Economy

CAK accuses banks and millers of colluding to fix product prices

karis

The Competition Authority of Kenya (CAK) director-general Wang’ombe Kariuki. PHOTO | FILE

Summary

  • The agency has previously called for the disbandment of lobbies such as the Kenya Bankers Association and the Cereal Millers Association saying that they act as price-setting cartels.
  • They had to disclose their dealings by submitting minutes of their board meetings, price mechanisms as well as the memorandum of association.

Financial institutions and agro-processing firms collude to fix market prices, denying consumers an opportunity to choose products based on quality and appeal.

Preliminary findings of an investigation by the Competition Authority of Kenya (CAK) have uncovered anti-competitive practices among the two sector players whose lobby groups also engage in market zoning.

The law imposes a penalty of up to 10 per cent annual revenues on any firm in breach of the competition laws. The CAK however says it will not take disciplinary action against them “because they voluntarily submitted the information.”

“We are going to give amnesty to these firms but we will closely monitor them to ensure they comply with the competition law, failure to which we will have to punish them,” CAK Director-General Kariuki Wang’ombe told the Business Daily.

“The findings have revealed that some of the firms were found to be engaging in anti-competitive behaviour such as zoning and agreeing on specific prices,” he added.

The investigation targeted banks, microfinance institutions, forex bureaus, capital markets and agriculture and insurance lobbies.
They had to disclose their dealings by submitting minutes of their board meetings, price mechanisms as well as the memorandum of association.

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The agency has previously called for the disbandment of lobbies such as the Kenya Bankers Association and the Cereal Millers Association saying that they act as price-setting cartels.

Mr Wang’ombe said seven financial institutions and agricultural associations submitted their files under the programme. Some firms were also found to have unjustifiably excluded members of trade associations from their meetings.

Pricing formulas

The list of illegal practices restricted by CAK includes recommending pricing formulas and terms of sales such as discount, credit, transport and delivery costs as well as sales and production volumes to influence the market.

Entering into agreements which divide customers or geographic regions for coverage among players or members of a business association is also considered illegal.

Others are use of rules agreed upon by members to establish prices, restricting advertising or excluding competitors from the market.

The watchdog launched an inquiry into the conduct of powerful trade associations with cartel-like behaviours last June in order to weed out practices which have denied consumers full benefits of a free market.

The CAK said the high cost are partly driven by anti-competitive business practices which give rise to cartels.

Also read: Big banks cartel hurting Kenya's economy
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