Companies

EABL loses first round in legal battle with distributor

Summary

  • EABL is seeking to appoint new distributors on the routes served by Bia Tosha arguing they are not exclusive, but the High Court in June stopped them, prompting the appeal.

The East African Breweries Limited (EABL) has lost the first round of an appeal to have orders barring them from appointing a new distributor on the supply routes of its single-largest distributor lifted.

The Court of Appeal yesterday ordered that the distribution contract between EABL and Bia Tosha for 22 routes remains in place until the full hearing and determination of the brewer’s appeal.

EABL is seeking to appoint new distributors on the routes served by Bia Tosha arguing they are not exclusive, but the High Court in June stopped them, prompting the appeal.

Bia Tosha on its part holds that it has paid more than Sh38 million in goodwill for the distribution routes, which the regional brewer has declared as part of its profit over the years.

“In the interim as the parties having been trading and have special relationship we order that the status quo obtaining as at today be maintained pending the hearing and determination of the appeal,” the Court of Appeal order states.

When making the order Court of Appeal judges Martha Koome, Festus Azangalala and Fatuma Sichale acknowledged that the two firms have been trading “over a long period” and that the only dispute was the status quo.

The judges ordered EABL and its subsidiary United Distillers Vintners (UDV) to file and serve written submissions of its appeal within 14 days, noting that “fast-tracking of the appeal will resolve the dispute”.

File another response

Bia Tosha and Cogno Ventures — one of the suppliers appointed to some of the former’s routes — are also expected to file their response 14 days after they are served.

READ: EABL's biggest distributor signs deal with Keroche

EABL may file another response to this within seven days of receipt.

“The appeal shall thereafter be fixed for highlighting the written submissions. This application be mentioned when the appeal comes up for hearing for directions or further orders,” the judges ordered.

Bia Tosha is claiming distribution of EABL products in Namanga, Bissil, Kajiado, Kitengela, Athi River, Industrial Area, South B, Nairobi West, Kenyatta, Lang’ata, Rongai, Kiserian and Magadi, according to court documents.

Other routes are Upper Hill, Ngong Road, Hurlingham, Kawangware, Satellite, Dagoretti, UDV A, UDV B and UDV C.

Bia Tosha sued EABL in June claiming that its parent company — Diageo — has been threatening local distributors to coerce them into shunning rival manufacturers as part of a scheme to defeat anti-monopoly laws enacted in 2011.

EABL has denied these intimidation claims, saying the brewer only appointed other distributors to the 22 routes in dispute after evaluations revealed that Bia Tosha is unable to adequately service the areas.

The brewer also asked the High Court to refer the dispute to arbitration as per the terms of the agreement with Bia Tosha. The distributor has since signed a distributorship deal with rival Keroche Breweries.

- MUGAMBI MUTEGI