Crown Beverages, a Kenyan unit of SABMiller was fined an “administrative penalty” of Sh2.4m Kenyan shillings ($23,700) for engaging in restrictive trade practices by setting minimum price rules for its distributors.

This follows an investigation by The Competition Authority of Kenya (CAK), which found two clauses in Crown Beverages distributor contracts that set price floors for distributors who sell its products.

Crown Beverages is 80% owned by SABMiller, which packages and markets a wide range of alcoholic beverages in the East African country such as Redds, Castle Lager, Nile Special, Peroni, Miller and Keringet mineral water.

SABMiller took over Crown Beverages in 2010, marking the brewer’s re-entry into the Kenyan market, eight years after leaving the country following a fallout with its business partner, East African Breweries Limited (EABL).

Setting of minimum prices is a form of Retail Price Maintenance (RPM) whereby a manufacturer sets the maximum or minimum prices distributors can sell their products.

The Kenyan Competition Authority claims that setting of minimum prices works to the benefits of other parties in the production and supply chain but to the detriment of consumers, thereby making the practice illegal.

Manufacturers counter by saying they seek to prevent distributors from selling their products below their competitors in order to attract customers and increase sales. They say price undercutting by distributors risks driving down distributor’s profits and end up hurting the manufacturer’s earnings.

They add that setting of minimum prices also protect distributors who invest their time and resources in promoting their products and risk being run out of business by those who do not.

Crown Beverages said in a released statement: “We would like to clarify that Crown Beverages has never enforced minimum resale price maintenance or prevented our distributors from undercutting their competitors in order to woo customers and increase sales as they see fit.

“Crown Beverages strongly believes in the principle of free and fair competition in the markets in which we operate.”