State Antitrust Suit Says Pepsico Is Using Fines And Boycotts

Posted: December 23, 1986

Pennsylvania Attorney General Leroy S. Zimmerman, in an antitrust suit filed yesterday against PepsiCo and two of its central Pennsylvania bottlers, said the giant soft-drink company was using fines and boycotts to prevent price competition in the sale of its products.

The suit, filed in U.S. District Court in Harrisburg, accuses PepsiCo Inc. of Purchase, N.Y., Allegheny Pepsi Bottling Co. Inc., of Harrisburg, and Confair Bottling Co. Inc. of Williamsport, of imposing fines and staging boycotts against retailers who buy Pepsi products from anyone but their local bottler.

Zimmerman is seeking a permanent injunction barring the sanctions, which, he said, have become so widespread "that they appear to have become institutionalized in the soft-drink industry."

"These anti-competitive practices ultimately harm the consumer because retailers are prevented from buying soft drinks at the lowest possible price," Zimmerman said in a statement released yesterday by his office.

James M. Griffith, spokesman for Pepsico, described Zimmerman's antitrust action as "bizarre" and "kind of ironic," adding that the sanctions imposed by Pepsi's bottlers are allowed under the Soft Drink Interbrand Competition Act enacted by Congress in 1980.

"It not only allows (the sanctions), but demands you enforce it," said Griffith, adding that the fines and boycotts are a nationwide standard in the soft-drink industry. "There is nothing unusual, special or unique about the situation in Pennsylvania. We're all bound by it" -the Soft Drink Act.

This is the first time such a complaint has been filed against PepsiCo, Griffith said.

In his complaint, Zimmerman said that "some enterprising retailers" in the Harrisburg and Williamsport areas were purchasing large quantities of Pepsi soft drinks from bottlers in their designated territories and selling them to other retailers at wholesale prices.

The retailers that PepsiCo learned about were prevented from purchasing any Pepsi products after that and the bottlers who sold the large quantities were fined by the company, the suit contends.

"It's sort of a shoot-first-then-ask sort of thing," said Robert R. Gentzel, spokesman for the attorney general.

Gentzel said the suit does not provide details on the number of retailers and bottlers punished under the system or on how long the system has been employed.

"Material has been, and is being gathered," Gentzel said.

But PepsiCo spokesman Griffith said the fines and boycotts have been used at least since 1980. and that it is widely known among retailers and bottlers in the industry that territories are protected by contractual agreements, and that sanctions would be imposed if the territories are violated.

"It's a bizarre situation because we're being sued for abiding by the federal law," Griffith said.

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