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Giant brewers begin fresh round of beer bottle battle

Saturday April 23 2016

The bottling line at the East African Breweries Limited plant in Ruaraka, Nairobi. A report filed in court shows that Kenya’s top two beer makers EABL and Keroche have mixed up their bottles. PHOTO | FILE | PHOEBE OKALL

The bottling line at the East African Breweries Limited plant in Ruaraka, Nairobi. A report filed in court shows that Kenya’s top two beer makers EABL and Keroche have mixed up their bottles. PHOTO | FILE | PHOEBE OKALL  NATION MEDIA GROUP

By ABIUD OCHIENG
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A new round of beer battles is brewing, with Keroche Breweries accusing East Africa Breweries of attempting to use courts to entrench its monopolistic position and lock it out of business.

Keroche is also accusing the Department of Weights and Measures of being in the “paid service” of the London-owned beer maker to harass and intimidate its staff and distributors with the aim of driving them out of business.  

Last month, EABL and its subsidiary Kenya Breweries Ltd (KBL) filed a case in court seeking orders to compel the Naivasha-based brewer to stop bottling beer in brown bottles labelled “EABL”, saying Keroche was infringing on its copyright and using its resources to further its business.

In a defence filed last week, Keroche denied the allegations, saying brown bottles are conventionally used worldwide by beer manufacturers and hence EABL has no claim whatsoever to them.

“The present case is a classic example of a dominant industry player using regulatory State organs to harass, intimidate and drive out competition under the guise of intellectual property violations,” says Keroche.

It adds that the brown bottles, being universal, are not reserved for any beer manufacturer to patent or trademark.

“Those universal bottles are colloquially known as ‘Euro Bottles’. By the nature of beer, it is sold and retailed either in brown or green bottles to protect it from exposure to dangerous ultra violet rays which can denature it,” says Keroche.

An investigation report filed in court by EABL shows that the top two beer makers have mixed up their bottles so much that consumers are unwittingly drinking their favourite products packed in the rival firm’s bottles.

The mix-up is aggravated by bar owners who cannot differentiate Keroche and EABL bottles.

But Keroche says that use of brown bottles started long before EABL began using them and thus cannot claim any originality on the bottles. It says that by purporting to inscribe an alleged trademark on a universal bottle, EABL is setting the stage for future restrictive practices.

The latest tussle is one of many that Keroche has had to fight to survive. A few months ago, the brewer won yet another fiercely contested case which involved State agencies like the Kenya Bureau of Standards (Kebs), the Kenya Revenue Authority (KRA), the National Police Service and the Ministry of Interior and Co-ordination.

In that case, Keroche argued that these were part of a government-orchestrated conspiracy to shut down its operations.

Justice George Odunga declared a directive by President Uhuru Kenyatta ordering a crackdown on illicit brews as null and void. He also annulled Kebs letter dated July 3, 2015 which suspended the licences of Keroche Breweries.

Keroche had told the court that the taxman’s refusal to renew its licence for the 2015 to 2016 financial year was part of a scheme to unlawfully shut it down. Kebs has challenged the decision in the Court of Appeal.

The “bottle wars” are being seen as a culmination of predetermined unfair trade practices which gained traction after Keroche launched its Sh2.7 billion new plant in Naivasha last year. The new plant enables Keroche to increase its production tenfold, from 10 million litres of beer a year to 110 million litres.

Other battles fought include “criminal proceedings instituted by EABL and KBL against Keroche, its officers, distributors and retailers, with the active participation of the office of director of Weights and Measures. The present case is a culmination of a larger scheme commenced elsewhere, the intention being to use the honourable court as an unsuspecting participant in a nefarious enterprise,” the documents filed in court say.

Keroche says the alleged registration of the initials EABL in 2007 was not intended to confer any intellectual property rights upon the rival brewer but was a carefully executed scheme to ultimately engage in restrictive trade practices. It adds that Keroche had, by the end of 2006, publicly indicated that it would enter the beer manufacturing, sale and distribution business.

“The registration is consistent with a definitive scheme to misuse intellectual property to forestall market entry. It is also in violation of section 21(3)(h) of the Competition Act, in that it amounts to use of an intellectual property right in a manner that goes beyond the limits of fair, reasonable and non-discriminatory use,” says Keroche.

It adds that EABL has in the past not shied away from using its dominant position to stifle fair competition and drive out competitors.

The company cites the case of Castle Brewing Kenya Ltd, the only other large entity that has engaged in manufacture and retail of beer products from 1998. The firm based in Thika Town suffered restrictive practices and market entry barriers. It was later bought and shut down in 2002 by EABL.

“The company was owned by South Africans and had been in Kenya for only four years before it was bundled out,” Keroche says.

The firm adds: “EABL’s use of the Department of Weights and Measures is a misuse of a State organ to ostensibly deal with “infringement complaints”. In actual fact, the department is carrying out its actions to assist EABL achieve a nefarious scheme of shutting down Keroche”.

Keroche, the first locally owned beer manufacturer, says its entry into the market provides the consumer with a home-grown and refreshing drink. Before its entry, the consumer had limited choice and flexibility due to lack of variety, it says.

Keroche is seeking a declaration that EABL and KBL are collectively occupying a dominant position in the beer market, and that they are abusing this position in violation of Section 24(2)(e) of the Competition Act.

It also wants a declaration that the purported registration of “EABL” initials on brown bottles as a trademark amounts to use of intellectual property right in a manner that goes beyond the limits of fair, reasonable and non-discriminatory use. The case will be heard on May 5.