The competition watchdog has fined nine steel manufacturers Sh338.8 million for what it describes as "cartel conduct."
Competition Authority of Kenya (CAK) in a statement said the steel manufacturers colluded to increase the prices of their products, subsequently raising the cost of construction of homes and infrastructure.
CAK says the cost of steel products like bars, pipes, and sheets increased by 20 per cent as a result of "artificial inflation."
The affected manufacturers are Nail and Steel Products Ltd, Brollo Kenya Ltd, Blue Nile Wire Products Ltd, Tononoka Rolling Mills Ltd, Devki Steel Mills, Doshi & Hardware Ltd, Corrugated Steel Ltd, Jumbo Steel Mills and Accurate Steel Mills Ltd.
CAK notes that the firms collectively agreed to set prices and adjust timelines.
The watchdog said with the exception of Accurate Steel Mills, the firms have also been penalised for output restriction by agreeing to limit imports of certain steel components, thereby causing an artificial shortage, which in, turn, raised prices.
CAK Acting Director-General Adano Wario said the penalties are proportionate to the offences and are meant to restore competition in the sector and deter companies from deploying anti-competitive practices as a business strategy.
“Cartels are conceived, executed, and enforced by businesses to serve their commercial interests and to the economic harm of consumers. In this matter, the steel firms illegally colluded on prices and margins as well as output strategies,” said Dr Wario.
Price fixing and output restriction are illegal under the Competition Act since they hinder competition in the market.
Competitive markets allow consumers to benefit through lower prices, increased choice, and quality of goods and services.
“This penalty is the highest-ever imposed by the Authority, and it should send a clear message that cartel conduct is illegal under the Competition Act,” added Dr Wario.
He said in a liberalised market like Kenya’s, the forces of supply and demand should signal prices, free from manipulative business practices.
“Agreements between competitors seek to defeat this fundamental facet of a free economy,” added Dr Wario.
Investigations into the conduct of the firms started in August 2020 when CAK conducted a countrywide covert field exercise.
The Authority said intelligence gathered from the exercise pointed to coordinated conduct by the manufacturers on how to price their products and control production.
Later in December 2021, a search and seizure was conducted at dawn in eight firms where electronic and physical evidence was secured.
The evidence comprised of minutes of meetings where the parties resolved to restrict the importation of 0.9mm coils and plates, coordinated release of price lists through analysis of ex-factory prices, monitoring competitors' stock levels and agreeing or discussing skipping importation of raw materials to stabilise prices and product specifications to protect or enhance profit margins.