Understanding Kenya's Competition Act: Prohibited Practices and Enforcement

Competition drives lower prices, better quality and innovation. Kenya's Competition Act, No. 12 of 2010 protects that competition by prohibiting cartels, abuse of market power and mergers that harm the market, and by protecting consumers from unfair practices. The Competition Authority of Kenya (CAK) has become an active enforcer, imposing significant penalties and taking a particular interest in retail, financial services, digital markets and agriculture. This article explains what the Act prohibits, how it is enforced and how businesses can stay compliant.

Key takeaways

• The Act prohibits restrictive agreements, abuse of dominance, abuse of buyer power and unnotified mergers.
• Price fixing, market sharing and bid rigging between competitors are treated as serious, per se violations.
• The CAK can impose administrative fines of up to 10% of the preceding year's gross annual turnover in Kenya.
• Mergers that meet the thresholds must be notified to and approved by the CAK before implementation.
• A leniency programme rewards businesses that report cartels and cooperate with investigations.

The institutions

The Competition Authority of Kenya investigates and decides on restrictive practices, approves mergers and handles consumer complaints. Its decisions can be appealed to the Competition Tribunal, and from there to the High Court. The CAK also works with sector regulators, such as the Central Bank of Kenya and the Communications Authority, where competition issues arise in regulated sectors.

Prohibited practices

1. Restrictive trade practices (section 21)

Agreements between undertakings, decisions by associations and concerted practices that have the object or effect of preventing, distorting or lessening competition are prohibited, unless exempted. The Act specifically prohibits agreements that:

• directly or indirectly fix purchase or selling prices or other trading conditions;
• divide markets by allocating customers, suppliers, areas or specific types of goods or services;
• involve collusive tendering (bid rigging);
• impose minimum resale prices on distributors (resale price maintenance);
• limit or control production, market outlets, technical development or investment; and
• apply dissimilar conditions to equivalent transactions, or make contracts subject to unrelated obligations.

Trade associations should be careful: sharing pricing information or recommending prices among members can amount to a prohibited practice.

2. Abuse of dominance (section 24)

Being dominant is not unlawful; abusing that dominance is. An undertaking is generally considered dominant if it holds 50% or more of a market, or between 40% and 50% unless it can show it does not have market power, or less than 40% where it controls prices or excludes competitors. Abusive conduct includes:

• imposing unfair purchase or selling prices;
• limiting production or technical development to the prejudice of consumers;
• discriminatory pricing or conditions;
• tying the supply of one product to the purchase of another; and
• abusing intellectual property rights.

3. Abuse of buyer power (section 24A)

Kenya was among the first African countries to regulate abuse of buyer power specifically. Large buyers, such as supermarket chains, processors and manufacturers, must not abuse their bargaining power over suppliers. Examples include unilateral termination of supply contracts, delayed payment without justification, demanding payment for shelf space or promotions, and transferring commercial risk unfairly to suppliers. In 2021, the CAK found that Majid Al Futtaim Hypermarkets (Carrefour) had abused its buyer power by forcing suppliers to pay rebates and listing fees, and ordered refunds and changes to its supplier contracts. The CAK has since issued a retail sector code of practice and pursued other buyer power cases, including in agriculture and digital markets.

Merger control

Any acquisition of control over a business that meets the prescribed financial thresholds must be notified to the CAK and approved before it is implemented. "Control" includes acquiring a majority of shares, the ability to appoint a majority of the board, or the ability to materially influence policy. Key points:

• Thresholds are based on the combined turnover or assets of the merging parties in Kenya and the turnover or assets of the target, as set out in the Competition (General) Rules.
• Smaller transactions may be excluded from notification but still be subject to review in certain sectors.
• Transactions notified to the COMESA Competition Commission may also need to be considered in Kenya, particularly where public interest issues arise.
• The CAK assesses competition effects and public interest factors, such as employment, the ability of small businesses to compete and the competitiveness of Kenyan industry. Many approvals come with conditions on employee retention or local supply.
• Implementing a notifiable merger without approval is an offence and the transaction is void.

Consumer protection under the Competition Act

Part VI of the Act protects consumers against false or misleading representations, unconscionable conduct and supply of unsafe goods. The CAK handles consumer complaints, can order refunds and has acted against misleading pricing and advertising. See our article on consumer protection law in Kenya.

Investigations and enforcement

Investigative powers

The CAK may begin investigations on its own initiative or following a complaint. It can summon witnesses, require documents and carry out search and seizure operations, commonly known as dawn raids, under a warrant.

Penalties

Leniency programme

Under section 89A, an undertaking that voluntarily discloses its participation in a cartel and cooperates with the CAK may receive immunity or a reduced penalty. The first to come forward obtains the greatest benefit.

Settlements

The CAK may agree settlements, including payment of a penalty and commitments to change conduct, which are often quicker and less costly than contested proceedings.

Competition compliance checklist

1. Train staff, especially sales and procurement teams, on what they may and may not discuss with competitors.
2. Review distribution agreements for resale price maintenance and exclusivity clauses.
3. Assess your market position and review pricing and trading terms if you may be dominant.
4. Review supplier contracts and payment practices for buyer power risks.
5. Check every transaction for merger notification requirements early in the deal timetable.
6. Adopt a dawn raid response plan.
7. Keep records of legitimate business reasons for pricing and commercial decisions.

Frequently asked questions

Can competitors share price information?

Exchanging current or future pricing information with competitors is risky and may be treated as a concerted practice. Seek advice before taking part in any information exchange, including through trade associations.

Does a small business need to worry about competition law?

Yes. The prohibition on cartels applies regardless of size, and small businesses that are suppliers are protected by the buyer power provisions.

How W.O.A. Advocates can help

We advise on merger notifications, competition compliance programmes, CAK investigations, leniency applications and appeals to the Competition Tribunal. Contact our competition law team.