Kenya: Heineken fined USD 16.4 million for breach of distribution agreement

The High Court of Kenya has declined to stop the execution of a judgement that ordered Heineken East Africa to pay Maxam Limited KES 1.7 billion (USD 16.4 million) as special damages for loss of business after Heineken terminated Maxam’s distribution agreement. Maxam accused Heineken of blatantly going ahead to acquire its key account customers as sub distributors contrary to an order stopping the same. Heineken, however, said the decision to cancel the distributorship contract with Maxam was just on the basis to attract more suppliers and to expand the business.

On July 29, Justice James Makau ruled that termination of the contract dated May 21, 2013 by Heineken East Africa Company Limited and Heineken International B.V was “unlawful, irregular, unprocedural and therefore null and void”. He therefore sentenced Heineken to compensate Maxam for offering lower market prices to other distributors and approving higher prices to Maxam on the same products thereby arbitrarily reducing their approved margins.

Heineken now stated that the company is currently unable to do the payment because it has no assets. "We have filed a notice of appeal and we shall be prosecuting it expeditiously, we ask the court to come at the earliest day to have the matter heard. During that, we pray that a stay be granted and we are ready to provide security", Heineken’s lawyer said.

The High Court now noted that Heineken “deliberately decided not to obey the orders issued on July 29. Defendants should comply with the orders before the stay is issued.” The court however, declined to grant the beer makers any orders and directed that they serve their application to the respondents. A hearing in this matter is scheduled for September 17.

Maxam was founded in October 2006 as the sole distributer of Heineken beer in Kenya.  Initially, Heineken had been introduced in Kenya in 2004 but had not realized the expected growth of this brand. In 2011 along with Heineken International, we grew the business beyond the Kenyan borders and established the brand’s presence in the rest of the East African region. Maxam’s partnership with Heineken was extended to Tanzania and Uganda in 2012 and Maxam widened its offering to include other beverage products including Warsteiner Premium beer from Germany, which is today the company’s flagship brand.

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