Monster denied the allegations in the lawsuit

Monster denied the allegations in the lawsuit

Monster Beverage Corp has spoken out after paying US$16.3m to settle a long-running lawsuit that accused the company of overstating the benefits of a distribution deal, leading to an allegedly inflated share price.

The group's CEO, Rodney Sacks, has said he is “confident” the company would have defeated the class action, but said the settlement was in the firm's “best interests” to avoid disruption.

The lawsuit, filed in 2008, claimed the group's 2007 financial results were skewed by “channel stuffing”. This allegedly involved Monster supplying Anheuser-Busch distributors in the US with an excessive amount of stock to sell. The suit also accused the firm of deferring the reporting of promotional expenses.

The company denied all the allegations.

In a statement on its website Monster said it had spent five years “aggressively defending” itself against the allegations. But, it added: “In light of the potential costs of continued litigation, as well as the potential burden and disruption to the company and its management, Monster, together with its insurance carriers, believed it was in their best interests to settle the case for the amount set forth in the settlement agreement."

The firm also flagged that, "contrary to the allegations in the lawsuit, Monster's relationship with Anheuser-Busch was extremely successful during the proposed class period and thereafter". 

Sacks said: "We are fully confident that we would have prevailed if the litigation had proceeded. Nevertheless, given the terms of the settlement, the payment of which is being funded by insurance carriers entirely, we believe it is in the company's interests to put this matter behind us."