THE Lusaka High Court has thwarted attempts by Trafigura to monopolise the supply and sale of petroleum products in Zambia by ordering that Dana Oil Corporation should directly procure Castrol lubricants from BP South Africa instead of Puma Zambia Limited, a subsidiary of Trafigura.
Lusaka High Court Judge Justine Chashi on 8th May, 2015 quashed a decision by the Competition and Consumer Protection Tribunal that approved an application by BP Zambia now Puma Zambia Limited, to sell Castrol lubricants at its filling stations in Zambia, thereby obliterating Dana Oil Corporation.
Judge Chashi has since ordered that Dana Oil Corporation should be the sole supplier of Castrol products in Zambia and that the products should be procured directly from BP South Africa.
The effect of Judge Chashi’s order could be the reduction in the prices of petroleum products because the middleman, Puma Energy, a front of Trafigura, had been removed from the supply chain
Justice Chashi ruled that the approval of the application by the Competition and Consumer Protection Tribunal was in direct breach of the conditions under which BP Global and Castrol Corporation Limited merged.
The condition in the merger demanded the appointment of a local and independent distributor to distribute Castrol products in Zambia and not Puma Energy directly supplying Dana Oil Corporation. The condition was violated by Puma Energy.
Justice Chashi has ordered that Dana Oil Corporation should be procuring Castrol lubricants directly from BP South Africa as opposed to buying the products through Puma which was basically playing the role of a middleman.
The judgment by Justice Chashi would save Zambia from losing millions of United States dollars to Trafigura, the parent company of Puma Energy Zambia Limited.
In 2008, Dana Oil Corporation entered into an illegal contract that violated the conditions under which BP Global and Castrol Corporation Limited were merged in 2001, the merger which was authorized by the Zambian Government.
BP Africa ignored the conditions in the merger that restricted the company from supplying its products directly to Dana Corporation through its subsidiary Puma Energy Zambia Limited and the Competition and Consumer Protection Commission ordered Puma to stop distributing both its products and Castrol products.
The Competition and Consumer Protection Commission was forced to fine both Puma Energy Zambia Limited and Dana Oil Corporation for the breach of the conditions under the merger but the fine was later dismissed by the tribunal.
In his ruling, Justice Chashi said: “The Competition and Consumer Protection Commission appealed against the decision of the tribunal on three grounds. The first ground was that the Competition and Consumer Protection Commission Tribunal erred both in law and fact by imputing a blanket procedure on how merger compliance affronts under the Competition and Consumer Protection Act. The second ground is that the tribunal erred in law and grossly misdirected itself in fact by finding that section 64, of the Act was mandatory. The third ground is that the tribunal starkly erred both in law and in fact when it rendered the decision of the Competition and Consumer Protection Commission to restrict Puma from distributing Castrol products to Dana Oil Corporation. I am sanguined that all the three grounds of appeal have been resolved and the sum total is that the tribunal erred in law by dismissing the fine against Puma Energy.”
Judge Chashi ruled that the tribunal erred in arriving at the fact that the commission had no jurisdiction to punish Puma Energy and Dana Oil Corporation for breaching the conditions of the merger between BP Africa and Castrol Corporation.
The Justice Chashi ruling has effectively reinstated the directives of the Competition and Consumer Protection Commission that Puma and Dana were abrogating the condition of the merger and therefore needed to revert to condition that restricted Puma from distributing Castrol products.
The merger between BP Global and Castrol Corporation Limited could be revoked if Puma Zambia is going to ignore the High Court order. And in his ruling in Dana’s cross appeal, Justice Chashi said Dana Oil was obliged to buy Castrol products from BP South Africa or any person who BP would nominate.