Competition Authority of Kenya Leniency Programme: A Tale of Madness, Cartels, and Leniency gambit

By: Collins Owino & Lynn Awuor

"Chess is not only a game, it is a science and an art." - Stefan Zweig.

In the realm where madness intertwines with strategy, Stefan Zweig's words echo, unveiling the profound connection between chess and the human psyche. The chessboard, a canvas for intellectual warfare, mirrors the intricate moves played out in the corporate world, where strategy and cunning dance hand in hand.

 Zweig's art masterpiece, "The Royal Game," unveils the enigma of Dr. B, a chess prodigy whose mind becomes entangled in the labyrinth of three-dimensional chess. A dance between reality and illusion, sanity, and madness, unfolds as Dr. B, once imprisoned, battles his imaginary self on the chessboard. The beauty of chess, as Zweig captures, lies in its ability to push the boundaries of human reason, resonating with Aristotle's wisdom: "There is no genius without a touch of madness."

Transitioning from the surreal chess realm to the harsh realities of corporate manoeuvring, on the 23rd of August 2023 the Competition Authority of Kenya (CAK) unleashed a checkmate on steel cartels. Nine manufacturers, including giants like Devki Steel Mills, Doshi & Hardware Limited and Tononoka Rolling Mills Limited, were fined a total of fines exceeding three hundred million shillings on accusation of them orchestrating an elaborate ballet of illegal price fixing and output restrictions, creating an artificial shortage to inflate steel prices. In turn these practices lead to significant cost in construction, therefore placing an undue burden on consumers.

As the CAK imposes record fines, a glimpse into the rationale behind Kenya's Corporate Leniency Programme emerges. The rise of cartels is motivated by the desire to keep supply low and increase profit from the resulting higher demand and price. Cartels are mainly formed, operated and enforced by businesses to serve their own interests often at the expense of consumers.  The programme was introduced to deter cartels, the leniency program could be seen as a strategic gambit where deterrence, detection, sanctioning, cessation, and cooperation form the pillars of this program. It's a symphony where confessing cartel members become the maestros, orchestrating the downfall of their illicit counterparts while seeking leniency as a shield.

As the legal and corporate worlds continue their relentless chess match, the question lingers: How will this symphony of madness, fines, and leniency shape the future moves on these complex and unpredictable chessboards?

Introduced under Section 89A of the Competition Act in Kenya, the leniency programme is on a first come first served basis, where the first applicant may secure full immunity while subsequent applicants face reduced penalties and eventually becomes the beacon guiding the CAK through the convoluted paths of cartel detection and delineating various forms of leniency, with conditional leniency taking centre stage. This initial immunity is granted once the applicant, referred to as 'first through the door,' satisfies the CAK with substantial evidence aiding inquiries and proceedings marking the commencement of the chess game. The applicant, now engaged in a legal tête-à-tête, must adhere to the conditions stipulated in the guidelines which progresses to full, total and/or permanent leniency upon completion of the investigation.

Upon initiating the leniency application, the CAK grants a formal acknowledgment known as a 'marker.' This marker, a strategic position reserved for twenty-eight days, signifies the applicant's timing in comparison to others. The applicant, now a player in the legal chess game, must submit relevant information within this period. The CAK proceeds with internal investigations, and a subsequent meeting with the applicant delves into crucial information and clarifications. Within fourteen days post-meeting, the CAK communicates in writing, either granting or denying leniency. 

Throughout the leniency process, the applicant is bound by strict rules where full, truthful, and timely disclosure, unwavering cooperation, confidentiality, and an immediate cessation of restrictive practices are the guiding principles. The effectiveness of the leniency programme depends on the applicant's commitment to these rules and the veracity of the information provided.

Challenges of the Leniency Program

The leniency program goes beyond national boundaries, fostering collaboration with regional entities such as the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). However, this cooperative effort faces numerous challenges, including insufficient capacity, legal differences among jurisdictions, and sovereignty concerns that hinder smooth collaboration. Additionally, legal constraints on sharing information and admissibility pose further obstacles to international cooperation. Complicating matters, there is a lack of complete mutual interest among countries, adding another layer of complexity to the situation.

Conclusion

The leniency initiative was implemented in Kenya with the aim of discouraging, identifying, penalizing, and dismantling cartels while fostering global collaboration in cartel investigations. The fines imposed by the CAK in August 2023 served as a warning, not only to construction law firms but also to businesses across diverse sectors, emphasizing the intolerance for unfair pricing and the protection of consumers' economic rights. The existing leniency program requires enhancement due to gaps in the Competition Act and deficiencies in the guidelines, aiming to enhance the effectiveness of the program.