Competition Authority responds to Senate’s statement with regards to the monopolistic tendencies

November 20, 2020 - Reading Time: 3 minutes - By The Vellum Team

Vide a letter dated 9th November 2020 to the Ministry of Industrialization, Trade and Enterprise Development referencing a Statement on monopolistic tendencies by EABL in beer packaging, the Senate Standing Committee on Trade, Tourism and Industrialization requested the

Competition Authority to provide the following information:

  • Explain why EABL is using its dominant position in the market to engage in restrictive trade practices by engraving the universal position in the market to engage in restrictive trade practices by engraving the universal Euro brown design beer bottles with the EABL initial thus limiting access of beer bottles by its competitors.
  • Explain whether any beer company in Kenya has the right to claim ownership of the Euro brown beer bottles considering that the bottles design existed many years before EABL and these competitors ever entered the Kenyan market.
  • State whether the move by EABL to engrave the Euro Brown design beer bottles with its trade mark is in contravention of the Competition Act.
  • Cause the Competition Authority of Kenya(CAK) to investigate EABL`s unfair competition practices and take the requisite action as provided in law: and
  • State measures put in place by the Government to ensure EABL does not continue abusing its dominant position in the market to perpetrate anticompetitive practices against other players in the beer market.

In its response to the Senate, the Authority stated that it had written to the Kenya Industrial Property Institute (KIPI) on 7th February 2020 in an effort to establish whether or not EABL or any company has Intellectual Property Rights over the Euro brown beer bottle. KIPI responded to the Authority 19th February 2020 requesting for a sample of the bottle referred to in order to allow them to respond adequately to the Authority. Following this, the Authority wrote to Keroche Breweries Limited on 20 th February 2020 requesting for the sample of the Universal Brown Euro Beer Bottle that was contested. This information request has never been responded to by Keroche Breweries.

The Authority also took cognizance of pending litigation on the same issue Civil Case No E471 of 2019 Alexander Mugo Mtetu &5 Others Versus Kenya Breweries Limited, CAK &3 Others which made reference to various allegations of market dominance by KBL and EABL including:

  • causing a bottle that is universally used in alcohol packaging to be embossed as an exclusive property of the 2nd Defendant (East African Breweries Limited);
  • using the irregularly acquired intellectual property rights, which are denied in a manner that goes beyond the limits of fair, reasonable and non-discriminatory use;
  • continuously harassing the Plaintiffs through the use of police;
  • engaging in concerted practices with the object or effect of preventing, distorting or lessening competition in the alcohol industry;
  • working to prevent, distort and or restrict competition in the alcohol industry;
  • seeking to limit and or control production and market outlets of the Plaintiffs suppliers;
  • seeking to own bottles shape whilst not owning the bottle (which had already been sold to a distributor), a practice that has no parallel in other industries.

Rule 34 (5) (a) of the Competition (General) Rules, 2019, the Authority decided to hold the matter in abeyance pending the dispensation of the same for the reasons that (among others):
a. The issues considered by the Authority in its investigations were similar to the subject matter in Civil Case No E471 of 2019 and HCC No 88 of 2016 which are matters before the High court. Specifically:

  • The subject matter in both cases is the Euro Brown Bottle whose ownership is being contested.
  • Issues of abuse of dominance are directly and substantially in issue in Civil Case No E471 of 2019.
  • The Orders sought directly against the Authority are with respect to failure to curtail abuse of dominance by these players in the industry

b. There is a Consent Order in HCC No 88 of 2016 which prevents other players in the
industry from using the EABL trademark of the bottles. Thus, in conclusion, the Authority stated that although they had initiated investigations into the concerns raised over dominance, no determination was made on the same because of the pending court matters.

Notably, the Authority will soon again be called in to make submissions with regards to the reinstated debate on market dominance by Safaricom Plc. The telco was the latest to be mentioned by Senator Petronilla Were earlier this month when she by sought a statement from Standing Committee on Information and Technology (ICT) regarding the abuse of dominance by Safaricom. She wants the committee chaired by Baringo Senator Gideon Moi to outline measures put in place to ensure there is a level playing field for players in the telcoms sector.

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