Watchdog stops lawyers from price-fixing in court fight

A team of lawyers proceeding to the Public Service Commission offices in Nairobi on Wednesday, October 13, 2021. PHOTO | DENNIS ONSONGO | NMG

Lawyers have been dealt a blow after the High Court dismissed a petition seeking to quash a section of the law that stops them from fixing prices without seeking approval from the competition watchdog.

High Court judge Hedwig Ong’udi backed the law that requires professional bodies like the Law Society of Kenya (LSK) to get the nod of the Competition Authority of Kenya (CAK) before setting prices for lawyers’ services, including conveyance, filing of suits, registration of trademarks and debt collection.

Parliament amended Section 29 of the Competition Act in 2019, allowing punishment for professional associations engaged in price-setting without seeking exemption from the CAK.

Those in breach face fines of up to Sh10 million or a jail term of five years or both in the law aimed curbing price-fixing.

The Law Society of Kenya (LSK) opposed the law, arguing that their compensation terms are guided by the Advocates Remuneration Order, which sets minimum fees for different services offered by the advocates.

It argued that the competition watchdog lacks jurisdiction over their fees and that section 29(8) of the Competition Act that created an obligation for professional associations to seek CAK exemption for price-setting was illegal.

Judge Hedwig Ong’udi disagreed with LSK.

“The inevitable conclusion of this analysis is that section 29(8) of the Competition Act is constitutional,” Justice Ong’udi said.

The CAK is only allowed to grant exemption in cases where the professional body seeking it has proven that failure to fix prices could negatively affect the quality of services.

Such an application is, however, benchmarked against international best practices before any exemption is granted.

Lawyers have been pushing for an increase in the fees arguing that failure to review the charges is hurting their finances and keeping them out of tune with the cost of living.

The competition regulator maintains that the law requires any professional body involved in fixing of rates, minimum or otherwise, to seek its approval.

Initially, the law did not provide punishments for those in breach, prompting the introduction of the Sh10 million fine and five-year jail term in 2019.

The court noted that there was public participation over the 2019 amendments following an invitation by Parliament, but the LSK failed to participate.

Justice Ong’udi said the restriction has been in place since 2011 save for the penalty clause that was introduced by the 2019 amendment.

“Moreover, the petitioner and interested parties despite putting up a spirited fight in respect of the impugned law failed to demonstrate by submission of facts or evidence how the impugned provision or the 3rd respondent (CAK) violated its rights,” she said.

She said there was nothing to show that the amendment curtailed the rights of association as claimed by LSK or risk hurting the quality of legal services.

The CAK defended the law saying it was enacted to check abuse of buyer power and strengthen its oversight role.

Kenya has more than 10,000 practising lawyers, with corporate deal-making presenting lucrative opportunities.

The Advocates Remuneration Order allows a lawyer to bill clients based on the complexity of the case and time spent in cases where the express value of a case cannot be determined.

The theoretical foundation for a lawyer’s billing schedule is that the more complex a suit is the more money a client should spend on it — which has not been the case, causing discontent in legal circles.

For instance, lawyers will be cited for misconduct of price undercutting if they charge less than Sh12,000 for bankruptcy suit, Sh20,000 for dissolution of a firm and Sh42,000 for trademark registration.

They are not allowed to charge less than Sh20,000 for a lease agreement of below Sh500,000. Advocates must charge more than Sh60,000 for company formation.

Any advocate who accepts fees that is less than what is provided in the scale risks being fined not less that Sh100,000 or imprisonment of up to two years.

It was LSK’s argument that the section of law is unconstitutional in view of Article 36 of the Constitution which safeguards its right to freedom of association.

Lawyers said section 44 of the LSK Act 2014 directs the lawyers’ lobby to make recommendations to the Chief Justice on all matters relating to the remuneration of advocates.

The lobby added that the section of the Competition Act restricts LSK’s right to freely, independently and effectively carry out its mandate as an association as required by the law and the Advocates Act.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.