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Economy

KTDA sues watchdog over tea price-fixing probe

East Africa Tea Trade Association stakeholders during a tea auction at Tea Trade Centre in Mombasa. PHOTO | FILE
East Africa Tea Trade Association stakeholders during a tea auction at Tea Trade Centre in Mombasa. PHOTO | FILE 

The Kenya Tea Development Agency (KTDA) has sued the competition watchdog over a damning report indicating prevalence of cartels and price manipulation at the tea auction that cut farmers’ earnings.

The agency wants the High Court to quash the findings of the report that highlighted the near monopoly status of the tea agency, saying its ownership wards off possible competition.

KTDA says the Competition Authority of Kenya (CAK) tricked its officials into giving confidential information used to prepare a section of the report. The agency also claims it was not given an opportunity to respond to many allegations made against it in the report.

“Some KTDA officers were approached with questionnaires which were filled out in answer to some specific questions and there was an assurance that the views communicated would be treated with utmost confidentiality,” says John Omanga, KTDA’s group secretary.

KTDA, which represents small scale farmers in Kenya, filed the suit in fear of punitive action from the CAK arising from the recommendations made by the Deloitte-prepared report.

It has asked the court to stop the competition watchdog from making any decisions informed by the report.

The report indicates that KTDA lost focus and adopted unclear mandate to the detriment of farmers. It also casts doubt on the business of the East African Tea Traders Association, which runs the weekly tea auction in Mombasa.

Players at the Mombasa Tea Auction are accused of colluding to fix prices and deny small-scale farmers their deserved earnings. Tea prices dropped to a six-year record low last year.

CAK accused various players, chief among them the KTDA, of manipulating the price of the highest tea grade, PF1, which is mainly produced by small-scale farmers.

The weekly auction is the main outlet for Kenyan tea and was found to be in the hands of only a few buyers. Some regulations of the tea traders association were said to hinder competition.

For instance, the number of brokers is capped at 12, the fee charged is fixed at 0.5 per cent of the auction volumes while producers cannot become brokers, the report says as it takes issue with near monopoly status of the tea agency, saying its ownership wards off possible competition.

More than 14 years since the liberalisation of the industry, no new entity has been able to serve any of the 65 small-scale tea factories in Kenya.

On Wednesday, Competition Authority director-general Francis Wang’ombe said they are yet to be served suit papers, adding that the law mandates the authority to conduct market enquiry on uncompetitive behaviour. The tea agency reckons it has been accused unfairly.

“I am aware that KTDA has been adversely mentioned in the report whose insinuations include that the agency has lost focus and adopted an unclear mandate to the detriment of farmers, and is guilty of many wrongs like abuse of a dominant position,” Mr Omanga added.

Another report by the Tea Directorate published last year also accused KTDA of colluding with tea brokers and marketers to fix green leaf prices.

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