Summary

On Wednesday, 23 August 2023, the Competition Authority of Kenya (the Authority) announced its verdict, imposing sanctions and penalties on nine (9) steel manufacturers for engaging in the practice of price fixing and output restriction.

Background: Investigate Mandate

The Competition Act of 2010 (the Act), empowers the Authority to initiate investigations into the actions of an entity, either independently or in response to a complaint. These investigations are aimed at examining potential violations of prohibited practices outlined in the Act.
In this particular instance, the Authority, following the provisions of section 31 of the Act, launched the investigations into the activities of steel firms in the year 2020. The results of the investigations led the Authority to believe there was coordinated conduct by the steel manufacturers to fix prices and restrict
output.

Notably, the Act permits businesses to seek resolution through settlement. This is particularly attractive to undertakings seeking to achieve a speedy and cost-effective resolution. At any stage of an investigation into a potential violation of regulations concerning restrictive trade practices, the Authority has the option to engage in settlement discussions with the involved undertaking(s). This agreement may encompass compensatory damages for the complainant and any potential monetary penalties. It’s mandatory for the Authority to publicize details of such settlements by publishing a notice in the Kenya Gazette. We understand that the Authority is currently engaging in settlement negotiations with five (5) other steel firms.

Trade Practices

The Act prohibits agreements between undertakings, decisions by associations of undertakings, decisions by undertakings or concerted practices by
undertakings which have as their object or effect the prevention, distortion or lessening of competition in trade in any goods or services in Kenya, or a part of
Kenya (restrictive trade practices) unless they are exempt in accordance with the Act. These include any agreement, decision or concerted practice which:

(a) directly or indirectly directly fixing the purchase or selling prices or any other trading conditions;
(b) divides markets by allocating customers, suppliers, areas or specific types of goods or services;
(c) involves collusive tendering;
(d) limits or controls production, market outlets or access, technical development or investment;
(e) otherwise prevents, distorts or restricts competition.

Investigative Process

The Competition Act grants the Authority the power to initiate investigations into alleged or potential violations of specific prohibitions related to competition practices including restrictive trade practices, abuse of dominance, and abuse of buyer power. If the Authority decides to proceed with an investigation, it can issue a written notice to individuals or entities involved. This notice can require them to provide relevant information in writing, produce specific documents or items, appear before the Authority to provide evidence, and share relevant records. In line with the provisions of the Act, the Authority interviewed the steel firms and their legal representatives and issued a notice of proposed decision and invited the firms to make their oral and written submissions. Subsequently, the Authority determined that the manufacturers were in breach of the prohibited practices under the Act by engaging in cartel conduct including price fixing. The Authority’s decision was reportedly supported by various evidence, including meeting minutes discussing the restriction of imports for specific steel products, coordinated price list releases based on ex-factory price analysis, monitoring of competitors’ sales and stock levels, and a mutual understanding to abstain from importing raw materials.