Date: August 24th, 2023
The Competition Authority of Kenya (CAK) has made a significant move to curb anti-competitive practices in the country’s steel sector. This action comes in response to an investigation into cartel conduct in the industry, focusing on price fixing and output restriction. The CAK, established under the Competition Act No.12 of 2010, is responsible for enforcing fair competition and enhancing consumer welfare.
Penalties Imposed
Following a thorough investigation, the CAK has imposed penalties on nine steel manufacturers totaling KES. 338,849,427.89. The investigation revealed that these companies were involved in a cartel conduct that artificially inflated the prices of steel products, including bars, pipes, beams, and sheets. This conduct raised the cost of construction of homes and infrastructure, impacting consumers and the economy. The penalized companies include Nail and Steel Products Limited, Brollo Kenya Limited, Blue Nile Wire Products Limited, Tononoka Rolling Mills Limited, Devki Steel Mills, Doshi & Hardware Limited, Corrugated Steel Limited, Jumbo Steel Mills, and Accurate Steel Mills Limited.
The penalized firms were found guilty of engaging in price fixing by collectively setting prices and price adjustment timelines. Additionally, except for Accurate Steel Mills, these companies were penalized for output restriction due to their agreement to limit imports of specific steel components. This action artificially created a shortage, leading to increased prices.
Significance of the Penalties
Dr. Adano Wario, the Acting Director-General of the CAK, emphasized that these penalties are proportional to the harm caused to consumers who have been grappling with high steel product prices. The CAK’s objective in imposing these penalties is to restore fair competition within the sector and deter other companies from employing anti-competitive practices as part of their business strategies.
Dr. Wario underlined that cartels harm both consumers and the economy, manipulating prices and output strategies to favor their commercial interests. The penalty, which is the highest-ever imposed by the Authority, is intended to send a clear message that such behavior is strictly prohibited under the Competition Act, and in a liberalized market, pricing should be determined by genuine supply and demand dynamics, not manipulated by colluding competitors.
Efforts towards Resolution and Compliance
The CAK’s investigation and subsequent penalties are part of ongoing efforts to promote a competitive market, particularly within the construction industry. The aim is to align with the government’s initiatives, including providing affordable housing for Kenyan citizens.
As part of the investigation process, the CAK is also engaging with five other steel firms for settlement negotiations under the Competition Act’s provisions. This approach seeks a swift and cost-effective resolution to reinstate effective competition. The outcomes of these settlements will be published in the Kenya Gazette.
Furthermore, the penalized companies are required to commit to avoiding anti-competitive behavior in the future and to implement competition compliance programs within their operations.
Background of the Investigation
The investigation began in August 2020 when the CAK conducted a covert field screening, revealing coordinated conduct among manufacturers related to pricing and output restriction. Subsequent search and seizure operations were carried out in December 2021, followed by interviews with various steel companies and their legal representatives. The Authority relied on evidence such as meeting minutes, price list analysis, and sales volume monitoring to substantiate its findings.
Conclusion
The Competition Authority of Kenya’s decisive action against cartel conduct in the steel sector sends a resounding message that anti-competitive behavior will not be tolerated. The penalties imposed on the nine steel manufacturers demonstrate the authority’s commitment to upholding fair competition, protecting consumer welfare, and promoting a transparent and competitive market environment. This landmark move not only addresses the immediate concerns in the steel sector but also sets a precedent for other industries to operate within the bounds of ethical and legal competition.
For more insights, you can reach out to the writer at ndirangu@mmsadvocates.co.ke . You can also contact us at MMS Advocates, Lower Duplex Apartments, LOWER HILL ROAD or email us at info@mmsadvocates.co.ke