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Tea auction brokers win appeal to retain fixing Sh1.4bn fees

Edward Mudibo
East Africa Tea Trade Association managing director Edward Mudibo. FILE PHOTO | NMG 

Brokers at Kenya’s sole tea auction in Mombasa are free to continue setting their Sh1.4 billion brokerage fees, partly paid by farmers, after overturning an order from the Competition Authority of Kenya (CAK) to stop price-fixing.

The Competition Tribunal ruled that East Africa Tea Traders Association (Eatta), which runs the auction, can continue to fix the fee for brokers, a move that CAK had opposed for being an anti-competitive practice.

The competition watchdog wanted market forces to influence the fees and not the brokers. “The upshot of the above analysis and determination is that this appeal is partially successful and the tribunal orders that the appellant’s application under Section 25 of the Act for exemption with respect to fixing brokerage fees is allowed,” said the tribunal.

However, the tribunal gave conditions that any changes in brokerage fees must be approved by the Tea Directorate and that the exemption is only allowed for two years from the date of delivery of the judgment.

The tribunal, however, dismissed another prayer by Eatta seeking exemption in the setting of the warehouse fee. The brokers have set a commission of 1.25 percent of the value of tea that goes through the auction, earning them nearly Sh1.4 billion annually in fees. Farmers through the tea factories pay 0.75 percent while buyers of the beverage settle 0.75 percent.

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The Eatta had in 2018 sought an exemption and wanted to be allowed to fix the brokerage fee despite opposition from the competition watchdog.

The CAK had argued that fixing of prices by Eatta contravened Special Compliance Process Act, which Eatta voluntarily subscribed to. Eatta managing director Edward Mudibo said they are satisfied with the ruling and that the association will comply with it.

“The ruling on warehouse does not spoil much, however, on the brokerage, if it would have been disallowed then it would have changed a lot of things, we are okay with the judgment,” said Mr Mudibo.

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