This blog was co-authored by Candidate Attorney, Neshalia Nayagar.
The Competition Authority of Kenya recently published the Draft Consolidated Administrative Remedies and Settlement Guidelines, which are available here . The Guidelines will be used by the Authority in determining administrative penalties and offer insight into how such penalties will be calculated. Under Kenyan competition law a firm can be liable for a penalty for engaging in restrictive practices, abuse of dominance, abuse of buyer power, and conduct that violates consumer welfare.
The Guidelines set out that in calculating the financial penalty applicable to the specific conduct, the Authority will apply a base percentage of 10% to the offending firm’s gross annual turnover for the previous financial year, which is distinct from South African authorities who use a base percentage of 10% of turnover ‘affected’ by the conduct. This base percentage will then be adjusted using aggravating and mitigating factors to produce the final financial penalty, which is capped at a maximum of 10% of the offending firm’s gross annual turnover of the preceding financial year.
For contraventions relating to restrictive practices and mergers, the adjustment to the base percentage is determined by looking at the nature, duration, gravity and extent of the contravention, any loss or damage suffered as a result of the contravention and the market circumstances in which the contravention took place. Aggravating factors increase the penalty payable and mitigating factors would reduce the base percentage.
In contrast to many other jurisdictions, the Guidelines specify a range for each stipulated aggravating and mitigating factor depending on its extent, generally between 0.5 – 3%. Where your conduct falls on this scale will dictate the percentage of turnover that will be added to or subtracted from the base percentage. By way of an example, if the prohibited conduct was among competitors or potential competitors, this will result in an addition of 3% to the base percentage, whereas conduct which is vertical in nature (among suppliers and customers) will result in an addition of only 1%. These percentages reflect that practices among competitors (such as price fixing) are assumed to be more detrimental to competition in a market than vertical practices like exclusive agreements of long duration that cannot be justified.
Further to this, the Authority may consider any aggravating and mitigating factors not stipulated in the Guidelines which can each carry a value of 0.5% capped at an additional 2%.
Although the Guidelines provide consistency in the application of administrative penalties by the Authority, the methodology prescribed will produce some very significant penalties close to 10% of gross turnover for the offending firm in the absence of strong mitigating factors. Accordingly, firms conducting business in Kenya should take steps to ensure that their conduct aligns with Kenyan competition law to avoid hefty financial penalties such as those imposed by the Authority in August 2023 against all nine steel manufacturers in the amount of approximately USD2.1 million.