Trade associations face crackdown, Sh10m fine for unethical practices

Shoppers at a supermarket in Nairobi. The Competition Authority is seeking to punish businesses applying unethical practices in the market. [PHOTO:FILE/STANDARD]
Competition Authority of Kenya (CAK) wants trade associations to audit their operation systems and rules as part of its new resolve to crack down on increasing cartels swindling consumers and farmers of their hard-earned income through unethical trade practices.

Starting June this year, the regulator will publish in the Kenya gazette, a notice requiring all business member organisations to hire independent assessors to interrogate their business processes to encourage sound competition.

Director General Wang’ombe Kariuki said CAK will launch Special Compliance Process (SCP) targeting trade lobbies in financial services, agriculture and agro-processing sectors.

Agriculture and Financial services sectors, he said are being targeted because of their substantial input to the Gross Domestic Product (GDP) and equally forms the foundation for investment in Kenya.

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Minting billions

Mr Kariuki said the sector associations will be compelled to probe their rules, practices and procedures as part of disassociating themselves from cartels that have been minting billions of shilling through immoral trade behaviour. Failure to comply with the directive, he said will force the authority to initiate investigations and any group or person to have contravened competition law will be fined a financial penalty of Sh10 million or sentenced five years in jail.

“We expect the trade lobby groups to co-operate in implementing the SCP as from June 2015 in terms of ensuring they have assessed their operating systems, memorandum and articles of association, agreements, minutes, among other business procedures,” he said.

This, he added, is aimed at identifying and rectifying past behaviours largely blamed for curtailing competition as cartels set prices, segment the market, and abuse dominance.

“By practising the corrupt behaviours, the cartels mint billions of shilling at the expense of small scale farmers and depositors,” said Kariuki.

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Kariuki told a business journalists’ training workshop in Nanyuki early this week the new approach will run for eight months starting June. The two sectors – financial services and agriculture and agro-processing has the highest number of trade associations some of which always disagree with regulators over introduction and implementation of new policies.

He said Competition Authority of Kenya Act No. 12 of 2010 Sections 21, 22, 23 and 24 places stiffer penalties to any trade group involved in anti-competitive behaviour. Some of the unethical trade practices include directly or indirectly fixes purchase or selling prices, divides markets by allocating customers, suppliers, areas or specific types of goods or services and abuse of market dominance.

“Any person who contravenes the provisions of this law commits an offence and shall be liable on conviction to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings or to both,” he warned.

Targeted trade associations include Kenya Bankers Association, Association of Kenya Reinsurers, Association of Kenya Insurers, East African Tea Trade Association, Kenya Coffee Traders Association, Kenya Tea Development Authority, Cereals Millers Association, Kenya Association of Stockbrokers and Investment Banks.

Unethical trade practices have contributed to high cost of doing business in the economy and thus contributing to low investments.

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