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25 March 2024

2023 In Review: Competition Developments In Kenya

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2023 was a transformative year for competition law in Kenya, marked by a series of developments across various industries. In January 2023, the Competition Authority of Kenya ("CAK")...
Kenya Antitrust/Competition Law

2023 was a transformative year for competition law in Kenya, marked by a series of developments across various industries. In January 2023, the Competition Authority of Kenya ("CAK") appointed Dr Adano Wario to serve in the capacity of Acting Director-General, following the end of Mr Wang'ombe Kariuki's second and final term.

A summary of the key developments in competition law in Kenya over the last year:

  • Abuse of buyer power - CAK settlement agreement with Unilever Kenya

In January 2023, the CAK entered into a settlement agreement with Unilever Kenya Limited ("Unilever") following investigations into the company's alleged abuse of buyer power in connection with a unilateral review of supplier payment terms by Unilever. Among other actions imposed, the terms of the settlement agreement require Unilever to gradually reduce payment terms for small and medium enterprises ("SMEs"), increase its procurement from SMEs, conduct supplier development training for its SME suppliers and implement a competition compliance training programme.

The settlement agreement is a significant indication of the regulator's appetite for actively enforcing the relatively new buyer power regime and the overall commitment to fostering fair competition amongst SMEs.

  • Integration of the CAK services on e-Citizen platforms

On 10 March 2023, the CAK announced that its e-filing portal has been integrated with the e-citizen platform (an online portal which offers access to Government services) in line with the Government's agenda of enhancing the use of digital platforms in service delivery. The integration is aimed at ensuring efficiency in filing applications relating to proposed mergers, exemptions and complaints relating to competition law infringements.

  • Draft Consolidated Administrative Remedies and Settlement Guidelines 2023

In April 2023, the CAK published the draft Consolidated Administrative Remedies and Settlement Guidelines for stakeholder comment and input. The proposed guidelines outline the CAK's approach to administrative remedies and settlement for specific violations under the Competition Act, particularly in relation to restrictive trade practices, control of mergers, abuse of buyer power and consumer welfare. The proposed guidelines are essentially an overhaul of the Fining and Settlement Guidelines (2018), the Administrative Remedies Guidelines for Consumer Protection (2017) and the Competition Administrative Penalties and Settlement Guidelines (2020).

  • Memoranda of Understanding with the East African Community Competition Authority ("EACCA")

On 16 May 2023, the CAK announced that it had entered into a Memorandum of Understanding ("MoU") with the EACCA aimed at fostering regional integration and cross-border trade and investment in the East African region. The MoU is intended to establish a degree of transparency and predictability in relation to multi-jurisdictional merger notifications and facilitating information sharing on joint investigations, and market inquiries, among other matters. The two agencies had hoped to develop merger notification guidelines by the end of December 2024. This has not yet occurred.

It remains unclear how the EACCA intends to interact with other regional competition regulators such as the COMESA Competition Commission for instance.

  • Merger control - Competition Tribunal upholds CAK penalties for failure to notify a notifiable merger

In a judgement dated 10 August 2023, the Kenya Competition Tribunal issued its first appeal decision relating to the imposition of penalties by the CAK for failure to notify a merger implemented in the early months of 2019. The Competition Tribunal agreed with the CAK decision of 8 December 2020 to impose a financial penalty of KES 7,239,876 (approx. USD 47,000) on The Makini School Limited ("Makini School") after it acquired certain assets of R. K Bhayani Nursery & Primary School, a school campus in Kisumu, Kenya, without the approval of the merger transaction by the CAK.

The Kenya merger regime is suspensory and merging parties are prohibited from implementing a notifiable transaction until the CAK grants its approval.

In this particular case, the penalty imposed by the CAK was the equivalent of 1% of the deemed relevant turnover of Makini School for the 2018 financial year. The Competition Tribunal also agreed that this penalty was justified and within the confines of the Competition Act.

It should be noted that the merger was undertaken before the Competition (General) Rules, 2019 came into force on 25 November 2019. The rules set out applicable merger thresholds which exempt certain mergers from notification to the CAK based on the value of turnover or assets of the merging parties.

The decision is the first of its kind in Kenya and reaffirms the position of the CAK to actively enforce merger control rules in Kenya.

  • Cartel conduct (restrictive trade practices) - CAK penalizes nine steel manufacturers

On 23 August 2023, the CAK announced that it had penalized nine steel manufacturers a total amount of KES 338,849,427.89 (approx. USD 2.2 million). Following investigations, the CAK had found that the steel manufacturers had engaged in cartel conduct resulting in an increase in the cost of construction of homes and infrastructure by artificially inflating the prices of steel products. Further, the steel manufacturers with the exception of one, were also found to be participating in output restriction by agreeing to limit imports of certain steel components and creating an artificial shortage of steel products that raised prices.

The Competition Act prohibits price fixing and output restriction, and as such, the companies were found to be guilty of anti-competitive practices and harming consumers. According to the Director General of the CAK, the financial penalty was proportionate to the offence Currently, the companies have appealed to the Competition Tribunal for a review of the CAK decision.

Another resounding indication of the CAK's very active enforcement of competition laws.

  • Market Inquiry into the animal feed markets in Kenya

On 29 September 2023, the CAK announced its intention to conduct a market inquiry into the animal feed markets in Kenya and invited stakeholders for comments. The key objective of the market inquiry was to assess the market interactions, market structures, market outcomes and other factors that may be affecting competition in markets along the animal feed value chains and recommend interventions that would support sustainable growth and competitive markets for a robust animal feed sector in Kenya. The CAK has yet to publish its market inquiry report.

  • Abuse of buyer power - CAK sanctions Carrefour for abuse of buyer power

On 19 December 2023, following investigations on the operations of Majid Al Futtaim Hypermarkets Limited (trading in Kenya as Carrefour), the CAK announced that it had imposed a financial penalty of KES 1,108,327,873.60 (approx. USD 7,150,502.41) on the company for abusing its superior bargaining position in relation to two of its suppliers. The CAK also ordered Carrefour to refund the suppliers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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