Wednesday, November 23, 2005

Shopkeeper took on Coke - and won

· Accusation of bullying tactics ends in record fines
· Multinational appeals against Mexican rulings

Jo Tuckman in Mexico City
Thursday November 17, 2005


The 49-year-old owner of a tiny corner shop in a rundown part of Mexico City has done what few of her compatriots thought possible: taken on Coca-Cola and won. "Everybody got scared and told me I was crazy and I'd be ruined," Raquel Chavez recalled. "I said I'd rather die with my dignity intact than be trampled on."
Mrs Chavez's allegations that the soft-drink giant was trying to bully her into taking other products off her shelves lie at the heart of a 157 million peso fine (£8.6m) imposed by the federal competition commission against a Coke subsidiary and 15 distributors after a two-year investigation. A second fine of £31m prompted by a complaint from Pepsi followed; the largest fine ever imposed by the watchdog.

The cases revolved around allegations that Coca-Cola and its distributors abused their dominant position in the market, threatening shopkeepers with taking away promotional fridges and other material if they continued to display, or in some cases stock, rival products.

Although decided in the summer, neither penalty was announced owing to the watchdog's policy of keeping quiet until the appeals process is completed. Spokesmen from both it and Coke have confirmed the rulings, but said appeals are under way. "We're presenting arguments that our business practices do comply with Mexican competition laws," a Coca-Cola spokesman, Charlie Sutlive, told the Guardian.

These are the multinational's first fines in Mexico, a country governed by a former Coke executive and where more Coca-Cola products are consumed per capita than anywhere else in the world. Coke accounts for about 70% of a carbonated drinks market that is so ingrained in daily life that police use "for my softdrink" as code to ask for a bribe, and fizzy drinks have become part of religious rituals in some indigenous communities.

The fines, if upheld, would be of little economic concern for Coca-Cola in Mexico, but represent a blow to the company's image. They delight Mrs Chavez, who, as she told her story on an upturned Coke crate outside her shop, showed little concern that she will not see any of the cash.

Years of resentment about the company's tactics, she said, developed into confrontation in 2003 when her distributor sought to stop her selling Big Cola. Cheaper than Coke and sold in extra-large bottles, the Peruvian brand is becoming popular in working-class areas like her own. Mrs Chavez alleged that Coca-Cola had tried to make her and other small shopkeepers stop stocking the Peruvian upstart by threatening to take away their fridges, awnings and the free gifts used to entice clients. "I told him I may only have a tiny shop, but I would be ashamed to practise business the way you do."

Mrs Chavez claimed such run-ins prompted the distributor to refuse to supply her, a move that led to her decision to lodge a complaint at the competition commission. The complaint was later expanded by Big Cola. Aware that no shop in Mexico can survive without selling Coke, Mrs Chavez borrowed money to buy from more expensive wholesale outlets. She hauled the crates up the hill to her shop by herself as her husband watched, furious at his wife's stubbornness.

"I thought that they were going to be able to say to me, 'Look, ant, we stamped on you,'" she said. "I am so proud."