In an ongoing appeal case in which the Appeal Court barred the East African Breweries Limited (EABL) from appointing a new distributor on the supply routes of Bia Tosha, the court effectively allowed the brewers to work with anyone else since at the time the ruling was made, there was no contractual dealings between the two companies.
EABL and Bia Tosha, its single-largest distributor have been in a legal tussle over distribution routes. The beer maker is alleged to have reduced the distribution areas controlled by the distributor yet they had paid goodwill. But the beer maker argued that since the coming into force of the Competition Act, having exclusive access to these markets was illegal. In addition, it argued that the goodwill payment was non-refundable.
On Wednesday, August 10th 2016, the Court of Appeal Judges Martha Koome, Festus Azangalala and Fatuma Sichale 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.
However, at the time the decision was made, there was no contractual agreement between Bia Tosha and EABL because their earlier contract had expired on August 2nd, 2016.
In an article published on Business Daily, the brewers said
“There could have been no other interpretation because by the time the order to maintain the status quo was issued on August 11, there was no contractual relationship between us and the distributor.”
EABL is seeking to appoint new distributors on the routes served by Bia Tosha arguing they are not exclusive. But the distributor argue that it had paid Kenya Breweries Limited (KBL) more than Sh38 million in goodwill for exclusive control of the 22 routes.
The contested distribution areas ares for EABL products are Namanga, Bissil, Kajiado, Kitengela, Athi River, Industrial Area, South B, Nairobi West, Kenyatta, Lang’ata, Rongai, Kiserian, Magadi, Upper Hill, Ngong Road, Hurlingham, Kawangware, Satellite, Dagoretti, UDV A, UDV B and UDV C.
While the distributor who controls about 12 percent of EABL products declined to brand their vehicles claiming the Competition Act does not allow them to do so because they would effectively become exclusive distributors for EABL, they in July started distributing Keroche products. They signed a three-month memorandum as negotiations on a long-term contract continue.
The Judges ordered the parties to the case EABL and its subsidiary United Distillers Vintners (UDV), Bia Tosha and Cogno Ventures to file and serve written submissions of its appeal within 14 days. They noted that “fast-tracking of the appeal will resolve the dispute”.