Watchdog starts probe of cartels in agriculture, finance sectors

The Competition Authority of Kenya (CAK) director-general Wang'ombe Kariuki. PHOTO | FILE 

By NEVILLE OTUKI

The competition watchdog has launched an inquiry into the conduct of powerful trade associations with cartel-like behaviours to weed out practices that have denied consumers full benefits of a free market.

The investigation targets banks, microfinance institutions, forex bureaus, capital markets, agriculture and insurance lobbies, which will have to disclose their dealings and those found culpable indicate how they plan to rectify their anti-competitive behaviour.

The Competition Authority of Kenya (CAK) published a gazette notice that gives legal teeth to a Special Compliance Programme that seeks to align the practices of lobby groups in finance and agriculture sectors with the competition law.

“Notwithstanding the coming into force of the Competition Act, trade associations continue to have rules, practices and procedures which are likely to contravene the Act,” the CAK director-general Wang’ombe Kariuki said in the notice dated June 26.

The list of illegal practices includes recommending pricing formulas and terms of sales such as discount, credit, transport and delivery costs as well as sales and production volumes to influence the market.

Others are use of rules agreed upon by members to establish prices, restrict advertising or exclude competitors from the market.

READ: Watchdog launches probe into maize price fixing claims

Entering into agreements which divide customers or geographic regions for coverage among members is also considered illegal.

The Kenya Bankers Association, the Association of Kenya Reinsurers, the Association of Kenya Insurers and the Kenya Forex Bureaus Association make the list of financial associations that will be required to re-evaluate their operations.

These associations will have to submit board reports and presentations made since 2011 to the competition watchdog, circulars sent to members, contacts and names of members of the associations since 2011.

The CAK is also demanding full disclosure of directives issued to members by the associations on pricing of product and services.

Those found in breach of competition laws but would not have disclosed to the CAK in the three months to September will face penalties, including imprisonment of their directors for five years or payment of a Sh10 million fine.

The compliance exercise could offer much-needed relief to Kenyan consumers who have for years been paying high prices for financial services and agricultural produce because of rules set by the cartel-like associations.

The CAK says the high costs are partly driven by anti-competitive business practices that give rise to cartels.

The competition law also allows the authority to impose a financial penalty equivalent to 10 per cent of a firm’s sales.