Distell hauled beverage behemoth AB-InBev before Tribunal on claims of breach of merger conditions. File Photo: IOL
Distell hauled beverage behemoth AB-InBev before Tribunal on claims of breach of merger conditions. File Photo: IOL

Distell waits for tribunal ruling

By Siphelele Dludla Time of article published Sep 13, 2019

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PRETORIA – Local alcoholic beverages company, Distell Limited, will have to wait for the Competition Tribunal’s decision whether or not global beer brewer Anheuser-Busch (AB) InBev and SABMiller plc (SAB) have breached their merger conditions by striking exclusive deals with outlets. 

Distell hauled AB InBev and SAB before the Competition Tribunal yesterday, arguing that the company breached certain conditions by removing competitors’ advertising material at certain retail outlets when it merged with SABMiller.

On June 30, 2016, the Competition Tribunal conditionally approved the multi-billion rand merger between AB InBev and SAB, and imposed certain conditions on the merger.

One of the conditions on the merger gave discretion to outlet owners to allocate promotional and advertising space.

The conditions placed on SAB the obligation not to “preclude or induce” outlet owners from offering “ambient and cold spaces” to third parties.

SAB was also obliged to ensure that outlets left free at least 10 percent of a beverage cooler or refrigerator for use by South African-owned and produced cider brands of competing third parties for a period of five years. 

Distell now alleges that the SAB concluded exclusive contracts with outlets and incentivised them to not allocate any space to the promotional material of its rivals.

It also argues that SAB concluded exclusive agreements with a number of stadia that bar those stadia from granting its competitors marketing and promotional space in the stadia, and/or stocking competitor products in the public areas of the stadia.

Arguing for Distell, Advocate Greta Engelbrecht cited a “theory of harm”, saying there was a correlation between advertising and sales as posters and other promotional material would naturally induce customers to try out its products. 

Distell produces wines, spirits and ciders like Savanna, Hunter’s Dry, and Klipdrift among others. 

The company approached the Competition Tribunal after the commission found that the conditions had not been breached.

Distell is asking the tribunal to review and set aside the commission’s findings, for a full investigation to be conducted and for guidance on the interpretation of the conditions to be provided.

Engelbrecht said Distell did not want the tribunal to impose a fine on SAB or revoke its merger with AB InBev, but rather they wanted the merging companies to put up a plan to rectify the alleged breaches. 

But SAB dismissed Distell’s allegations based on a “proper interpretation” of condition 7 of the merger conditions.

Arguing for SAB, advocate Wim Trengrove SC said Distell’s complaint was an attempt to restrict competition and was unrelated to the merger conditions.

Trengove said the “ambient and cold space” condition was limited to shelving, storage and floor space of products, and not the two-dimensional surfaces of walls of the outlets.

“The branded outlets may stock, display and sell competing products, but may only carry SAB signage and advertising on their walls,” Trengove said

On the exclusive selling at stadiums, Trengove said SAB had sponsorship agreements with sports bodies, event organisers and stadia owners, which entitled it to exclusive “pouring rights”. Pouring rights is the exclusive right to market and sell alcoholic drinks during events at stadia.

“Stadia does not constitute “outlets” with the meaning of condition 7. The nature and purpose of SAB’s promotion and sales at stadia differ markedly from those of ordinary outlets for the sale of alcohol beverages,” Trengove said.

“SAB submits that Distell’s accusations are unfounded and should be dismissed.”


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