Heavy fine and prison sentence for company executives engaging in unfair practices

Companies that exercise an unfair competitive advantage over their suppliers will now face heavy fines and even prison terms, according to a new bill proposed by the Competition Authority of Kenya (CAK).

According to the Competition Amendment Bill 2024, businessmen will be liable to imprisonment not exceeding five years or a fine not exceeding Ksh 10 million, or both, for several offenses.

Some of these violations include: delays in paying suppliers without justifiable reason or breach of contract or terms of agreement.

Other violations listed in the proposed bill include: unilaterally terminating or threatening to terminate a business relationship without notice or with excessively short notice without justifiable cause.

Additionally, companies that use unfair bargaining power to transfer business costs and risks to a counterparty will be considered to have violated the law if the bill passes.

Companies will also be prohibited from demanding preferential conditions unfavorable to the counterparty.

The bill also clarifies that businesses will not be allowed to charge purchase prices below competitive levels or service fees above competitive levels.

Furthermore, the Authority seeks to regulate competition in the Kenyan business landscape by limiting the unreasonable collection and/or processing of counterparty data.

Companies will also not be able to impose unduly difficult conditions for termination of service; and obstruction of business activities or interference in the management of its affairs by the counterparty.

“A person who contravenes the provisions of paragraph one commits an offense and shall, on conviction, be liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings, or of both,” the bill reads in part.

The creation of the amendment follows a landmark ruling where a popular supermarket chain was fined Ksh1 billion for exercising an unfair competitive advantage.

According to the statement released by the Authority in December, the chain was accused of having transferred the retailer’s costs to two of its suppliers.