Competition Authority of Kenya order sees Tuskys close two outlets

Monday August 4 2014

One of the Tuskys outlets in Nairobi on August 4, 2014. The retail chain closed some of its branches following a Competition authority directive aimed at curtailing dominance in Nairobi’s central business district. PHOTO | BILLY MUTAI

One of the Tuskys outlets in Nairobi on August 4, 2014. The retail chain closed some of its branches following a Competition authority directive aimed at curtailing dominance in Nairobi’s central business district. PHOTO | BILLY MUTAI NATION MEDIA GROUP

By LILIAN OCHIENG'
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Retail chain Tuskys Supermarket has indefinitely closed down two of the six branches it recently acquired from its rival Ukwala Limited after the national competition watchdog declined to approve the deal.

In a letter sent to Tusker Mattresses Limited, the company which owns Tuskys supermarkets, the Competition Authority of Kenya last Wednesday said it had approved the transaction exclusive of the five outlets within Nairobi’s central business district.

“Pursuant to section 46 (6) of the Act, we wish to notify you that the authority has approved the transaction conditionally subject to the exclusion of the business and assets of five Ukwala Supermarket branches at Hakati Street; Ronald Ngala Street, the two branches along Tom Mboya Street (Tom Mboya and hyper) and Haile Selassie street all in Nairobi central business district from the transaction. Also be kindly advised that we shall cause the publication of this in the gazette as soon as is it practicable,” CAK letter signed by director general Wang’ombe Karuki read.

DISPLAYED INTERNAL MEMO

Tuskys had displayed a copy of a letter from CAK on the doors of all the affected branches on Monday.

It had also posted an internal memo advising its employees to report to its head office on Thursday for further instructions.

“In complying with the Competition Authority of Kenya (CAK) orders, the two branches (Ronald Ngala and Tom Mboya) will remain closed until further notice. Kindly report to the head office on Thursday 7th August 2014 at 10;00am for further instructions,” the memo signed by Mr Peter Leparachao, general manager in charge of supply chain management read. It was not clear why the other three outlets implicated in the CAK’s decision remained open.

Tuskys had initially taken charge of six Ukwala stores in the city and rebranded them but CAK only approved the sale of one outlet — Ukwala Jogoo road.

The move deals a major setback to the transaction that Tuskys had hoped would help it expand its presence across the city as rivalry in the retails sector intensifies.

The competition watchdog last month fined the two companies Sh5.3 million for engaging in restrictive trade practices in the deal.

CAK argued that Tuskys’ market share would have increased to 57.15 per cent from the current of 39.3 per cent if the deal was approved.

The percentage is above the dominance threshold set at (50 per cent +1 per cent) and would make it the major retail firm in the Nairobi CBD market if the transaction went through.

REFUSED TO ANSWER

Tuskys managing director Stephen Mucuha Kamau declined to comment, only referring Daily Nation to the company’s human resource manager Francis Kimani who said he doesn’t speak to the media about internal issues.

As part of the transaction, Tuskys was to implement a staff re-organisation in the Ukwala-owned branches. Sources within the company said the “re-organisation” included laying off of some temporary workers.

Tuskys has had a strained relationship with its employees who in December downed their tools causing the retail chain to halt nationwide operations.

On Friday, the employees, under the Kenya Union of Commercial Food and Allied Workers, obtained interim orders from the Industrial Court barring the company from introducing key performance indicators and new qualification benchmarks in their contracts.

“That pending hearing and determination of this application interim orders be and are hereby issued restraining the respondents from forcing its employees to sign key performance indicators and performance benchmarks,” the court order reads.

Last week, Kampala Capital City Authority closed down a Ugandan Tuskys branch after an impromptu visit that disclosed expired goods and rotten beef at the outlet’s shelves.