NAIROBI, Kenya – In a significant move for regional trade law, global drinks giant Diageo has agreed to pay $750,000 to settle a lengthy antitrust investigation. The probe, conducted by the COMESA Competition Commission (CCC), centered on allegations that the company’s business practices were unfairly limiting competition across several East and Southern African nations.
The settlement concludes a four-year inquiry that questioned the very structure of Diageo’s distribution networks in key markets.
The Heart of the Matter: A Clash Over Market Integration
The CCC’s investigation, launched in June 2021, scrutinized Diageo’s operations in Eswatini, Seychelles, Uganda, and Zambia. Regulators took issue with specific clauses in the company’s distribution agreements that they argued violated the core principles of the COMESA trade bloc, which aims to create a seamless, single market across 21 member states.
The Commission identified several restrictive practices, including:
- Territorial Allocation: Distributors were contractually barred from selling Diageo products outside their designated regions, effectively creating isolated national fiefdoms.
- Anti-Re-export Clauses: Agreements prevented distributors from selling to customers who might resell the goods in another COMESA country.
- Price and Brand Control: The investigation found evidence of Diageo enforcing minimum resale prices in Seychelles and Uganda, and imposing “single-branding” obligations in Uganda that limited distributors from working with competing beverage brands.
A CCC official emphasized the severity of restricting “passive sales”—where a customer from another territory seeks out a product on their own initiative. Such restrictions, the official noted, “are an affront to the overriding Treaty objective of single market integration.”
A Settlement Without Admission of Guilt
Rather than engaging in a protracted legal battle, Diageo opted for a negotiated resolution. In May of this year, the company entered into commitment talks with the CCC, choosing to settle without admitting any liability for the alleged violations.
The agreement requires Diageo to take concrete corrective actions:
- Remove all identified restrictive clauses from its distributor agreements within 180 days.
- Explicitly permit passive sales across the entire COMESA region.
- Implement annual competition law compliance training for its staff and management for the next three years.
The financial penalty of $750,000 is broken down, with $300,000 linked to territorial and pricing restrictions and $150,000 tied to single-branding issues. The CCC will actively monitor Diageo’s compliance with these terms for a period of five years.
Broader Implications for Business in Africa
This case sends a powerful message to multinational corporations operating in Africa. The COMESA Competition Commission is establishing itself as a robust regulator committed to enforcing its rules for market integration. For businesses, it underscores the necessity of aligning distribution and pricing strategies with regional competition laws, not just national ones.
The settlement represents a step toward a more interconnected African market, where goods can flow more freely across borders, ultimately fostering greater competition and potentially offering consumers more choice and better prices. For Diageo, it’s a costly lesson in the evolving landscape of African trade governance.New chat
