EABL appeal delaying ruling on beer industry anti-competition claim

The competition watchdog is awaiting the ruling of the appeals tribunal before it can release the findings of an investigation on claims of unfair competition in the alcohol industry.

Competition Authority of Kenya (CAK) director-general Wang’ombe Kariuki told the Business Daily that the anti-trust watchdog shelved the outcome of its preliminary findings after EABL filed an appeal at the Competition Appeals Tribunal objecting to the undisclosed findings.

The tribunal handles appeals against the regulator.

“That matter was on our desk, we had reached a certain level of investigation and the issue was that there was kind of territorial allocation which was reducing intra-brand competition and when we wanted to conclude the matter, EABL went to the Competition Appeals Tribunal,” said the CAK boss in an interview on Thursday.

“We are about to conclude the matter, we did the investigation and then they [EABL] went to the Competition Appeals Tribunal. When a matter is taken there, it is another adjudication body.”

Mr Wang’ombe spoke as a lobby representing a section of beer and spirit distributors, most of them working with Kenya Breweries Ltd (KBL), put out a newspaper ad calling a meeting on Saturday to push for the opening up of the distribution channels to end exclusive contracts in the industry.

Business practices

The Beverage Distributors of Kenya says it draws membership from Central, Mountain, Western, Rift Valley and Coast regions.

The lobby has in the recent past pushed for the opening up of the sector by seeking to “streamline the structure, operations and proper regulation in the beverage logistics trade.”

READ: Lobby wants spirits, beer distribution sector opened up

“The board of directors of Beverage Distributors of Kenya, (BDK) have the pleasure of inviting Diageo (KBL and UDV) distributors to a consultative meeting to discuss Diageo business practices in Kenya and beverage distributorship in Kenya under the 2010 Constitution and under the Competition Act,” said a notice signed by Wanjiku Kirika.

Ms Kirika said the lobby had convened the meeting to address competition issues affecting all distributors in the beer industry.

“Those invited to the meeting are the members of the association mostly Diageo distributors. There are some other manufacturers who had expressed interest to attend,” she told the Business Daily.

EABL did not comment on the planned meeting despite several requests for interview.

Essentially, if the resellers’ bid succeeds distributors will not be tied to particular producers which has been the tradition for years.

KBL, a subsidiary of UK Diageo’s EABL, is the largest and oldest producer of beer in the country.

The listed firm is followed by the Naivasha-based Keroche Breweries.

A 2010 study by the Overseas Development Institute noted that Kenya suffers from a relatively high degree of concentration in its alcohol industry and identified a number of anti-competition practices.

Anti-competitive practices

The study said anti-competitive practices in  the beer market in Kenya include territorial allocation where each distributor operates only within a specific area, precluding direct competition.

Others are exclusive dealership preventing dealers from contracting with any other beer producers and price fixing whereby the wholesale price of beer which distributors must charge is fixed by the producer.

There is also evidence that some producers provide coolers to bars, as long as they are only used for their own products.

Bar owners risked automatic withdrawal of the facility if they were found to have put rival products in the coolers.

The resellers have called for an end to exclusivity of product’s distribution in line with the Competition Act.

Effective from August 1, 2010, the Competition Act had sought to stamp out price fixing by manufacturers and producers on all sectors of the Kenyan industry.
The Act in addition addresses distribution fairness issues in article 24.

The distributors’ lobby has argued the opening up of the beverages trade will “greatly enhance the profitability of beverage distributors and bring in efficiency through sheer economies of scale under this statutory framework”.