mario Monti said Tuesday that commitments presented personally by Coca-Cola chief executive Neville Isdell in Brussels were "sufficient for a settlement decision, which will close a five-year probe."

The changes include an end to exclusivity arrangements with stores or restaurants, and allowing rival drinks into Coke-branded coolers. The aim, Monti said, is to let consumers choose what to buy "on the basis of price and personal preferences, rather than pick up a Coca-Cola product because it's the only one on offer."

The deal allows Atlanta-based Coke to avoid a fine and potentially years of continued legal wrangling. It would likely take effect in spring, after being translated and published in the EU's Official Journal for a formal consultation period.

In a statement, Isdell welcomed the deal, saying it "provides clarity" about how EU competition rules apply to sales practices of Coke and its European bottlers.

"We have always sought to compete fairly in an increasingly competitive European nonalcoholic beverage marketplace," he said.

PepsiCo, whose complaint against Coke initially sparked the EU case, praised it as well. Spokesman Dick Detwiler said the deal should increase competition and result in "significant changes" in the European carbonated soft drink market.

The settlement decision, a new tool in the EU's antitrust arsenal, makes the commitments the company agrees to legally binding and enforceable in national courts. A fine could be imposed later if Coke breached the terms.

Pepsi complained in the 1990s that Coke's distribution deals in Europe unfairly restricted access for competing products to store shelves, coolers and soda fountains.

Coke has roughly half the European market, compared with about 10 percent for PepsiCo's Pepsi-Cola unit, based in Purchase, N.Y. In the United States, Coke's lead over Pepsi is smaller.

Under the five-year deal, Coke will scrap all rebates that require retailers to buy the same amount of Coke products or more each time. It also will no longer require that a customer who wants to buy best-selling regular Coke or Fanta Orange also take less-popular brands, or offer rebates if they do or reserve shelf space for them.

It will also allow rivals to occupy 20 percent of the space inside its coolers, if its coolers are the only ones in the store.

After the draft compromise is published in the EU's journal, there is a one-month period for comments from Coke's competitors or other interested parties. The comments will then be reviewed by the commission.

Little change is expected, as regulators had already sought input from industry and national regulators beforehand.

"Our own analysis plus the informal consultation gives us confidence on the quality of these undertakings," Monti said.

The decision's adoption will also end separate investigations in several EU nations.

Monti, whose term expires at the end of the month, rejected the suggestion at a news conference that he was seeking a "kinder and gentler image" in the United States as he prepares to return to private life by being "softer" on Coke than other U.S. corporate icons.

He was harshly criticized in the United States when he squashed General Electric Co.'s merger plans in 2001, and again after issuing a sweeping ruling and record fine against Microsoft Corp. this year when settlement talks collapsed.

He said Coca-Cola was "seriously disposed" to reach a deal after the EU's investigation, which included raids at bottlers across Europe in 1999 and 2000 and grew to a 100,000-plus page files.

"It was a difficult path to go down but I think we have now reached the end of it," Monti said.