Legal Wrangling over Ambo, Coca Merger Backtracks


Months back the two companies were fined five percent of their annual revenue adjudged for illegal merger




 

The legal battle the bottlers of Coca-Cola and Ambo Mineral Water are having with the prosecutors of the Trade Competition & Consumer Protection Authority set out for another trial as the appellate tribunal remanded the case to the lower judicature.

Fighting on the tribunal since June 16, 2017, Ambo Mineral Water and East African Bottling Company were adjudged for allegedly making an illegal merger without giving proper notice to the Authority. The two companies were fined five percent of their annual turnover from each account.

Though the bench closed the case after penalising the companies, the Appellate Tribunal of the Authority has remanded the case back stating that the lower tribunal gave the final verdict without reviewing some points.

The case was instigated 11 months ago when the we processors of the Tribunal filed a suit accusing the duo of merging illegally, i.e. without notifying the Authority. The two companies were charged for having declared their union in January 2017 in the presence of their staff and distributors at the United Nations Economic Cooperation of Africa (UN-ECA).

In their charge, the prosecutors of the Authority claimed that the companies informed their distributors that it was mandatory to carry the products of both companies. The suit also alleged that the pair has been exchanging workers, logo and letterheads which could be a confirmation of the merger.

The merger was supposed to occur three years back when the companies were reported of having made an arrangement whereby Ambo Mineral would join Coca-Cola as SABMiller, a major shareholder within Ambo Mineral with a 51pc stake. Established in 1930, Ambo was nationalised in 1974. Along with a 33pc of the government’s share, Ambo was partially privatised to SouthWest Development, a company founded by the prominent businessman Tewodros Ashenafi, and SABMiller.

Two years ago a Mauritius-based company, Ambo International Holding Ltd, has acquired 33pc of the government’s share in Ambo Mineral Water for 19.7 million dollars. In 2014 both SABCO and SABMiller Plc along with the Coca-Cola Company formed Coca-Cola Beverages Africa (CCBA) through a merger.

The prosecutors also claimed that SABCO swallowed Ambo International Holding Mauritius and East African Bottling, which effectively led to the merger of the defendants.

SABCO, on the other hand, holds a 98pc share in East African Bottling, having bought its first shares in 1995. Nigussie Hailu, a businessman who has served a 14-year jail sentence convicted for a high profile corruption case that involved former Defence Minister Tamrat Layne, and three more companies own the remaining minority shares.

Established 59 years ago and nationalised in 1975, East African Bottings bottled 250 million litres of beverage last year from its three plants in Dire Dawa, Addis Abeba and Bahirdar. In the reported year, the company paid 1.4 billion Br in a tax and 492 million Br as a salary for its employees.

Denying the merger, the two companies filed their preliminary objection and statement of defence on July 3, 2017. They also stated that the suit does not have a cause of action to show why the claim was brought. The Authority does not have reliable evidence, according to their statement of defence.

However, the presiding judge of the tribunal, Kidane G. Mesqel, rejected their defences on August 23, 2017, stating that the Authority has a legitimate cause of action in bringing the claim. He also ruled that to proceed with oral litigation, stating other issues would be reviewed in the course of the proceedings.

After the oral litigation, on September 15, 2017, the two companies requested the court to amend their statement of defence. For the amendment, the lawyers of the companies reasoned out that their initial defence was not elaborative, did not describe the arguments of the two companies well and could not fit the standards of a statement of defence.

Basing on the evidence, which includes the transfer of four employees from East African Bottling to Ambo Mineral Water, joint using of their logos and sharing each other’s sales line, and the litigation on December 20, 2017, Kidane ruled that the companies made a merger without proper notification. He also penalise them with a monetary fine.

Displeased with the ruling of the Tribunal, the two companies appealed jointly on January 17, 2018, requesting the higher tribunal to reverse the verdict and the fines levied on them. In their appeal, the two companies claimed that the lower tribunal passed the decision without reviewing their defence stances by rejecting their application of amending their statement of defence.

Their joint appeal, filed by their lawyer Fikadu Petros, also claimed that the lower tribunal considered the agreement of a merger as an actual merger. They also pleaded that the local companies did not make any merger just like their parent companies did globally.

Though there is no merger among the companies locally, the merger could be legal according to the rules and regulations of Common Market for Eastern Southern Africa (COMESA), which Ethiopia is a member of and will a bid to the principle, claimed their appeal form.

Admitting their appeal, the Tribunal adjourned the case to March 6, 2018, for oral litigation. During the oral litigation, the prosecutors of the Authority argued that even though Ethiopia is a member of COMESA, the Authority should be notified of any merger, referring to the establishment proclamation of the Authority.

The three judges of the appellate tribunal Kechito G. Mariam, Habtamu Mamo and Solomon Ayalew, who reviewed the documents and heard the litigation, returned the case to the lower tribunal annulling the former ruling. The judges ordered the lower tribunal to frame the charge again and proceed with the trial.

The lower tribunal heard the charge of the plaintiff last Wednesday, May 9, 2018, and adjourned the case to May 25, 2018, for oral litigation.



By FASIKA TADESSE
FORTUNE STAFF WRITER

Published on May 12,2018 [ Vol 19 ,No 941]


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