October 1, 2001 Posted: 1523 GMT
LONDON (CNN) -- Britain's Cadbury Schweppes has filed an antitrust suit against PepsiCo over an agreement that it says blocks the sale of its 7 UP drink.
Cadbury, the world's third-largest soft drink maker, claims Pepsi signed an agreement with Tricon Global Restaurants (YUM: down $1.10 to $38.12, Research, Estimates) that restricts the sale of 7 UP in Tricon's KFC, Taco Bell, and Pizza Hut outlets.
"These anti-competitive arrangements restrict the ability of 7 UP to compete in these outlets and limits freedom of choice for the consumer," Cadbury said on Monday.
7 UP is the No. 2 drink in the lemon lime sector behind Coca Cola's (KO: down $0.27 to $46.58, Research, Estimates) Sprite. Pepsi recently launched a rival lemon lime drink, called Sierra Mist.
Cadbury, which bought Pernod Ricard's soft drinks business for $643 million last week and acquired Snapple Beverages of the United States for $1.45 billion last year, said PepsiCo (PEP: up $0.31 to $48.81, Research, Estimates) had offered Tricon a discount on concentrates across all its soft drinks, including Sierra Mist.
The legal action affects "fountain sales" of 7 UP where the drink is dispensed from a tap, and which accounts for about 10 percent of sales, according to Reuters. 7 UP provides about 18 percent of Cadbury's Dr Pepper/Seven Up U.S. sales in the sector.
The case was filed as an alleged violation of the Free Enterprise and Antitrust Act in Dr Pepper/Seven Up's home state of Texas.
A Pepsi spokesman said the company has yet to see the Cadbury complaint and that the suit is without merit.
"We understand as well as everyone else how competitive the U.S. soft drink market is, especially the fountain channel, and we compete fairly and vigorously in all channels," said Pepsi spokesman Larry Jabbonsky.
In July, Cadbury said sales at its North American drinks unit rose 54 percent to more than £1 billion ($1.48 billion) and trading profit rose 49 percent to £299 million (roughly $443 million).
Shares in Cadbury (CBRY) fell 5 percent to 419 pence Monday in London trade. The stock has fallen more than 14 percent from a high of 493.5 in June and 8 percent from the beginning of the year.
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