Directors of research firm Ipsos-Synovate Kenya face jail terms and multi-million-shilling fines for failure to seek regulatory approval of the firm’s acquisition of its predecessor Synovate.
The Competition Authority of Kenya (CAK) says French firm Ipsos did not seek its approval when it acquired Synovate’s operations in four countries including Kenya in October 2011.
The watchdog has the mandate to review the impact of cross-border transaction on whether a deal will cause negative competition and hurt consumers.
Ipsos bought the entire stock of Synovate whose Kenyan unit remains the largest research firm in the country, exposing itself to regulatory action for failure to notify CAK.
The authority has forwarded the matter to the Director of Public Prosecution (DPP) with a view to have Ipsos Kenya’s directors face action court.
The directors face a jail-term of five years, a fine of up to Sh10 million and CAK can also impose a financial penalty equivalent to 10 per cent of a firm’s sales.
“Upon investigation by the Authority, it was established that the transaction took place without authorisation as required,” CAK said in its latest annual report.
The DPP has advised the Directorate of Criminal Investigations (DCI) to investigate the matter further.
Kenya created an independent watchdog in 2012 to fight price fixing, abuse of market dominance and those in breach of merger rules, replacing the Monopolies and Prices Commission.
Previously, market malpractices in Kenya attracted a maximum fine of Sh200,000 or a jail-term of up to three years for offending companies, a light sentence for a firm whose annual turnovers are in excess of a billion shillings.
CAK says it is seeking even harsher penalties to discourage cases of mergers and acquisitions done without its approval.
The regulator’s probe of the Ipsos deal is set to compound problems for the French firm which says it was misled into overpaying Synovate’s shareholders.
Ipsos last year filed a case in the UK suing Synovate’s owner, claiming they inflated profits and failed to disclose tax and fraud probes in the company before selling it.
The Paris-based firm said it was seeking as much as $100 million (Sh8.5 billion) from Aegis — Synovate’s major shareholder prior to the buyout — saying it would have paid less than the £525 million (Sh74.6 billion) it did.
The acquisition created the world’s third-largest global market research company, with the Kenyan unit continuing to dominate research covering politics, consumer markets, and corporate intelligence.
Ipsos Kenya derives its revenue from research (70 per cent), media monitoring (20 per cent) and opinion polling (10 percent).