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    BusinessAmbo, Coca-Cola rumored merger backfires

    Ambo, Coca-Cola rumored merger backfires

    Date:

    The Administrative Tribunal of the Consumer Protection & Trade Practice Authority dropped a defense statement presented by Ambo Mineral Waters Plc and East African Bottling SC in the case involving the merger of the two companies which was said to be unlawful and against the principle of fair-trade practice and causes damage to consumer’s interest.

    The case was initiated by the Authority in June, 2017 at least two years after the ill-fated merger was said have taken place between the two companies.

    In its hearing in August 23, the two companies argued dismissing the fact that they have underwent a merger process and asked the tribunal presided by Judge Kidane Tsegaye to throw out charges instituted against them.

    They argued that the Authority has failed to prove if there indeed was an actual merger process as well as a merger between the two companies.

    Moreover, the defendants have also challenged the jurisdiction of the tribunal to look into the case. They also asserted that there were no shares, properties and securities between them. Hence, East African Bottling, the bottler of Coca Cola in Ethiopia, has raised a preliminary objection arguing that the Authority has no cause of action.

    In the same hearing, Authority’s case processor has countered the arguments saying that the merger has happened and that it was conducted without consideration to public interest.

    The case processor further explained that the two companies had officially announced their merger at a conference held at UNECA meeting hall, which was held=====. During the meeting, senior managers of the two companies were present, according to the plaintiff’s statement.

    Following the controversial merger, distributors working for the two companies were told to carry only the two companies’ products which brought an adverse impact on the market. This has also resulted in pushing some of the distributors out of the market.

    If it can be proved that the two companies were involved in a merger transaction or process of merging they would probably lose 10 percent of their annual income as penalty.

    In case of difficulty to determine the annual income the fine that they will be forced to pay will range from 300,000 birr to 600,000 birr. In addition, the offenders might face a rigorous imprisonment of 3 to 5 years.

    As far as merging is concerned, the proclamation on Trade Practice and Consumer Protection stated that any act or practices carried out in course of trade, which is dishonest, misleading, or deceptive and harms or is likely to harm the business interest of a competitor shall be deemed to be an act of unfair competition and is prohibited.

    The Authority has the power to approve any merging requests from private companies. The Authority will approve the request after doing an extensive assessment to check if the merger has any negative consequence on fair trade practice.

    Ambo Mineral Waters has been operating in Ethiopia since the 1930s and is considered to be a leader in the market. The company was nationalized by the Derg regime. In 2008, Ambo was partially privatized when SABMiller (a South African brewery) and Tewodros Ashenafi, a notable local businessman, acquired a chunk of it. At the time, SABMiller owned 51 percent of the company while Tewodros owned 16 percent.

    Tewodros is known for his investment in oil exploration under his company, South West Development. Moreover, he was behind a USD 510 million deal to transfer 40 percent of the Ethiopian National Tobacco Enterprise to Japan Tobacco Enterprise. Tewodros is also a board chairman of Ambo Mineral Water S.C., a subsidiary of Coca Cola Beverages Africa, according to his LinkedIn account.

    Last year, the Ethiopian government fully privatized the company, and sold its 33 percent stake to Ambo International Holding PLC for USD 19.7 million.

    On the other hand, Coca Cola first started its bottling business here in 1959. By the time, it was owned by Ethiopian Bottling Share Company. The two plants were nationalized in 1975 and ran as public companies and continued to do so until the coming of the EPRDF-led government in 1991. In 1996, the company was privatized.

    According to foodbusinessafrica.com, Coca-Cola has bought SabMiller’s 54.5 percent stake in Coca-Cola Beverages Africa from AB inBev for USD 3.15 billion in 2016.

    The tribunal has adjured the case for September 6, 2017 for oral litigations. 

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