Tuskys breaches Ukwala bid deadline

Tuskys Supermarkets was yet to comply with the competition watchdog’s June 30 deadline, requiring it to terminate its acquisition of three Ukwala Supermarkets outlets as at Monday evening, risking further sanctions from the regulator.

The Competition Authority of Kenya (CAK) ordered Tuskys to terminate its bid to acquire three Ukwala Supermarkets stores on Tom Mboya Street, Ronald Ngala and Jogoo Road in Nairobi.

The retailer was fined Sh5.3 million early last month for the irregular acquisition of three Ukwala outlets in April last year after the CAK said the deal amounted to a restrictive trade practice.

“They have until midnight today (Monday) within which to comply with the order,” said the CAK director general Wang’ombe Kariuki in an interview.

A spot-check by the Business Daily showed that the former Ukwala stores on were still being operated by Tuskys, just hours to the midnight deadline.

Tuskys’ signage was still up in the three outlets and the receipts being issued by the stores were also from the supermarket chain, contrary to an order by CAK last month.

The two businesses paid the fine and were given until midnight Monday to terminate all joint operations, which included stripping Tuskys’ branding from the three premises and reverting their receipting to Ukwala.

READ: Why regulator stopped Tuskys bid to acquire rival Ukwala

There was no indication that the changes ordered by the regulator would be effected by the time of going to press.

Employees interviewed at the supermarket said it was business as usual for them and that they had not heard of any plans to revert the stores back to the Ukwala.

When reached for comment, Frank Kamau, Tuskys’ financial director, said “unfortunately I cannot comment on that matter”.

Tuskys and Ukwala’s brush with the competition watchdog started in October 2013 when CAK was notified that Tuskys, Kenya’s second-largest retail chain, had acquired the three Ukwala stores.

In the agreement, which was never made public, Tuskys was allowed to acquire Ukwala’s stock, set commodity prices and even take over payment of staff in the three branches.

Tuskys was also given the permission to implement staff re-organisation. At the Ronald Ngala outlet, for instance, at least 30 Tuskys employees were deployed to work in the busy outlet last year.

About six months after this deal had been sealed and operations commenced, CAK got wind of it and initiated investigations to determine if Tuskys had acquired over 50 per cent of Ukwala.

The authority also wanted to establish whether Tuskys’ acquisition of its rival would alter the control of the entire Ukwala business (such as setting of prices) and board decisions.

After six months of investigations, CAK last month ruled that the two supermarket chains were engaging in a “horizontal restrictive trade practice.”

This irregularity arises when businesses that are in the same line of business are deemed to be in a relationship that could ultimately curtail competition in the market.