Pepsi Slams Coke With Court Case

The global cola war spilled over into Indian courts yesterday as PepsiCo filed a petition against arch-rival Coca-Cola in the Delhi High Court, alleging that Coke had entered into a conspiracy to disrupt Pepsis business operations by inducing its key employees and associates to break existing contracts illegally.

Pepsi has sought a permanent injunction and an ex-parte order against Coke, restraining it from taking away Pepsis employees and business associates. Pepsi has also reserved the right to seek financial damages from Coke at a later date if necessary.

The court of Justice C M Nayar, while refusing to grant an injunction against Coca-Cola, issued summons to Coke, returnable on May 6. Coca-Cola confirmed that it had received the courts notice but declined comment, saying the matter was sub-judice.

 

Sources close to Coca-Cola said the companys defence could be that under the Indian Constitution, there can be no restrictions on movement of labour. Besides, any effort by a company to restrict its employees from joining other companies might fall foul of the MRTP Act for restrictive and unfair trade practices.

Former attorney-general Ashok Desai and noted lawyer Arun Jaitley argued on behalf of Pepsi. The multinational has also taken legal counsel from the noted lawyer, K K Venugopal.

In its petition evoking the Law of Torts, Pepsi cited numerous incidents over the past six months during which various Pepsi employees, independent bottlers, business consultants, distributors and institutional clients were offered inducements by Coke in the form of remuneration much higher than the prevailing industry average.

However, sources close to Coke said any breaking of contractual obligations should be taken up under the Law of Contract and not the Law of Torts. The sources also said that every contract contains an exit clause which allows an employee to terminate his contract, subject to employment conditions, as used by Pepsi in the past to hire key personnel from Hindustan Lever Ltd.

The inducements were, alleged Pepsis petition, illegal in so far as they were offered for immediate termination of existing contracts with Pepsi without serving a valid notice period and in violation of the confidentiality agreement of each employee.

Citing specific instances, Pepsi has accused Coke of entering into a conspiracy with the sole intention of causing prejudice, loss and damage to its business interests.

Pepsi has cited the instance of Coke snapping up cricketer Javagal Srinath inspite of the latter signing a contract with Pepsis sports consultant 21st Century Media. In fact, alleges Pepsi, Coke persisted in inducing the consultant itself to terminate its contract with Pepsi in favour of Coke.

Similarly, Pepsi has charged Coke with inducing the Board of Control for Cricket in India to give the sponsorship of the recently concluded Pepsi Triangular Cricket Series series to Coke, as acknowledged in the BCCIs submission before the Mumbai High Court, even while a firm contract was signed with Pepsi.

However, sources close to Coke said Pepsis contract with Srinath was allegedly in the verbal stage, with no legal bindings.

THE COLA WAR HEATS UP

Pepsis charges:

With the objective of disrupting Pepsis operations, Coke made lucrative offers over the past six months to

* Key Pepsi employees: Lured away three of 10 key sales personnel from Kanpur and all 61 employees of Goa Bottling Co

* Independent bottlers

* Inependent business consultants: Repeatedly induced sports consultant 21st Century Media to break its contract with Pepsi and join Coke, wrested away cricketer J Srinath from 21st Century Media in violation of his contract, petitioned the BCCI to give the sponsorship of the Pepsi Triangular series to Coke even after the contract was signed, persistently induced music consultant DNA Networks to terminate its contract with Pepsi and join Coke

* Distributors: Offered Pepsis Ahmedabad distributor Rs 25 lakh to snap Pepsi contract in favour of Coke

* Institutional accounts: Induced Hyatt Regency (New Delhi) to break a Pepsi contract