In a landmark decision, the Competition Authority of Kenya (CAK) has imposed hefty fines totaling Sh338,849,427.89 million on nine steel manufacturers. These companies, including Nail and Steel Products Limited, Brollo Kenya Limited, Blue Nile Wire Products Limited, Tononoka Rolling Mills Limited, Devki Steel Mills, Doshi & Hardware Limited, Corrugated Steel Limited, Jumbo Steel Mills, and Accurate Steel Mills Limited, were found guilty of engaging in price fixing and output restriction. This illicit behavior has significantly driven up construction costs, placing an undue burden on consumers.
Steel is a vital component in construction, accounting for more than 20% of the total cost of building a house. The cartels at the heart of this controversy manipulated prices and collectively determined price adjustment timelines, effectively stifling competition in the market and harming consumers.
Price fixing and output restriction are strictly prohibited under the Competition Act, as they undermine healthy competition in the business-customer environment. Competitive markets are essential for providing consumers with lower prices, increased product choices, and improved product quality, while also fostering innovation among businesses.
Adano Wario, the Acting Director-General of the Authority, emphasized that the penalties imposed are commensurate with the gravity of the offense and the adverse impact it has had on consumers struggling with the high cost of steel products. The objective of these penalties is twofold: to reinstate fair competition within the sector and to dissuade companies from resorting to anti-competitive tactics as part of their business strategy.
Wario commented, “Cartels are formed, operated, and enforced by businesses to serve their own interests, often at the expense of consumers. In this case, steel companies conspired to fix prices, manipulate margins, and control output strategies, all to the detriment of consumers. This fine represents the largest ever imposed by the Authority and serves as a clear warning that cartel conduct is unlawful under the Competition Act. In a market like ours, where competition should dictate prices freely, these manipulative practices go against the principles of a free economy.”
As part of the ongoing investigation, the Authority is in discussions with five other steel firms, following the procedures outlined in section 38 of the Competition Act. The aim of these negotiations is to expedite a cost-effective resolution and restore effective competition within the sector.
This intervention in the steel industry is a continuation of the Authority’s commitment to fostering a competitive environment within the construction sector. It aligns with the government’s objectives, including the provision of affordable housing for Kenyan citizens. In 2021, the Authority imposed fines totaling Sh66 million on four paint manufacturers for cartel conduct, which included price fixing. Prior to this, the Authority had also taken steps to address anti-competitive practices within the cement sector.
This significant decision by the CAK sends a strong message that unfair business practices will not be tolerated, and it marks a significant step towards ensuring fair pricing and healthy competition in the Kenyan construction industry. Consumers can look forward to a more transparent and competitive market, ultimately benefiting from lower costs and a wider array of choices in steel products for their construction needs.
