Buenos Aires, Aug. 10 - An Argentine judge has rejected Coca Cola Co.'s criminal complaint against some executives of French food and drink maker Danone, concluding that a smear campaign against Coke's Dasani water imposed no damages to its brand, Coca Cola Argentina confirmed Friday.
The judge acknowledged Coke's claim that Danone and its advertising agency Euro RSCG had orchestrated a smear campaign against Dasani.
However, the judge rejected the U.S. company's claim that the campaign caused damage to the brand's sales, because when the campaign started Dasani was a new brand and it didn't yet have any consumers to lose to Danone, Coca Cola Argentina said.
Danone Argentina wasn't immediately available for a comment.
Coca Cola Argentina said it appealed the ruling Friday, arguing that its complaint included substantial evidence that it lost customers because of the false information spread via e-mail.
Furthermore, Coca Cola Argentina argues that, if not reversed, the judge's ruling might create a dangerous precedent, by establishing that market entrants aren't protected from defamatory smear campaigns.
"It is important to note that the decision did not find that the propaganda campaign did not happen, nor did the lower court in any way vindicate the individuals who are alleged to be responsible for the conduct," Coca Cola Argentina said in an e-mailed statement.
The statement added that this campaign has not only impacted Dasani's entry into the Argentine and Latin American markets, but also unfairly attacks The Coca-Cola Company's most valuable assets: its long-built reputation and consumers' confidence in its products.
The ruling follows the complaint filed last month by Coca Cola Argentina against two executives of Danone Argentina's water unit and an executive of Euro RSCG in Buenos Aires seeking damages of as much as $10,000 per individual.
The world's biggest soft-drink company alleges that its French rival made false statements against Dasani in an Internet smear campaign calling it "bottled tap water" and "cancer water."
Danone Argentina has rejected these allegations in the past, while Euro RSCG never returned calls seeking comments.
The Past Haunts Back
Coca-Cola says Dasani is water "from a municipal source" that is "subjected to multi-barrier filtration," purified and enhanced with minerals. Regular tests made by Argentina's food standards agency, ANMAT, have so far shown that Coke's water brand is safe, ANMAT director Teresa Velich told Dow Jones Newswires.
Danone's water brands, such as Evian and Villavicencio of Argentina, are instead made from spring water.
Indeed, Coke has said it used to add calcium chloride to the water it bottled in the U.K. to comply with a local requirement that mineral water contain calcium.
The company has said the practice resulted in higher-than-expected bromate levels, a chemical that can increase the risk of cancer. The finding led the company to withdraw Dasani from the U.K. in 2004. As a result of the bad press on Dasani in the U.K., Coke said it gave up plans to launch Dasani in the rest of Europe.
The smear campaign launched by Danone in Argentina echoed the headlines run by U.K. media at the time, allegedly hurting the brand's potential sales in Argentina and in other Latin American countries.
Dasani is the number 2 water brand for sales in the U.S. after PepsiCo.Inc.'s Aquafina. Poland Spring of Swiss giant Nestle SA is the third.
The brand is sold in Canada, Japan, Korea, in Africa and in many countries in Latin America.
Dasani was launched in Argentina in October 2005. Immediately following the launch, its competitor started the e-mail campaign that extended beyond Argentina to a number of other Latin American markets, The Atlanta-based company said.
Coke alleges that as a result of Danone's campaign, Dasani sales in Argentina are half of what Coke's market research had projected. Coke has a 6% stake of Argentina's water market, including flavored waters, while Danone has a 57.3% market share.