Nine steel companies in Kenya have been fined $3.38 million by the Competition Authority of Kenya for price-fixing and creating artificial shortages in construction materials. These firms have appealed the decision, setting the stage for a legal battle, reports Business Daily Africa.
Nine major steel manufacturers in Kenya, including names like Devki Group, Doshi, Corrugated Steel Ltd, and Tononoka Rolling Mills, find themselves in hot water. They have been slapped with a hefty fine of $3.38 million by the Competition Authority of Kenya (CAK) for allegedly manipulating market prices and causing artificial shortages of essential building materials.
Last week, these companies lodged their individual appeals with the Competition Tribunal, as confirmed by CAK's acting director-general, Dr. Adano Wario. "Given that this is now a quasi-judicial issue, we can't comment further," Wario stated.
The CAK imposed the fine after a lengthy investigation into the steel sector. Their probe revealed that these companies had colluded to fix prices and create material shortages. This behavior resulted in an increase in construction costs, affecting both residential buildings and key infrastructure projects.
According to the CAK, steel products like bars, pipes, beams, and sheets make up over 20% of the total construction cost of a house. By inflating these prices, the companies substantially raised the cost of building homes and other structures.
This case is part of a broader investigation by the CAK into potential anti-competitive behavior across various sectors, including manufacturing and agriculture. These investigations occur against a backdrop of high inflation and soaring commodity prices, which have remained above the Central Bank of Kenya's upper limit of 7.5% for over a year.
Furthermore, the CAK is currently hosting the African Competition Forum (ACF) Cartel Workshop. Here, authorities from across Africa are sharing strategies to combat cartels effectively. "Research shows that cartels raise the prices of goods and services by approximately 25%. Imagine the impact of our interventions on several aspects, including consumer purchasing power," said Mr. Boniface Makongo, CAK's Director of Competition and Consumer Protection.
The landscape is changing, with more businesses adopting digital technologies like artificial intelligence to evade regulatory scrutiny. Dr. Wario emphasized the need for competition agencies to stay ahead of these advances and invest in countermeasures.
The legal fight between the steel companies and the CAK serves as a high-stakes example of the ongoing tension between industry and regulatory oversight in Kenya. The appeal of the $3.38 million fine could set a precedent for how anti-competitive behavior is handled, not only in Kenya but potentially across Africa. It also calls attention to the crucial role of regulatory bodies in maintaining fair competition and market stability.