The country's competition authority has said it has been investigating the soft drinks giant for more than a year following a complaint from rival Pepsi.

If Coca-Cola is found to have breached fair business practices, it could be fined up to 10% of its sales in Italy, or the equivalent of about $83m.

Coca-Cola accounts for nearly half of Italy's soft drinks market

However, a spokeswoman for the authority said: "We haven't imposed a fine on Coca-Cola or suggested it will be fined."

A report by the authority sent to Coke accuses the company of dominating the market through questionable trade practices, damaging its competitors' ability to conduct business.

The report alleges Coke offered discounts to retailers who displayed its products more prominently than those of competitors.

It also says the company allegedly discriminated against wholesalers who refused to displace competitor's products.

Pepsi had complained in 1997 that Coke was unfairly and systematically trying to exclude it from the Italian market.

The probe was stepped up following a second complaint by Italian supermarket chain Esselunga.

Legal advice

The competition authority said Coke, based in Atlanta, in the US, has until October 29 to deny the accusations and it would make a ruling by mid-December.

Alessandro Magnoni, a spokesman for Coca-Cola Italia in Milan, said the company was seeking legal advice.

The prospect of fines for alleged anti-competitive practices in Italy unsettled Coca-Cola Beverages on the London stock market.

Coca-Cola's products account for about 46% of Italy's soft drink market, Italian news reports said.

The company is still reeling from raids by European regulators on its offices in the UK, Germany, Denmark and Austria, and a contamination scare that caused it to recall millions of cans of soft drinks in Europe.