Beer maker Kenya Breweries Limited, a subsidiary of UK Diageo’s East African Breweries Ltd (EABL) #ticker:EABL, has entered into a settlement agreement with the competition regulator committing to end some restrictive trading practices.
This follows an investigation by the Competition Authority of Kenya (CAK) into the alcoholic beverages sector, which established that Kenya Breweries Limited (KBL) had entered into vertical distribution agreements with its distributors that “provided territorial exclusivity and dealing in products of competitors.”
The regulator says it has ticked off the issue as resolved after KBL established an internal competition compliance policy that the brewer will use to inform its partnerships and review controversial clauses and terms of engagement.
“The Authority established that the Distributorship agreement between Kenya Breweries Limited and its Distributors contained clauses that could likely lead to the lessening of intra-brand competition,” said CAK.
KBL was investigated under Section 21 of the Competition Act which describes restrictive trade practices (RTPs) as those that lessen competition to the detriment of consumers.
“Kenya Breweries Limited invoked Section 38 of the Act providing for Settlement where it was agreed that they amend the identified problematic clauses and develop an internal Competition Compliance Policy.”
The Competition Act also states that CAK may penalise the parties up to 10 percent of the preceding year’s turnover of the undertaking(s) or issue cease and desist orders to remedy the infringement.
Its parent firm EABL, which has distributors in various regions across the country including at the Coast, Rift Valley and Western Kenya, has in the past had standoffs with some of its partners over stringent financial and contractual requirements.
The beer maker has previously been accused of hitting distributors with contractual demands that prevent the merchants from dealing with rival firms’ products.
A standoff with EABL came to a head in June 2016 after some distributors declined to sign agreements requiring them to notify the brewer, which controls around 90 percent of Kenya’s beer market, of any plans to deal in competitor products.
The firm had at the time issued its distributors with three-year contracts that effectively barred them from selling products from rival firms, which some distributors declined to sign after deeming them uncompetitive.