The Justice Department announced yesterday that a grand jury has indicted the former chairman of the Washington area Pepsi-Cola bottling company and a former Coca-Cola executive who is now president of Seven-Up for conspiring to raise the price of soft drinks in the Washington area.
Two other indictments and three guilty pleas on criminal price-fixing charges were disclosed yesterday as the on-going investigation of soft-drink price-fixing continued to unfold.
Mid-Atlantic Coca-Cola Bottling Co. Inc. of Silver Spring pleaded guilty to two separate criminal price-fixing charges in Washington and Norfolk and agreed to pay $1 million in fines in each case. The firm, a local subsidiary of the Coca-Cola Co. of Atlanta, agreed to cooperate with the Justice Department's investigation.
U.S. Attorney Joseph E. diGenova said the charges are "just the beginning of cases involving economic crime ... that directly affects the consumer."
Local Coke and Pepsi bottling executives are accused of agreeing in a series of restaurant meetings and phone calls between 1982 and 1985 not to lower the prices they charged supermarkets, liquor stores, restaurants and other soft-drink sellers.
Indictments handed up yesterday in U.S. District Court in Norfolk charged the Allegheny Pepsi-Cola Bottling Co. of Baltimore and its chairman, Morton M. Lapides, with conspiracy to set prices between 1982 and 1985. Lapides has since sold the Pepsi franchise to PepsiCo Inc.
The same indictment also named Odis R. Allen, former vice president of Mid-Atlantic Coca-Cola and James J. Harford, the bottling company's former president, as conspirators. Harford is now president and chief executive officer of Seven-Up.
Spokesmen for Lapides and Harford yesterday denied the charges. Allen could not be reached for comment.
The corporations face fines of up to $1 million and the individuals fines of up to $250,000 and three years in prison if convicted on the charges.
The investigation, which has been going on for more than a year, involves 11 grand juries in eight states: Virginia, Pennsylvania, Maryland, California, Indiana, Ohio, Georgia and Florida. Yesterday's actions bring the total number of indictments to nine and fines levied so far to more than $3 million.
Asked whether additional indictments are expected, diGenova said: "Anytime somebody pleads guilty, they're going to start flapping their jaws."
Charles F. Rule, assistant attorney general in charge of the antitrust division, said, "Price-fixers don't simply violate the antitrust laws. They take money out of the pockets of every consumer" who buys the products.
Rule said he could not estimate how much consumers had been harmed or how much prices rose because of the company's actions. "Unfortunately, it does seem to be the case" that price-fixing is widespread in the industry, he said.
Court documents filed in connection with the guilty plea in Norfolk show that Mid-Atlantic conspired with Allegheny Bottling to fix Coke and Pepsi prices in areas served by their Norfolk and Richmond divisions.
In a separate pleading in the District, Mid-Atlantic admitted to conspiring with General Cinema Beverages Inc. -- the D.C. Pepsi distributor -- to fix prices by agreeing to maintain prices published in promotional letters sent to retailers in the District, Maryland and Virginia. Mid-Atlantic agreed to pay a $1 million fine in each of the cases.
General Cinema last year paid a $1 million fine after pleading guilty to a similar charge. General Cinema is also the defendant in a civil antitrust lawsuit brought by a District soft-drink vending company seeking $150 million in damages. The lawsuit claims that local cola drinkers have paid at least $50 million more than they should have for soft drinks because of illegal price-fixing. A hearing expected to settle the claims against General Cinema is scheduled for Monday.
Of the three companies thus far named in the charges involving price-fixing, only Allegheny Beverage has not agreed to plead guilty. A statement released by the company yesterday said that Allegheny's counsel has been instructed to enter a plea of not guilty. In addition, Lapides stated that he is "innocent of any price-fixing and intends to defend vigorously against the charge."
Allegheny Pepsi, which had sales of about $180 million during 1984, was a wholly owned subsidiary of Allegheny Beverage Corp. until it was sold in 1985 to PepsiCo Inc.
Lapides' company diversified into food services, office furniture and other businesses after selling the Pepsi bottling subsidiary, then ran into financial trouble and was forced to sell most of its operations. It is presently trying to sell its last subsidiary, Service America Corp. for $450 million to avoid going bankrupt.
Allegheny Beverage has agreed it, not PepsiCo, will pay any penalties that result fromthe investigation.
Both Coca-Cola Co. and PepsiCo said the parent companies were not involved in the price-fixing by their local bottlers.
"Price-fixing is a betrayal of everything we stand for and the crooks should be drummed out of the business," said PepsiCo President Roger A. Enrico, in a statement released yesterday. The statement said Pepsi would cancel the franchise of any bottler convicted of price-fixing.
Another Coca-Cola subsidiary, NEG Holding Co. Inc., and Walter A. Sams III, former treasurer and director of the company, yesterday pleaded guilty to fixing wholesale and discount prices of soft drinks in northeastern Georgia. NEG is the corporate successor to the Athens (Ga.) Coca-Cola Bottling Co. The government has recommended that the company be fined $400,000 and that Sams be incarcerated, according to the Justice Department.
Staff Writer Nancy Lewis also contributed to this article.