Following months of legal wrangling, the Administrative Tribunal with the Ethiopian Trade Practices and Consumers Protection Authority, presiding over the illegal merger case between Ambo Mineral Water PLC and the East African Bottling Company, ruled Wednesday against the duo, leading to their paying at least half a billion birr in penalty fees, The Reporter has learnt.
The ruling states that both companies would pay five percent of their annual income of last year.
According to sources close to the case, last year’s annual turnover of East African Bottling alone is estimated in the neighborhood of six billion birr.
Just days after the ruling, the authority requested the Ethiopian Revenues and Customs Authority to provide last year’s audit report of the two defendants in order to calculate the exact fine amount.
The five-month-long judicial saga chronicles a roster of complaints that fault the two companies for participation in unfair trade practices as well as for undergoing an unlawful merger that had a negative impact on fair trade practices.
This act by the two defendants contravenes the proclamation on trade practices and consumer protection which stipulates that any dishonest, misleading or deceptive act or practice carried out in the course of trade, and that harms, or would likely harm, the business interests of a competitor, shall be deemed to be an act of unfair competition, and is thus prohibited.
The same proclamation gives the mandate of reviewing and deciding on merger requests to the Ethiopian Trade Practices and Consumers Protection Authority.
The merger was said to occur three years ago when the two companies were reported to have made an arrangement whereby Ambo Mineral would join Coca Cola family as SABMiller, a major shareholder within Ambo Mineral.
The deal was said to have given SABMiller and its local partner the advantage of bottling Coca Cola in Ethiopia as a majority shareholder, according to the plaintiff’s statements.
The two companies, on the other hand, argue that the merger did not take place in Ethiopia, and they still operated separately.
On the other hand, the plaintiff counter-argued that SABCO absorbed Ambo International Holding Ltd Mauritius and East African Bottling, which effectively led to the merger of the defendants.
The plaintiff provided pieces of evidence showing the merger of the two, including using stamps in one letter, exchanging staff members as well as company secrets. It also provided evidence as to the respective distributors of the two defendants were forced to distribute the two products.
After looking into the case, the administrative tribunal finally ruled in favor of the plaintiff.
There is a serious misunderstanding of our case, Patrick Plunkett, general manager of Ambo Mineral Water, told The Reporter.
“The merger happened in Mauritius, not in Ethiopia,” he said.
Ambo Mineral Water 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 South West Development owned 16 percent.
Tewodros is known for his investment in gas exploration under his company, South West Energy. According to his LinkedIn account, he is also a board chairman of Ambo Mineral Water S.C., a subsidiary of Coca Cola Beverages Africa and board member of the National Tobacco Enterprise.
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.
“Ambo Mineral and East Africa operate separately in Ethiopia,” according to Plunkett.
On the other hand, Coca Cola first started its bottling business here in 1959. At the time, it was owned by Ethiopian Bottling SC. 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.
Following the ruling, Ambo is preparing to appeal to a higher court.
“Yes! We will definitely appeal,” said Plunkett.
Procedurally, the case will next be overseen by an appellate court with the Federal Trade Practices and Consumers Protection Authority. If the defendants would not be satisfied with its decision, the federal cassation court will review the case as a last resort.