Cartel firms get amnesty in new CAK regulation


Mr Wang’ombe Kariuki, the CAK director-general. PHOTO | FILE


  • Firms involved in anti-competitive behaviour to get reprieve if they self-report.
  • The competition regulator is hoping that introduction of the clause in Kenya’s competition laws will help to speed-up adjudication of ongoing and future cases.

The competition regulator has drafted a law that will see whistleblower companies and their directors get off with lighter punishment for volunteering information that helps to break up cartels.

The Competition Authority of Kenya (CAK) says introduction of this law, which is already in the Finance Bill 2014, will attract informers that can help to bust unlawful business agreements between cartels and other secretive pacts that facilitate anti-competitive behaviour.

Whistleblowers whose evidence leads to the successful termination of such agreements and punishment (fines and jail sentences) of the participants will either get reduced fines or full pardon.

“The Authority (CAK) may operate a leniency programme where an undertaking that voluntarily discloses the existence of an agreement or practice that is prohibited by the Competition Act and co-operates…in the investigation of the agreement may not be subject to all or part of a fine…” the Finance Act 2014, which is awaiting the third reading in Parliament, reads in part.

The competition regulator is hoping that introduction of the clause in Kenya’s competition laws will help to speed-up adjudication of ongoing and future cases.

The Consumer Federation of Kenya (Cofek), for instance, has accused commercial banks of engaging in cartel-like behaviour while pricing their loans and financial services and short-changing customers.

READ: Banks face probe by competition watchdog

CAK is currently investigating this particular case to determine if there is undue concentration of market power in the banking sector, with its recommendations promising to have far-reaching implications on the industry.

A recent study commissioned by the authority shows that the Kenya Tea Development Agency (KTDA) unilaterally serves 65 small-scale tea factories in the country for 14 years, dictating prices and auction commissions.

“Where there is a near-natural monopoly such as KTDA, there is need to regulate. There is an urgent need to govern payment to farmers for green leaf by the factories,” a report quoted by the Daily Nation on Friday read in part.

The Authority is also currently investigating Lafarge for possible manipulation of cement prices, a charge that the global manufacturer which has significant ownership in two Kenyan companies has denied.

Mr Wang’ombe Kariuki, the CAK director- general, said the authority’s board has already signed off on the regulations to guide the program and are just awaiting the amendment in the law.

“The settlement policy we have drafted includes offering leniency to the directors of companies who come forward individually or as a group to report on cartels or unlawful business pacts,” Mr Kariuki told the Business Daily on Friday.

CAK is borrowing the leniency model from countries like South Africa and the United Kingdom where similar programmes has yielded significant results since their introduction.

The Competition Commission in South Africa introduced the Corporate Leniency Policy (CLP) in their laws in 2004 and in the past three years alone, this programme has seen them collect Sh3.5 billion in penalties.

Lafarge Industries South Africa was fined Sh1.2 billion in 2012 for taking part in a cement cartel in South Africa, Botswana, Lesotho, Swaziland and Namibia in cohorts with three other cement producers.

The competition watchdog, which initiated investigations into this cartel in 2008, got its major break in the case when one of the smaller cement producers -- Pretoria Portland Cement Company Limited (PPC) – applied for leniency.

PPC was fined Sh1 billion for its involvement in the syndicate.