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Fate of Nakumatt and Tuskys Merger in the hands of...

Fate of Nakumatt and Tuskys Merger in the hands of Competition Authority

By Gabriel Onyango

Nakumatt and Tuskys supermarket have presented a merger request to the Competition Authority but anti-cartel regulations could stand in their way, unless exemptions are made.

Dan Githua, Tuskys CEO in a  statement last week,confirmed that the two retailers jointly wrote a formal notice to the Competition Authority of Kenya (CAK), alerting them of their intended merger while seeking their opinion on how to proceed.

In an effort to rescue the giant supermarket chain which was at one point one of East Africa’s strongest and largest retailers.The deal involves streamlining of management, acquisition of assets and Nakumatt’s accessing stock through Tuskys’ goodwill with suppliers.

If the merger of the two giants pulls through, the duo will form the biggest retailer in the Kenyan marketplace.

Raising concerns about the merger’s impact on competition and the well-being of consumers, Kenya’s Trade Principal Secretary Dr. Chris Kiptoo said, “it is now the competition agency to determine what extent of dominance this proposed merger will have in the retail market. However, we do hope that this merger will ease off the pressure on Nakumatt.”

Mergers

Under Kenyan law, a merger occurs when one entity(business) takes whole or part of another entity’s business or acquires a controlling interest in a section of a business even if it’s from another country.

By virtue of their nature, mergers may have significant effect on competition as they consolidate technology,market,influence etc.They thus have to be closely monitored.

In Kenya, competition is governed by the Competition Authority of Kenya under the mandate of the Competition Act No.12 of 2010.

It can stop or penalize companies for practices that appear to stifle competition. Those practices include: Restrictive trade practices-agreements, decisions with the effect of distorting, preventing or decreasing competition in the trade of a product or service; Directly/indirectly fixing the purchase or selling price and collusion in tendering to suppress competition. It also includes dividing a market among parties by allocating customers, supplies etc.

In the case of Nakumatt and Tuskys, where there are concerns about their impact on competition. The CAK has to carefully evaluate the implications of their merger before any implementation is allowed.

For instance in 2014 a Tuskys and Ukwala supermarket merger was stopped by the CAK because of a perceived dominance that would have limited consumers’ choices within Nairobi.

However, the authority can also make exemptions and allow merger if it finds reasons that are compelling enough.

Nakumatt has been struggling for some time and has already closed several of its outlets in Nairobi, Busia and Bungoma among others. In certain malls like Junction, they are being forcefully evicted.

Conditions for merger exemptions

Mergers are allowed if they promote or maintain growth and exports. In addition, they are also allowed if the merger promotes technical (skill), economic progress and industry stability and provides a benefit to the public that outweighs effects of lessened competition.

Depending on market conditions and how one makes their case to convince the Competition Authority: a merger request can go either way. However, it is a point to note that how this merger ruling goes might just shape the future of retail in the country for a long time.


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