Agency rejects bid by public secretaries to fix prices

Wang’ombe Kariuki (left) and Francis Wangusi of Communications Authority of Kenya. [Standard]

An attempt by auditors to set a fees guideline for their services has flopped after their application was rejected by the Competition Authority of Kenya.

In the refusal, the anti-competition watchdog said fixing prices for audit services will eliminate the incentive to offer quality of services.

“It is the authority’s considered opinion that price fixing by professional associations extinguish competition with no plausible public benefits,” said CAK Director General Wang’ombe Kariuki.

He added that there was no sufficient evidence in the application to show that price fixing will improve the profession or prevent its decline.

“The decision to reject the Institute’s exemption application sends a strong message to professional bodies that fee guidelines decrease competition, reduce innovation and efficiencies, and limit customer choice,” Wang’ombe rejection reads further.

Auditors’ professional body, the Institute of Certified Public Secretaries of Kenya (ICPSK), had sought the approval of the anti-completion regulator to issue new governance audit guidelines to its members.

Setting such fee guidelines requires the approval of the CAK. Among the grounds the professional body sought in its application was that setting of minimum fees chargeable for various services would provide a fair play ground for all practitioners by preventing undercutting which lowers standards.

Rejection of the fee guidelines means companies seeking governance audit are free to contract the cheapest auditor, a proposition that application sought to eliminate.

Enhance competition

Wang’ombe also rejected another application by a beverages importer seeking to enter exclusive importation agreements with foreign manufacturers.

WOW Beverages had approached the CAK in its request that would effectively have locked out other importers from dealing in global brands such as high-end whiskies Jack Daniels and Famous Grouse. The exclusive distributorship rights involved seven international suppliers for an infinite period. Wang’ombe justified the rejection citing that having several importers would enhance competition and provide the best possible pricing for consumers.

“The Authority is of the opinion that parallel imports, through legal channels, are likely to bring more benefits to Kenyan consumers, including the enhancement of intra-brand competition which often leads to lower prices,” he said in his report.

WOW had argued that having exclusive rights would help in fighting counterfeits of the beverages from entering the market.

But CAK countered the argument writing in its response that the role of tackling fake products was the responsibility of different arms of government.

“Imported products are also subject to controls by competent Government authorities such Kenya Bureau of Standards, Kenya Revenue Authority and Anti-Counterfeit Agency that ensure compliance,” Wang’ombe said.