Nine steel manufacturers have been fined for engaging in price fixing and output restriction that has led to an increase in the cost of construction, putting financial pressure on consumers.
The nine cartels penalized Sh338,849,427.89 million by the Competition Authority of Kenya (CAK) include 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.
Steel products such as bars, pipes, beams, and sheets, account for over 20 per cent of the total cost of constructing a house. The cartels engaged in price fixing, through agreeing and collectively setting prices and price adjustment timelines.
Price fixing and output restriction are illegal under the Competition Act since they hinder competition in markets (business-customer environment). Competitive markets benefit consumers through lower prices, increased choice, and quality of goods and services. Business rivals are also motivated to innovate.
Adano Wario, the Authority’s Acting Director-General, said the penalties are proportionate to the offence, specifically harm to consumers who have been decrying the high cost of steel products in the country. The penalty imposition is 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.
“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. In a liberalized market like ours, 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.”
As part of the investigation, the Authority is engaging five (5) other steel firms in settlement negotiations as prescribed under section 38 of the Competition Act. The engagement is aimed at achieving a speedy and cost-effective resolution and a return of effective competition in the sector.
The steel sector intervention is a progression of the Authority’s efforts to facilitate a competitive market in the construction space in support of Government’s efforts to provide, among others, affordable housing to Kenyans. In 2021, the Authority penalized four paint manufacturers a total of Sh66 Million for cartel conduct, including price fixing. The Authority had also earlier intervened in the cement sector.
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