Advertising firms fined Sh11.6m for fixing minimum rates
The competition watchdog has fined eight advertising firms a total of Sh11.64 million for setting minimum advertising rates on billboards, a restrictive trade practice. File
What you need to know:
The Business Daily understands that the CAK is finalising settlement agreements with Base One Media, Consumer Links Communications Limited, Ingenious Concepts Group and Tangerine Investments.
The competition watchdog has fined eight advertising firms a total of Sh11.64 million for setting minimum advertising rates on billboards, a restrictive trade practice.
The Competition Authority of Kenya (CAK) has penalised market leader Magnate Ventures Limited (Sh5 million), A1 Outdoor Limited (Sh114,000), Live Ad Limited (Sh2.5 million) and Adsite Limited (Sh2.39 million).
Other firms that have already settled with the regulator include Consumer Link (Sh1.2 million), Look Media (Sh136,000), Firm Bridge Limited (Sh246,400) and Spellman Walkers Limited (Sh45,180).
The eight companies are part of a 12-member body called Outdoor Advertisers Association whose members agreed to fix Sh160,000 as the minimum monthly charge for 10 by 12 metre billboards in Nairobi and other major towns.
The association, which controls a critical and lucrative spot in the advertising industry, had also colluded to charge customers in smaller towns Sh150,000 per month for similar-sized billboards.
“The CAK has imposed a financial penalty of Sh5 million on Magnate and the company gave a written undertaking to in future desist from engaging in any conduct that is in contravention of the Act,” said director-general Wang’ombe Kariuki in the latest Kenya Gazette.
Look Media and Spellman Walkers settlement agreements were also gazetted on Friday while the others took place earlier.
The pricing abuse is said to have gone on for eight months and the fines were therefore calculated based on the revenue that the ad companies recorded in this period.
The Business Daily understands that the CAK is finalising settlement agreements with Base One Media, Consumer Links Communications Limited, Ingenious Concepts Group and Tangerine Investments.
“Through their trade association, these advertising firms were charging prices that were not being signalled by market forces,” Mr Kariuki said in a telephone interview.
Billboard prices go down
“With the CAK’s intervention, we have seen that billboard prices go down by between 20 and 25 per cent. Advertising constitutes a big portion of companies’ expenses and we expect these savings to cascade down to consumers.”
Growing consumerism in Nairobi has seen the mushrooming of outdoor advertisements, especially along major roads such as Thika Road, Mombasa Road, Ngong Road, Lang’ata Road and Waiyaki Way. Currently, the capital city has more than20,000 signages and over 1,000 large format advertisements, including on high-rise buildings such as Telposta Towers in the central business district.
Kenya’s leading corporations such as Safaricom, East African Breweries Limited, Unilever, Samsung, MultiChoice Kenya as well as commercial banks have over the years increased their advertising spend to grow sales.
The eight advertising firms infringed on a section of the law prohibiting trade associations from “directly or indirectly” recommending “prices charged or to be charged by members…or the margins included in prices or the pricing formula.”
This section also forbids them from recommending terms of sales (including discount, credit, delivery and service guarantee terms) which directly impact prices or profit margins.
The CAK’s position is that setting of minimum prices benefits other parties in the production chain to the exclusion of the consumer, therefore making it an illegal practice.
By fixing minimum prices, the eight ad firms kept billboard costs artificially above a certain level, denying users the benefit of price variations that usually result from uninhibited competitive and market forces.
