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Thursday, July 22, 1999 Published at 10:40 GMT 11:40 UK

Business: The Company File

Why Coca-Cola was raided

Man on a mission: Competition Commissioner Karel van Miert

Keeping an eye on competition is becoming one of the key roles of government as firms merge and expand in the hope of dominating rapidly growing international markets.

The route to profit puts many campanies on a collision course with the authorities responsible for protecting the interests of the consumer.

[ image: Incomer Mario Monti will pick up where Miert leaves off]
Incomer Mario Monti will pick up where Miert leaves off
European Commission inspectors raided Coca-Cola premises in the UK, Germany, Austria and Denmark, and seized documents after they received a tip-off claiming that the American drinks giant was abusing its position in the market.

It is alleged that Coca-Cola has been enticing retailers to push its products and stop stocking competitors by offering them incentives.

Last week, British Airways was fined almost £4.5m by Brussels for running schemes designed to persuade travel agents to favour its flights over other airlines. BA is appealing but a battle with the EC will always be tough and costly.

The scandal over mismanagement in the EC - which led to the mass resignation of the Commissioners three months ago - has heightened the need for the Commission to be seen to be whiter-than-white.

The Competition Commissioner, Karel van Miert, is being replaced in the reorganised Commission, and he is setting about his job with the ruthlessness of a man who has nothing to lose.

Competition hot potatoes

He is currently looking into claims that the German postal delivery service, DeutschePost, has been abusing its position, and also at the highly sensitive question of whether the funding of the French and Italian state television services is fair.

The pressure to be seen to be cracking down hard will still be there when his successor, Mario Monti, takes over in the autumn, and the trend towards mergers and growing market share shows no sign of abating.

In the UK, the Office of Fair Trading is being given sharper teeth to act more effectively against firms operating cartels and developing monopolies.

It is also working hard to establish a way of identifying industries which are charging too much. For example, car manufacturers were heavily criticised this week for their pricing policies in the UK.

Long in tooth and claw

The new Competition Act, which will come into force in March 2000, gives the OFT the power to enter premises, obtain information and levy hefty penalties of up to 10% of turnover. It is also getting 20% more money.

Increasingly, maintaining competition is being seen as an essential part of a successful economy, and the watchdogs are likely to gain more and more powers until world governments are satisfied that they are effective.

Coca-Cola is still smarting from the effects on its European sales of last month's health scare in Belgium. But the consequences of anti-competitive trading practices, if proved, could hit the company even harder.

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22 Jul 99 | The Company File
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