Egypt antitrust watchdog upholds charges against Oriental Weavers: Official

Deya Abaza , Wednesday 19 Aug 2015

Oriental Weavers is still liable for past violations, antitrust authority official says in response to statement issued by the carpet maker Wednesday denying any current monopolistic practices

Worker at Oriental Weavers factory (Photo: Oriental Weavers official website)

Egypt's antitrust authority will not backtrack on its referral of carpet maker Oriental Weavers to the country's prosecutor, it said  Wednesday after the company issued a statement denying monopolistic practices.

The company's claim that it revised exclusive contracts with distributors in 2012, allowing them to distribute competitors' products, does not mean it is not liable for violations of Egypt's competition law before or since, an Egyptian Competition Authority (ECA) official told Ahram Online Wednesday.

"The period covered by the ECA's investigation [into monopolistic practices] includes the period before 2012," the official, who requested not to be named because he is not authorised to speak to the press, said.

Oriental Weavers, the world’s largest producer of machine-woven carpets according to its website, is accused of striking agreements with distributors to exclusively sell its products in Egypt.

The company denied the charges in a statement to the Egyptian Stock Exchange Wednesday, explaining that prior to 2012, Oriental Weavers had agreements with independent distributors to sell its products exclusively in return for a two to four percent sales commission.

But the company added that it revised its contracts with all distributors in January 2012 to remove exclusivity clauses.

However, the ECA dismissed the company's statement as having no bearing on the results of the investigation, or criminal charges leveled against it.

Oriental Weavers' practices prior to 2012 were already criminalised by Article 8 of a 2005 Egyptian competition law, says the official, which prohibited "undertaking an act that limits distribution of a specific product on the basis of geographic areas, distribution centres, clients, seasons, or periods of time among persons with vertical relationships."

”The law prohibits any kind of practice that could lead to exclusivity in product distribution," the official added, which was not limited to written contracts of the kind Oriental Weavers says it revised in 2012.

According to the ECA, the company held a 90 percent share of the local market during the years covered by the investigation.

The watchdog's efficiency was given a strong boost last year when Egypt's competition law was amended to allow its board of directors to directly refer cases to the prosecution without seeking permission from other authorities.

If found guilty, Oriental Weavers could settle with the watchdog, or face a fine of up to LE300 million, although a new amendment to the law puts the fine at "10 percent of the turnover in the sales value of the infringed product for each of the years covered by the investigation," says the official, adding that it is up to a court's discretion how the fine would be calculated.

The carpet maker, which has been listed on Egypt's bourse since 1997 with a current market cap of LE4.39 billion, reported a consolidated net profit of LE261 million in the first half of 2015.

The company was trading at LE9.75 at time of writing Wednesday, after falling 2.5 percent during the day's session.

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