Watchdog fines Tuskys, Ukwala Sh5m for unfair trade practices

One of Tuskys outlets. The supermarket chain and rival Ukwala have both been fined Sh5 million for anticompetitive trade practices. [Photo: File]

Kenya: Competition Authority of Kenya (CAK) has cracked the whip and fined retail chains Tuskys and Ukwala Sh5.3 million for engaging in what it said were unfair trade practices.

According to the authority, the two firms colluded in setting retail prices of items in their supermarkets in a manner that undermined fair competition in the retail sector.

The retailers had gone into an agreement where Tuskys was to manage some outlets on behalf of Ukwala without seeking approval from the Competition Authority, which is against the law.

In a statement yesterday, the authority noted that the arrangement, which allowed Tuskys to manage three Ukwala Supermarket stores for a period of nine months, amounted to a horizontal restrictive practice.

The authority said such a malpractice contravened the provisions of the Competition Act to the extent that it allowed Tuskys to set the prices and other trading terms of a competitor in addition to managing the three Ukwala Stores, in terms of marketing and management systems.

“The parties are competitors, in a horizontal relationship both being Supermarket chains with branches in the Nairobi Central Business District,” said CAK.

The arrangement also allowed Tuskys to make decisions on acquisition of stock, setting prices, payroll management, staff re-organisation, deployment of technology, rebranding and settling any third party costs of the three stores.

Senior managers

Tuskys Senior Managers were also put in charge of the day-to-day management of the stores in a deal that was brokered after Tuskys invested Sh200 million.

According to the authority, the financial penalty was based on the affected turnover, the duration of the conduct and mitigating factors (as presented by the parties).

“The Authority further took consideration of the need to incentivise acceptance by the firms of the new competition regime and settlement with the authority rather than lengthy litigation, which may derail the authority’s focus of working for more competitive outcomes within the shortest time period,” said CAK.

The Competition Authority has been investigating traders that it said are engaged in unscrupulous activities. Last month, CAK Director General Wang’ombe Kariuki warned businesses engaged in cartel-like behaviour in various key sectors of the economy thus frustrating promotion of competition would be prosecuted. The watchdog cautioned that it is investigating unethical trade practices and abuse of dominance with a view to safeguarding the interests of consumers.

He said any merchant who would be linked to cartel tactics in the local market would be fined Sh10 million or jailed for a term of five years.

Mr Kariuki said investigations are already being conducted in the transport, insurance, shipping, milling, banking, cement, sugar, health care and tea sectors.

Consumers have been complaining of cartel-like behaviour in the said sectors, saying they have been subjected to a lot of suffering in terms of high prices and, low quality services and high cost of production.