Tuskys files appeal against CAK ruling on Ukwala buyout

Retail chain Tuskys has filed an appeal against the recent ruling by the competition watchdog that halted its bid to take over six Ukwala Supermarkets stores.

Tuskys wants set aside the decision by the Competition Authority of Kenya (CAK), which besides halting the buyout also ordered it to reverse an already ongoing acquisition of two Ukwala stores located in Nairobi’s city centre.

The joint appeal filed by Tuskys and Ukwala argues that the regulator erred in failing to distinguish and determine whether the transaction in question was a purchase of assets of Ukwala by Tuskys or a merger of the two.

The appeal also argues that CAK overstepped its mandate contrary to the Competition Act in misconstruing its authority to regulate markets to mean limited, undetermined, unmarked and unsurveyed or statutorily defined geographical area of what they termed as ‘Nairobi Central Business District’ contrary to the Act and the law.

Tuskys further argues that CAK erred in holding that Ukwala has a market share of 17.85 per cent while Tuskys has 39.3 per cent, making a total of 57.15 per cent if the transaction had been allowed to proceed.

The retailer, which is Kenya’s second biggest after Nkumatt, argues that CAK acted without evidence or proper facts and distorted what constitutes the geographic or substantive market as defined by the Competition Act.

“They also ignored the entirety of the market and instead arbitrarily and narrowly defined what made up or constituted the market share to the appellants’ prejudice and detriment,” argues Tuskys through advocates Taib Ali Taib.

Tuskys wanted to buy out six Ukwala stores in Nairobi but the Competition Authority of Kenya (CAK) declined to approve the deal.

READ: Tuskys shops shut as regulator stops takeover of Ukwala stores

The appeal may however suffer delays as the Competition Tribunal is yet to be constituted.

“The appointing authority of the Competition Tribunal is aware and has seized of the matter,” said the CAK director general Wang’ombe Kariuki.

The competition watchdog maintained that an unconditional buyout of the outlets would result in Tuskys’ market dominance and reduce competition in Nairobi’s retail sector, ultimately reducing choice and negatively impacting both consumers and suppliers.

The two retailers were effectively ordered to terminate and roll back the acquisition of Ukwala’s Tom Mboya and Ronald Ngala branches or risk criminal prosecution.

“They (Tuskys and Ukwala) should be advised that they will be in violation of the relevant provision of the Competition Act if they continue with the arrangement between themselves in respect to Ukwala branches other than the Jogoo Road branch,” CAK warned in its notice.

Tuskys also argues that CAK erred in fact and law and further acted arbitrarily and without evidence produced or tabled before it in holding that there exists what they termed as scarcity of adequate rental space in the relevant geographical market.

The retailer also holds that CAK erred in ruling that the availability of rental space in the Central Business District constituted a significant barrier to the entry of other competitors and that this factor was likely to lead to what they termed a dominant position and market power.

Both Tuskys and Ukwala now want the decision to be overturned or amended to exclude the prejudicial conditions and have sought for any incidental or consequential orders that may arise.