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Transcript

Unmasking Cartels · The Mwango Capital Podcast

0:00
SPEAKER_02: Good evening everybody and thank you so much for making time to be part of this
0:05
SPEAKER_02: conversation where we seek to understand more about the Competition Authority of
0:10
SPEAKER_02: Kenya and of course the work that they do within how to identify,
0:13
SPEAKER_02: how they investigate,
0:15
SPEAKER_02: how they prosecute and of course how they put together systems and tools to deter
0:20
SPEAKER_02: cartels to protect Kenyan consumers and of course the Kenyan population.
0:24
SPEAKER_02: My name is Tariana.
0:26
SPEAKER_02: I am a communications practitioner.
0:29
SPEAKER_02: I am a strategy lead and business development lead at CNBC Africa here in Nairobi.
0:35
SPEAKER_02: And I'm really looking forward to this conversation,
0:37
SPEAKER_02: both with my background and my ears as a journalist,
0:40
SPEAKER_02: but also as a Kenyan who runs a
0:43
SPEAKER_02: of course,
0:43
SPEAKER_02: heard a lot about cartels,
0:45
SPEAKER_02: what they are,
0:46
SPEAKER_02: and with my mind as a business journalist,
0:49
SPEAKER_02: the effects and the impact of cartels to our economies.
0:53
SPEAKER_02: Before we get into it,
0:55
SPEAKER_02: Eric,
0:55
SPEAKER_02: perhaps just tell us a little bit about Mongo and why you specifically thought this
1:00
SPEAKER_02: topic or this conversation is important for today.
1:03
SPEAKER_01: Yes, thank you so much, Terry-Anne, for agreeing to be our host.
1:07
SPEAKER_01: I know you're a very busy person.
1:08
SPEAKER_01: So thank you for being with us today.
1:10
SPEAKER_01: So yes, my name is Eric Mokai.
1:12
SPEAKER_01: I'm the founder.
1:12
SPEAKER_01: We really like to have topical issues discussed here on Mongo spaces.
1:16
SPEAKER_01: And even though tomorrow is all about the budget,
1:18
SPEAKER_01: now we want to take a little bit of a break from that to discuss a little bit on
1:22
SPEAKER_01: what cartels are all about.
1:23
SPEAKER_01: So we have two able speakers here who are going to explain what they are and why
1:27
SPEAKER_01: the CAK is there as a regulator to try and make sure that these things are in order
1:32
SPEAKER_01: all the time in the markets.
1:33
SPEAKER_01: I will not preempt what the speakers are going to talk about, but I think this is a topical issue.
1:37
SPEAKER_01: The political sphere, people hear a lot of the word cartels and they have a different meaning over there.
1:41
SPEAKER_01: So we want to get the witness space and get to understand what that is all about.
1:45
SPEAKER_01: So back to you, Terri-Ann, so you can continue with the conversation.
1:49
SPEAKER_02: Thank you so much.
1:49
SPEAKER_02: And you're so right.
1:50
SPEAKER_02: In the Kenyan context, katel could mean one thing or the other, depending on the circles that you're in.
1:56
SPEAKER_02: But now that we're here with the competition authority of Kenya,
2:00
SPEAKER_02: let's get the true definition of a katel.
2:03
SPEAKER_02: But I guess before we get into it, Mugambi Mutegi is here with us.
2:07
SPEAKER_02: who's in charge of communication corporate affairs at the Competition Authority of Kenya.
2:13
SPEAKER_02: Perhaps introduce us to the Competition Authority of Kenya,
2:17
SPEAKER_02: what you do,
2:18
SPEAKER_02: and then a segue into our conversation for this evening.
2:22
SPEAKER_00: Thank you, Trian.
2:23
SPEAKER_00: Thank you, Eric.
2:25
SPEAKER_00: I'm Mogambi Motegi.
2:26
SPEAKER_00: I'm in charge of communications at the CAK, the Competition Authority of Kenya.
2:31
SPEAKER_00: Essentially,
2:31
SPEAKER_00: what the CAK does is try to ensure that competition in our market,
2:35
SPEAKER_00: in our economic markets,
2:37
SPEAKER_00: in our various sectors as we know them,
2:39
SPEAKER_00: is effective.
2:40
SPEAKER_00: That consumers,
2:41
SPEAKER_00: you and I,
2:41
SPEAKER_00: benefit from that through access to competitively priced goods and services,
2:46
SPEAKER_00: not necessarily cheap.
2:47
SPEAKER_00: but at a level which we know is influenced solely by the forces of demand and supply,
2:52
SPEAKER_00: that we accept commodities that are innovative.
2:54
SPEAKER_00: Where there's no competition, people don't innovate.
2:57
SPEAKER_00: There's no motivation to do that.
2:58
SPEAKER_00: At a government agency, we do this through various departments or core technical units.
3:03
SPEAKER_00: We have mergers and acquisitions.
3:05
SPEAKER_00: This is,
3:05
SPEAKER_00: as the name suggests,
3:06
SPEAKER_00: we ensure that when two companies are coming together,
3:09
SPEAKER_00: two or more companies want to merge for whatever reason.
3:12
SPEAKER_00: It could be efficiencies.
3:14
SPEAKER_00: They have come to us first to assess how it will impact the market in terms of numbers,
3:18
SPEAKER_00: in terms of how many companies in that sector will remain,
3:21
SPEAKER_00: will competition be effective,
3:23
SPEAKER_00: and also how it's going to impact you and I as a consumer,
3:26
SPEAKER_00: if at all,
3:27
SPEAKER_00: public interest concern,
3:28
SPEAKER_00: how is it going to impact the economy,
3:30
SPEAKER_00: SMEs that are playing in that space.
3:32
SPEAKER_00: Then we go to buyer power.
3:34
SPEAKER_00: Buyer power, we've been in the news recently.
3:35
SPEAKER_00: quite a bit of late regarding our enforcement actions across the country.
3:40
SPEAKER_00: So buyer power is basically where,
3:42
SPEAKER_00: as described now in the law,
3:44
SPEAKER_00: the competition act is where you have two entities,
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SPEAKER_00: a buyer and a supplier,
3:47
SPEAKER_00: with the buyer being the person in the upstream who has access to an asset,
3:51
SPEAKER_00: an infrastructure,
3:52
SPEAKER_00: that the guy below them who is supplying goods to them or services
3:55
SPEAKER_00: is highly dependent on.
3:57
SPEAKER_00: So this is in every sector where there's a bit of bargaining going on.
4:01
SPEAKER_00: The person with the higher bargaining power may abuse that.
4:03
SPEAKER_00: So we sanction against that.
4:05
SPEAKER_00: There's a very critical task or function that we do, consumer protection.
4:09
SPEAKER_00: We ensure that we are not misled in the markets, that the goods that you consume do not harm you.
4:14
SPEAKER_00: If they harm you, what do you do?
4:16
SPEAKER_00: That they play without making
4:17
SPEAKER_00: Various commodities for us play by the rule book.
4:20
SPEAKER_00: If there are standards applicable, they follow them.
4:22
SPEAKER_00: If they fail to do it, we can come for them.
4:24
SPEAKER_00: There are various forms of egregious conduct that constitute consumer welfare infringements.
4:30
SPEAKER_00: So that is number three.
4:32
SPEAKER_00: Then anti-competitive conduct,
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SPEAKER_00: which in the competition world also is called restrictive trade practice,
4:39
SPEAKER_00: RTP,
4:39
SPEAKER_00: is what now we are concerned with today.
4:42
SPEAKER_00: Here we are talking about anything that's done in the market by someone to restrict
4:46
SPEAKER_00: or reduce competition is anti-competitive.
4:48
SPEAKER_00: So you'll find price fixing, abuse of dominance, again, a very topical subject.
4:53
SPEAKER_00: You'll find market allocation, abuse of dominance, obviously, 50 plus percentage market share.
4:58
SPEAKER_00: We may abuse that position.
4:59
SPEAKER_00: Things like market allocation is where there are many people in the market.
5:02
SPEAKER_00: Then we say you'll be in this county, region, and I won't bother you on this other side.
5:07
SPEAKER_00: Again, it's a cartel.
5:08
SPEAKER_00: Price fixing, as I mentioned, even two players just come and say, there's no need of us competing.
5:12
SPEAKER_00: Actually, though, competing is very expensive.
5:14
SPEAKER_00: You have to invest in research and development,
5:17
SPEAKER_00: go to the market,
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SPEAKER_00: test new products,
5:19
SPEAKER_00: see what people want,
5:20
SPEAKER_00: then come back.
5:21
SPEAKER_00: So it's more from a business perspective,
5:24
SPEAKER_00: someone who is thinking about joining a cartel,
5:26
SPEAKER_00: it's a very efficient way of doing business.
5:28
SPEAKER_00: Going, sitting down with your competitor and deciding, you know what, let's not compete.
5:32
SPEAKER_00: Let's just agree.
5:33
SPEAKER_00: As you spoke, Gambi, I had so many instances and
5:51
SPEAKER_02: industries and names of companies,
5:54
SPEAKER_02: which I cannot mention and you cannot mention as well,
5:57
SPEAKER_02: that over the years we have seen them get into anti-competitive behavior and that
6:02
SPEAKER_02: have been in the news actually for a while.
6:04
SPEAKER_02: We do see the work that the competitions authority is doing and the impact that some of the
6:10
SPEAKER_02: deterrence and the investigations that are ongoing or that have been done in the
6:15
SPEAKER_02: past has had on the economy.
6:16
SPEAKER_02: So thank you so much, Mugambi.
6:18
SPEAKER_02: And of course,
6:18
SPEAKER_02: I know you will be with us throughout this evening and you will also be answering
6:22
SPEAKER_02: some of the questions that come through directly on Twitter.
6:25
SPEAKER_02: So to our audience,
6:26
SPEAKER_02: please,
6:27
SPEAKER_02: if you do have any questions,
6:29
SPEAKER_02: comments as we go along,
6:30
SPEAKER_02: please add those or tweet them.
6:32
SPEAKER_02: And we have the team from CAK.
6:35
SPEAKER_02: who will be answering them live and hopefully also at the end,
6:38
SPEAKER_02: if time agrees,
6:40
SPEAKER_02: we will also be able to have a one-on-one.
6:42
SPEAKER_02: So I'd like to now welcome Priska Mwanyale, who's joining us from the Competition Authority of Kenya.
6:49
SPEAKER_02: Priska is an investigator, but I'd like her to introduce herself first.
6:53
SPEAKER_02: before we get into the conversation.
6:55
SPEAKER_02: Prisca, good evening, and thank you so much for making time to be with us on Muango Spaces this evening.
7:00
SPEAKER_02: Please introduce yourself to us and tell us a little bit about what to expect this evening.
7:05
SPEAKER_03: Prisca, and good evening.
7:06
SPEAKER_03: My name is Prisca Mwanyane,
7:08
SPEAKER_03: and I work at the Competition Authority of Kenya as a senior investigation officer.
7:13
SPEAKER_03: By way of background, I'm a lawyer and an economist by training.
7:17
SPEAKER_03: And my day-to-day work involves uncovering cartels.
7:20
SPEAKER_03: So typically I would be examining markets and examining tender documents to see
7:26
SPEAKER_03: whether they show certain tendencies of bid rigging,
7:28
SPEAKER_03: for instance,
7:29
SPEAKER_03: or I'd be looking at agreements that depict price fixing.
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SPEAKER_03: I'd be looking at whether there's instances in the market that depict two.
7:37
SPEAKER_03: unusual shortages of product due to output restriction or market allocation.
7:43
SPEAKER_03: Today,
7:43
SPEAKER_03: I'm happy to share the over eight years experience that I've gained through my work
7:47
SPEAKER_03: at the Competition Authority,
7:48
SPEAKER_03: and I hope the audience will enjoy and learn more.
7:51
SPEAKER_02: Thank you so much, Prisca.
7:52
SPEAKER_02: So as we kick off,
7:54
SPEAKER_02: and as we mentioned initially,
7:56
SPEAKER_02: Mokaya and myself and even Mugambi,
7:59
SPEAKER_02: that cartels could mean one thing or another.
8:01
SPEAKER_02: Sometimes we take it too lightly.
8:03
SPEAKER_02: It has been redefined and Kenyanized in so many ways.
8:07
SPEAKER_02: Perhaps you can just tell us what is a CATL?
8:10
SPEAKER_02: How are they formed within the Kenyan context from a CAK perspective?
8:14
SPEAKER_02: And why should we as Kenyans care about this?
8:18
SPEAKER_03: Yes, good questions.
8:19
SPEAKER_03: CATLs are typically a collection of independent business entities or organizations
8:25
SPEAKER_03: who come together to agree to manipulate or to eliminate effective competition.
8:30
SPEAKER_03: So you'd find maybe there's X,
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SPEAKER_03: Y,
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SPEAKER_03: Z companies who ordinarily should be competitors and should be making independent decisions,
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SPEAKER_03: but they come with the sole goal of defeating competition.
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SPEAKER_03: And by doing that, they enter into agreement, price fixing agreements.
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SPEAKER_03: They could be agreements relating to territorial allocations or agreements to do
8:49
SPEAKER_03: with output restrictions.
8:51
SPEAKER_03: For example, company X and company Y could agree.
8:54
SPEAKER_03: of pricing a certain product that they both sell at maybe one shilling, two shillings, three shillings.
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SPEAKER_03: And by that, they are able to defeat competition.
9:02
SPEAKER_03: Cartel,
9:03
SPEAKER_03: as we know it,
9:04
SPEAKER_03: within the competition circles,
9:05
SPEAKER_03: it's basically a group of independent businesses that come together to manipulate
9:10
SPEAKER_03: effective competition.
9:11
SPEAKER_02: Thank you so much.
9:13
SPEAKER_02: And why should we care?
9:14
SPEAKER_02: For myself as a Kenyan, as a consumer, as somebody who buys product in a supermarket, maybe.
9:20
SPEAKER_02: I don't want to mention the product because then it might look like I'm putting it under the lens of CAK.
9:26
SPEAKER_02: But a regular product that I would buy in a supermarket, why should I care?
9:30
SPEAKER_02: And how would I know as a consumer that perhaps this is under the cartels?
9:35
SPEAKER_03: So when companies fail to compete or eliminate competition,
9:39
SPEAKER_03: then obviously there's aspects of price increments.
9:42
SPEAKER_03: From our investigations,
9:44
SPEAKER_03: we've seen that whenever there's a cartel,
9:46
SPEAKER_03: the price markup is about 20 to 35% inflation of prices.
9:52
SPEAKER_03: So that takes away money from consumers, money which they would use in other activities.
9:58
SPEAKER_03: Other than that, there's a lack of innovation, for instance, because there's no need of competing.
10:03
SPEAKER_03: So they're not,
10:04
SPEAKER_03: competitors would basically not innovate and they'll just be producing the same
10:07
SPEAKER_03: products with no form of innovation because the competition lacks and they've
10:12
SPEAKER_03: already agreed anyway.
10:13
SPEAKER_03: So why should they invest money in competition?
10:16
SPEAKER_03: Other than that, then there's also lack of choice.
10:18
SPEAKER_03: So the consumer also lacks choice and is just given a set of products.
10:22
SPEAKER_03: So for those reasons, then there's a need for a consumer to be worried when competition is eliminated.
10:28
SPEAKER_02: All right, Priska, tell us how do regulators like the CAK uncover these shady deals?
10:34
SPEAKER_02: And you've talked about it as consumers.
10:36
SPEAKER_02: Now there are ways that we can now begin to see how prices are going,
10:41
SPEAKER_02: how the cartels are affecting the market.
10:44
SPEAKER_02: But how do you as a regulator uncover these deals?
10:46
SPEAKER_02: And what are some of the telltale signs that you see that we can also begin to see as consumers?
10:52
SPEAKER_03: So cartels operate in utmost secrecy.
10:55
SPEAKER_03: It is very difficult, Tarian, to uncover a cartel.
10:59
SPEAKER_03: And most of the times,
11:00
SPEAKER_03: even in other jurisdictions,
11:02
SPEAKER_03: you'll find that a cartel is uncovered five to 10 years after when the initial
11:07
SPEAKER_03: agreement was entered into.
11:08
SPEAKER_03: And because they operate in utmost secrecy,
11:10
SPEAKER_03: then the authority needs to constantly innovate and come up with strategies in
11:15
SPEAKER_03: order to uncover cartels.
11:16
SPEAKER_03: And some of the strategies that we use is what we call the informant reward scheme.
11:21
SPEAKER_03: So the informant reward scheme is a scheme that we came up in place whereby we tell
11:25
SPEAKER_03: members of the public,
11:26
SPEAKER_03: if you know of a cartel or if you're an employee of a certain organization and
11:31
SPEAKER_03: you've seen certain tendencies that are happening within that organization,
11:35
SPEAKER_03: then you can approach the authority using the informant reward scheme.
11:38
SPEAKER_03: Give us credible information that will enable us to uncover that cartel.
11:42
SPEAKER_03: And for that, then we reward you for the information that you provide to the authority.
11:47
SPEAKER_03: The other strategy that we use is what we call the leniency program.
11:51
SPEAKER_03: And the leniency program is a program whereby the members of the cartel themselves
11:55
SPEAKER_03: are accorded an opportunity to come and confess their sins,
11:59
SPEAKER_03: sins in court,
12:00
SPEAKER_03: to the authority.
12:01
SPEAKER_03: So if I'm a cartel member and for one reason or another I don't want to be in that
12:05
SPEAKER_03: cartel anymore or the high probability of being caught,
12:08
SPEAKER_03: then there's a mechanism through the leniency program where you can approach the
12:11
SPEAKER_03: authority
12:12
SPEAKER_03: And give the authority the information and the authority will give you amnesty in
12:16
SPEAKER_03: terms of waiving up to 100% of the penalty that the others would have suffered if
12:21
SPEAKER_03: the investigation would have occurred.
12:23
SPEAKER_03: Other than that, we invest in a state-of-art investigations tool.
12:28
SPEAKER_03: Terian,
12:28
SPEAKER_03: we are in the process of upgrading our forensic lab and getting the best of the
12:33
SPEAKER_03: tools and gadgets.
12:35
SPEAKER_03: And when training our employees,
12:37
SPEAKER_03: staff and our colleagues on the best methods of investigation and forensic analysis.
12:42
SPEAKER_03: We do market inquiries from time to time,
12:45
SPEAKER_03: and these market inquiries also inform the authority of certain characteristics and
12:50
SPEAKER_03: tendencies that might be happening within the market.
12:53
SPEAKER_03: Other than that, we also get tips from consumer bodies, from government entities, and even from some of
12:59
SPEAKER_03: The telltale signs that ordinarily would inform an investigator that a certain
13:04
SPEAKER_03: market is experiencing cartel tendencies would be perhaps unexplained price increments.
13:09
SPEAKER_03: Without any reason,
13:10
SPEAKER_03: there's no government intervention,
13:12
SPEAKER_03: there's no taxes,
13:13
SPEAKER_03: there's nothing,
13:14
SPEAKER_03: and we are seeing some unexplained price increments.
13:17
SPEAKER_03: Or we see price uniformity despite the companies being of a different scale of production.
13:22
SPEAKER_03: Or we see the similarity in which they release price revision that's revised around the same time.
13:29
SPEAKER_03: Or there's a tendency where perhaps the market leader comes in and makes an announcement,
13:32
SPEAKER_03: then followed by the rest of the companies coming in to implement this seemingly
13:38
SPEAKER_03: public announcement.
13:39
SPEAKER_03: Unexplained product shortages, for instance, is an indicator of market conduct.
13:44
SPEAKER_03: or a particular pattern in which government tenders or tenders by private are being
13:49
SPEAKER_03: won by a certain group of companies.
13:52
SPEAKER_02: As you spoke, a few industries came to mind and maybe not industry sectors or products.
13:57
SPEAKER_02: So my home is, I think, one of the biggest consumers of eggs.
14:01
SPEAKER_02: And I keep thinking there must be something going on.
14:04
SPEAKER_02: We were buying a tray of eggs at about 280 to 300 in 2020.
14:08
SPEAKER_02: Now we're buying a tray of eggs at about 650.
14:13
SPEAKER_02: Today,
14:14
SPEAKER_02: I just had a conversation with somebody about flight tickets over the last couple
14:18
SPEAKER_02: of years and now like a business class ticket to the US or Europe.
14:21
SPEAKER_02: A return ticket from Nairobi is in cash terms about $650,000 and above.
14:26
SPEAKER_02: And we were like, these are cartels.
14:28
SPEAKER_02: So I know you might not be able to tell us in exact terms the specifics, but I'm just curious about...
14:35
SPEAKER_02: how you choose which industries to investigate.
14:38
SPEAKER_02: Is it at random?
14:40
SPEAKER_02: And at the same time, are there sectors that are more prone to cartels?
14:43
SPEAKER_03: Yes, Torian, there are sectors that are more prone to cartel.
14:47
SPEAKER_03: And this is through economic analysis and evidences that have been shown over time.
14:53
SPEAKER_03: Sectors that have few player, oligopolistic markets.
14:57
SPEAKER_03: We have five to six players within that market or less than that.
15:01
SPEAKER_03: And these are sectors that are more likely to depict cartel tendencies.
15:06
SPEAKER_03: Other than that,
15:06
SPEAKER_03: sectors that produce homogeneous products,
15:09
SPEAKER_03: because if we are selling water,
15:11
SPEAKER_03: then it is water,
15:11
SPEAKER_03: right?
15:12
SPEAKER_03: Water is water.
15:13
SPEAKER_03: An egg is an egg, right?
15:15
SPEAKER_03: So it's a homogeneous product, even those that are more likely or prone to engage in cartel tendencies.
15:21
SPEAKER_03: Sectors where there's high level of investments and barriers to entry,
15:26
SPEAKER_03: for instance,
15:26
SPEAKER_03: say a sector where the initial capital is very intensive,
15:29
SPEAKER_03: then also because of the barriers to entries,
15:32
SPEAKER_03: then it means only few players can participate in that particular market.
15:36
SPEAKER_03: Then those sectors also,
15:37
SPEAKER_03: from experience and what we've seen in our jurisdiction and other jurisdictions,
15:42
SPEAKER_03: is that those sectors are likely to depict cartel tendencies.
15:46
SPEAKER_03: Sectors where there's excess capacity on the supply side,
15:49
SPEAKER_03: there is also a tendency of them also trying to do market output restrictions so
15:55
SPEAKER_03: that they limit the amount of products that are being produced.
15:57
SPEAKER_03: And because of that, they distort the laws of demand and supply.
16:01
SPEAKER_03: So we've also seen where there's an industry association, for instance.
16:06
SPEAKER_03: Right.
16:06
SPEAKER_03: And because of this cordial nature of members meeting constantly in an industry
16:12
SPEAKER_03: association and knowing each other,
16:14
SPEAKER_03: then they may want to engage in cartel conduct.
16:17
SPEAKER_03: And whereby the few members of a product have very high market share such that when
16:22
SPEAKER_03: their combined market share is above those of dominance,
16:26
SPEAKER_03: then those sectors we've seen that they're likely to depict cartel conduct.
16:31
SPEAKER_03: So in terms of how the authority determines which sector to investigate,
16:35
SPEAKER_03: one,
16:36
SPEAKER_03: it's usually directed by the government agenda of the day.
16:39
SPEAKER_03: For example,
16:40
SPEAKER_03: if the government has an agenda on affordable housing,
16:43
SPEAKER_03: for instance,
16:43
SPEAKER_03: or something to do with health,
16:45
SPEAKER_03: affordable healthcare,
16:46
SPEAKER_03: then it makes sense for the authority to align its investigation towards screening
16:50
SPEAKER_03: those particular sectors.
16:52
SPEAKER_03: So we'll ordinarily screen if it's affordable housing, then we'll be looking at the value chain.
16:57
SPEAKER_03: We'll be looking at the money.
16:58
SPEAKER_03: Manufacturers operate with cement or steel or paint.
17:01
SPEAKER_03: Anything within the value chain that relates to affordable housing will be screened
17:06
SPEAKER_03: to ensure that they are complying with Shonat.
17:09
SPEAKER_03: It doesn't mean that we necessarily need to find them to have contravened,
17:13
SPEAKER_03: but they will form part of the priority sector.
17:17
SPEAKER_03: Other than that, we also look at sectors that have high impact to public interest.
17:22
SPEAKER_03: So for example,
17:23
SPEAKER_03: if Kenyans love eggs or they love eating a certain product,
17:27
SPEAKER_03: then that is the product that the authority would consider channeling its resources
17:31
SPEAKER_03: and eat because of the level of impact that is likely to accrue to the general public.
17:35
SPEAKER_03: Other than that, we have the random ones whereby consumers come to the authority to complain.
17:40
SPEAKER_03: Those will be the random investigations that will be taken in along the period of
17:44
SPEAKER_03: time or when we are getting information from our sister government entities
17:50
SPEAKER_03: regarding certain sectors or consumer bodies or tips even from staff members.
17:54
SPEAKER_03: And when we talk about staff members,
17:56
SPEAKER_03: one of the investigations that was a success was actually from a tip from a staff member.
18:01
SPEAKER_03: Tell us about that.
18:02
SPEAKER_03: I may not go into the specific, because it's still a lot in the steel industry.
18:08
SPEAKER_03: So a staff member was purchasing some products.
18:11
SPEAKER_03: He was constructing his house somewhere and he was purchasing his product.
18:14
SPEAKER_03: And then he got the information from a distributor.
18:19
SPEAKER_03: So because of that, then the authority was able to screen.
18:22
SPEAKER_03: And it's one of the investigations that is now subject to various appeals and settlement proceedings.
18:28
SPEAKER_02: Thank you so much, Prisca, for sharing.
18:29
SPEAKER_02: And of course,
18:30
SPEAKER_02: we have seen in the news a little bit about that,
18:33
SPEAKER_02: the telecoms industry,
18:35
SPEAKER_02: the brewery industry,
18:38
SPEAKER_02: if I can call it that.
18:38
SPEAKER_02: We've seen something in the news over the past few years about anti-competitive behavior.
18:44
SPEAKER_02: So thank you so much for sharing.
18:46
SPEAKER_02: And just to our audience,
18:47
SPEAKER_02: if you have seen something that you classify as uncompetitive behavior,
18:52
SPEAKER_02: what is that?
18:53
SPEAKER_02: Could you share with us?
18:54
SPEAKER_02: in the comments as a tweet, and then we can get to discuss a little bit more about it as we go along.
19:01
SPEAKER_02: Prisca, I'll just come back to you from an enforcement and action perspective.
19:06
SPEAKER_02: Walk us through the step-by-step process from suspicion to busting a cartel to the penalties.
19:12
SPEAKER_02: What exactly happens and how does it happen?
19:14
SPEAKER_03: An investigation process starts through a screening exercise or through receiving
19:20
SPEAKER_03: of information from a complainant.
19:22
SPEAKER_03: So initially it will go through a stage that is known as a preliminary investigation process.
19:28
SPEAKER_03: So during the preliminary investigation process,
19:30
SPEAKER_03: the authority is satisfying itself that it has the jurisdiction
19:34
SPEAKER_03: over the allegations before it.
19:36
SPEAKER_03: So we're also satisfying ourselves that the information that we are having is
19:39
SPEAKER_03: enough for us to initiate an investigation.
19:42
SPEAKER_03: And at that particular point,
19:44
SPEAKER_03: if we find that perhaps it's not within our jurisdiction,
19:47
SPEAKER_03: the investigation would be terminated at that particular point and or may be
19:51
SPEAKER_03: referred to the relevant government entity.
19:53
SPEAKER_03: But when it passes that stage, then it goes to the next stage, which is called the full investigation.
19:58
SPEAKER_03: And at the full investigation stage, the authority has two options to do.
20:02
SPEAKER_03: One,
20:02
SPEAKER_03: depending on the nature of the investigation,
20:04
SPEAKER_03: it may issue a notice of investigation whereby we are just telling the parties that
20:08
SPEAKER_03: the authority has reason to believe that you are contravening the act and these
20:13
SPEAKER_03: specific provisions of the act.
20:14
SPEAKER_03: And we want you to either appear before the authority to answer to certain
20:18
SPEAKER_03: questions or supply us with certain information.
20:21
SPEAKER_03: So that one is done through information request or assurance of the notices of investigation.
20:26
SPEAKER_03: The other alternative that we have there is just to go straight and enter and
20:31
SPEAKER_03: search the premises of the parties.
20:33
SPEAKER_03: So the authority has the powers to enter and search.
20:36
SPEAKER_03: Obviously, we follow the due process.
20:38
SPEAKER_03: We ordinarily apply for search warrants through the courts.
20:41
SPEAKER_03: And once we get the search warrants,
20:43
SPEAKER_03: then we set up a team of investigators and they will be officially be appointed as
20:48
SPEAKER_03: investigators because that's what the act says.
20:51
SPEAKER_03: And then on a particular day,
20:52
SPEAKER_03: then we'll just wake up and just surprise parties and get the investigation.
20:56
SPEAKER_03: So once we've gotten the information either through the search and seize process or
21:00
SPEAKER_03: through the information request,
21:03
SPEAKER_03: we would go to the next stage,
21:04
SPEAKER_03: which is the stage show involving analysis.
21:06
SPEAKER_03: We will analyze the information.
21:08
SPEAKER_03: And if we need to get further information, then we would request that information from the parties.
21:14
SPEAKER_03: Or if you want them to appear, then we'll invite them.
21:17
SPEAKER_03: for a sort of a formal interviews whereby we will show them the list of documents
21:21
SPEAKER_03: or the information that we have them and ask them to shed more light on that information.
21:25
SPEAKER_03: Then after that,
21:26
SPEAKER_03: then if the authority is satisfied at that particular stage,
21:29
SPEAKER_03: again,
21:30
SPEAKER_03: it will terminate the investigation.
21:32
SPEAKER_03: But if there's need to proceed,
21:33
SPEAKER_03: we'll go to the next stage,
21:34
SPEAKER_03: which is the issuance of a notice of proposed decision.
21:37
SPEAKER_03: A notice of proposed decision is a charge sheet.
21:41
SPEAKER_03: Where all the offenses are laid out and the parties are given even the evidences
21:45
SPEAKER_03: that is being relied upon by the authority to make the proposed decision.
21:49
SPEAKER_03: At that point, they'll be given an opportunity to make their submissions and trends.
21:56
SPEAKER_03: and on whatever the authority is alleging.
21:58
SPEAKER_03: Then after that, then we'll proceed.
22:01
SPEAKER_03: If there's need be, then we'll do even formal oral hearings.
22:04
SPEAKER_03: So they'll come with their legal representatives.
22:07
SPEAKER_03: If they want to represent themselves, then they're free to do that.
22:10
SPEAKER_03: And the authority is required at that stage to take into account all the written
22:15
SPEAKER_03: and oral submissions that have been made by the parties.
22:19
SPEAKER_03: Then now then a recommendation will be made to the board of the authority on
22:24
SPEAKER_03: whether to make a determination.
22:26
SPEAKER_03: So the board will sit and convene at a particular time,
22:29
SPEAKER_03: review all the information that has been submitted by the investigators and make
22:33
SPEAKER_03: their own independent decision as to whether to take up the recommendations being
22:38
SPEAKER_03: provided to them.
22:40
SPEAKER_02: Thank you so much, Prisca.
22:42
SPEAKER_02: So we've got a couple of comments already coming on,
22:44
SPEAKER_02: and I just want to put in this as we go into the next question,
22:48
SPEAKER_02: where somebody's asking,
22:49
SPEAKER_02: is it that CAK goes to the smaller businesses?
22:53
SPEAKER_02: Because,
22:53
SPEAKER_02: and he mentions,
22:54
SPEAKER_02: and I might not mention it as a company,
22:58
SPEAKER_02: but he mentions companies that are politically affiliated or were politically
23:03
SPEAKER_02: affiliated with
23:04
SPEAKER_02: in the milk industry and other industries.
23:06
SPEAKER_02: And he says, why is CAK ignoring some of that and moving to taking action on small businesses?
23:14
SPEAKER_02: And I guess I'm asking, what's the price of collusion?
23:17
SPEAKER_02: What are the penalties for companies caught fixing prices or rigging beads or other
23:22
SPEAKER_02: such anti-competitive conducts?
23:24
SPEAKER_02: And I'd like you to keep in mind the question that one of our listeners has put in
23:28
SPEAKER_02: terms of who are these people you go for?
23:30
SPEAKER_02: The question is, don't you go after the big boys?
23:33
SPEAKER_02: And then is there enough deterrent to ensure that people stay to the code of conduct as a business?
23:39
SPEAKER_03: To me, that's an interesting question.
23:41
SPEAKER_03: Obviously, we do not discriminate.
23:43
SPEAKER_03: Any party that is brought before the authority would be investigated in the same measure.
23:48
SPEAKER_03: And a good example,
23:50
SPEAKER_03: in the steel industry,
23:51
SPEAKER_03: when you look at the guys that we've investigated in that particular industry,
23:54
SPEAKER_03: these are not your ordinary SMEs,
23:57
SPEAKER_03: so to speak.
23:58
SPEAKER_03: So in terms of discrimination, I don't think we do that.
24:01
SPEAKER_03: We investigate whether you are the curl wax or whether you are manufacturing a
24:06
SPEAKER_03: sufuria somewhere in Mombasa or you are playing with the big boys.
24:09
SPEAKER_03: When you're contravening the act, then it will be applied effectively.
24:13
SPEAKER_03: In terms of the sanction, the Act allows us to provide, there are two avenues for the sanction.
24:18
SPEAKER_03: One is the criminal angle.
24:20
SPEAKER_03: And the criminal angle,
24:21
SPEAKER_03: it provides that upon conviction,
24:24
SPEAKER_03: then there'll be an imprisonment for not less than five years or a fine not
24:28
SPEAKER_03: exceeding to 10 million or both.
24:30
SPEAKER_03: But that is the criminal angle.
24:31
SPEAKER_03: And obviously, that is within the mandate of the Director of Public Prosecution.
24:36
SPEAKER_03: But for the
24:36
SPEAKER_03: does is the administrative remedies, which include financial penalties.
24:41
SPEAKER_03: And these financial penalties can go up to 10% of the preceding year gross turnover.
24:46
SPEAKER_03: So you can imagine if you are turnovers in billions and we are going for 10%,
24:50
SPEAKER_03: then that is a very huge amount.
24:53
SPEAKER_03: Other than that, the authority also issues orders for cease and desist.
24:57
SPEAKER_03: So we can just also,
24:58
SPEAKER_03: in addition to financial penalties,
25:00
SPEAKER_03: we can also issue other orders like cease and desist,
25:03
SPEAKER_03: or we can mandate them to have compliance programs in place.
25:07
SPEAKER_03: Also,
25:07
SPEAKER_03: other than that,
25:08
SPEAKER_03: when we have the 10%,
25:09
SPEAKER_03: the authority does also take into consideration various mitigating and aggravating factors.
25:15
SPEAKER_03: For example,
25:15
SPEAKER_03: if it's a first-time offender,
25:17
SPEAKER_03: then that would be considered as a mitigating factor because the idea is also to
25:21
SPEAKER_03: strike a balance between businesses to thrive and regulation.
25:25
SPEAKER_03: So there's a balance of regulation and also creating an environment for businesses to thrive.
25:30
SPEAKER_03: So the authority looks at case-to-case basis.
25:32
SPEAKER_03: In terms of it being deterrent enough,
25:34
SPEAKER_03: I think it is deterrent enough because 10%,
25:37
SPEAKER_03: remember,
25:37
SPEAKER_03: it is a percentage of a growth
25:40
SPEAKER_03: So even though your gross annual turnover for the preceding year,
25:44
SPEAKER_03: so it covers your size and also it covers the impact of what that harm would have
25:49
SPEAKER_03: done or is likely to have done to the consumers.
25:53
SPEAKER_02: Prisca,
25:53
SPEAKER_02: I'm just looking at some of the comments and I'm laughing about one of them that
25:57
SPEAKER_02: says how Kenyans access government tenders and say ni god.
26:02
SPEAKER_02: And perhaps, Mokaya, we need a meme.
26:05
SPEAKER_02: We need a NIGOT meme.
26:07
SPEAKER_02: Kaya, over to you on that one.
26:09
SPEAKER_02: Lo has a question that Prisca, I'd like to pose to you at this moment.
26:13
SPEAKER_02: And she says, thank you, Prisca.
26:14
SPEAKER_02: Are you able to share details on some of the searches and seizures and,
26:19
SPEAKER_02: she says,
26:19
SPEAKER_02: downgrades that you have conducted?
26:21
SPEAKER_02: Perhaps you can share with us before we move to the next question.
26:24
SPEAKER_03: Yes.
26:24
SPEAKER_03: So we've done a number of downgrades.
26:27
SPEAKER_03: So one of the earliest downgrades was in the
26:31
SPEAKER_03: cement industry.
26:33
SPEAKER_03: Around 2016, we did a downgrade in the paints industry.
26:37
SPEAKER_03: How this investigation came about was there was a government directive that school
26:42
SPEAKER_03: buses should be painted yellow.
26:44
SPEAKER_03: If you remember some time in 2016, it was, I think, by the Minister of Education.
26:48
SPEAKER_03: And because of that, there was a public outcry regarding the automotive paint industry.
26:54
SPEAKER_03: So we did screen the sector at that particular point,
26:56
SPEAKER_03: and our main focus was basically on the automotive paints.
27:01
SPEAKER_03: But when screening the sectors, we did to the field and we interviewed a number of people.
27:05
SPEAKER_03: We did a country-wide survey and the investigation was enlarged now from automotive
27:12
SPEAKER_03: paints to the entire paint industry because we were able to find certain indicators
27:16
SPEAKER_03: to do with discounts,
27:18
SPEAKER_03: certain indicators to do with transportation costs,
27:21
SPEAKER_03: agreements and pricing and so on.
27:24
SPEAKER_03: After analysis of the investigation,
27:26
SPEAKER_03: the authority made a decision to invoke its powers under Section 32 of the Act,
27:31
SPEAKER_03: and we entered and searched the premises of four paint manufacturers.
27:35
SPEAKER_03: As a result of that investigation, a total of 66 million was imposed upon the paint manufacturers.
27:44
SPEAKER_03: The most recent one is the one that we did under the steel industry.
27:48
SPEAKER_03: The steel industry,
27:49
SPEAKER_03: it was one of our staff members who raised the alarm after he was doing his own
27:54
SPEAKER_03: purchases here and there.
27:55
SPEAKER_03: And we did also follow the same investigation process.
27:58
SPEAKER_03: And also in this particular investigation, we did an entry and search exercise.
28:04
SPEAKER_03: And this, we had a penalty of about $336 million that were imposed upon 14 steel manufacturers.
28:13
SPEAKER_03: There is also such a seizure exercise that had been done earlier on, on the fertilizer sector.
28:21
SPEAKER_03: Although for this particular sector, nothing much was gotten at that particular point.
28:26
SPEAKER_03: So those are some of the investigations that we've done through the center and such.
28:32
SPEAKER_02: Prisca,
28:32
SPEAKER_02: how can ordinary citizens,
28:34
SPEAKER_02: you know,
28:34
SPEAKER_02: myself and our listeners this evening,
28:37
SPEAKER_02: spot the signs of cartel activity?
28:39
SPEAKER_02: And most importantly, how can we report this?
28:43
SPEAKER_03: So spotting the signs of cartel activities,
28:46
SPEAKER_03: this could be things,
28:47
SPEAKER_03: for example,
28:48
SPEAKER_03: you're a distributor and you're being given a prize list by the manufacturers that
28:52
SPEAKER_03: speaks to the same concert prizes,
28:55
SPEAKER_03: right?
28:55
SPEAKER_03: For example,
28:56
SPEAKER_03: in one of the sectors that we had investigated,
28:58
SPEAKER_03: the distributors only had to use one price list because it never made sense for
29:03
SPEAKER_03: them to stock prices for all these other companies because this price list looked
29:07
SPEAKER_03: exactly the same.
29:08
SPEAKER_03: So that is one of the uniformity of pricing.
29:11
SPEAKER_03: an unexplained price increment or similarity to the price revision or the margin.
29:18
SPEAKER_03: For example, if you are being extended discounts, it is exactly the same discounts.
29:23
SPEAKER_03: It doesn't explain why a small company somewhere in Kilifi should be having the
29:29
SPEAKER_03: same cost of pricing compared to a company that is employing millions and millions
29:34
SPEAKER_03: of people,
29:34
SPEAKER_03: say,
29:35
SPEAKER_03: in Nairobi.
29:36
SPEAKER_03: One of the major indicators is usually on the pricing,
29:39
SPEAKER_03: but sometimes there's even more innovative ways that deal even with things to do
29:43
SPEAKER_03: with disk or even product scarcity.
29:45
SPEAKER_03: In terms of reporting,
29:47
SPEAKER_03: we have the informant reward scheme,
29:49
SPEAKER_03: which individuals can take advantage of and give us credible information,
29:53
SPEAKER_03: and then the authority will be able to,
29:54
SPEAKER_03: you know,
29:54
SPEAKER_03: reward them.
29:55
SPEAKER_03: So that is one of the very good tools that we want to put in place in terms of detection.
29:59
SPEAKER_03: Otherwise,
30:00
SPEAKER_03: just normal reporting mechanism through our channels,
30:03
SPEAKER_03: social media platforms,
30:04
SPEAKER_03: or even walking to our offices and reporting or raising complaints is one of the
30:09
SPEAKER_03: ways that the public can help us in the investigation process.
30:13
SPEAKER_02: Prisca, before I move on to the next question, I've got a very interesting question from
30:17
SPEAKER_02: Anna Konuche,
30:18
SPEAKER_02: and she says,
30:19
SPEAKER_02: seeing as the authority has a lot of power in respect to uncompetitive behavior by institutions,
30:25
SPEAKER_02: my question is what checks exist to ensure that the authority itself does not
30:30
SPEAKER_02: become a cartel in and of itself?
30:33
SPEAKER_03: We work within the confines of the law.
30:36
SPEAKER_03: We are guided by the Constitution being the supreme law.
30:39
SPEAKER_03: Other than that,
30:40
SPEAKER_03: the Competition Act itself lays down the procedure of an investigation,
30:44
SPEAKER_03: which we must adhere to the letter.
30:47
SPEAKER_03: Then we have the Fair Administrative Actions Act,
30:50
SPEAKER_03: which we also follow to the letter to ensure that we're also giving the parties
30:54
SPEAKER_03: that appear before us adequate opportunities for them to present their case of a
30:59
SPEAKER_03: right to be heard.
31:00
SPEAKER_03: So the procedures of natural justice are usually followed.
31:04
SPEAKER_03: Other than that, there are also recalls.
31:06
SPEAKER_03: Once the authority has made its decision and the parties are not satisfied with the
31:09
SPEAKER_03: decision that has been made by the authority,
31:11
SPEAKER_03: we have the competition tribunal and the parties have a right of a first appeal at
31:16
SPEAKER_03: the tribunal where the matter won't be relooked after.
31:20
SPEAKER_03: are fresh and even that instances where the tribunal has the powers to even depart
31:25
SPEAKER_03: from or vary the decision that has been made by the authority.
31:28
SPEAKER_03: There is also an additional appeal at the High Court.
31:31
SPEAKER_03: So I think there's a lot of mechanisms that have been placed within the law itself
31:36
SPEAKER_03: that ensure that the authority does not abuse its powers.
31:39
SPEAKER_02: All right.
31:39
SPEAKER_02: Thank you so much.
31:41
SPEAKER_02: For that, and of course, there's some really interesting comments that are on our Twitter threads.
31:48
SPEAKER_02: And to our audience, please continue to share that on Twitter using the hashtag MoangoSpaces.
31:54
SPEAKER_02: And our team from the Competition Authority of Kenya will be responding to them.
31:59
SPEAKER_02: And we will also be retweeting.
32:01
SPEAKER_02: That's from my handle and also from the Moango Capital handle.
32:06
SPEAKER_02: as well.
32:06
SPEAKER_02: I see we've just got about 10 minutes to wind up our conversation this evening.
32:11
SPEAKER_02: Prisca, we live in a tech savvy world.
32:13
SPEAKER_02: So does the reality of commerce being conducted in the digital space make it harder
32:18
SPEAKER_02: for CAK to catch cartels?
32:20
SPEAKER_02: And perhaps you can tell us just with that, what other obstacles do you face as investigators at CAK?
32:27
SPEAKER_03: And indeed, cartel members are coming up with a very innovative way to operate cartel tendencies.
32:33
SPEAKER_03: For example,
32:34
SPEAKER_03: right now,
32:34
SPEAKER_03: cartel members do not really need to meet in a room to discuss or even have
32:39
SPEAKER_03: something written or even leaving paper trails behind.
32:43
SPEAKER_03: For example,
32:44
SPEAKER_03: there's this aspect that is known as algorithmic collusion,
32:47
SPEAKER_03: whereby machines are being taught to learn the behaviors of their competitors.
32:52
SPEAKER_03: And over time, they're able to even collude
32:55
SPEAKER_03: So the collusion is done by the machines themselves without even minimal human intervention.
33:01
SPEAKER_03: So these are some of the ways in which even the type of evidences that we are
33:05
SPEAKER_03: getting is not the normal traditional evidences,
33:08
SPEAKER_03: but evidence that is digital in nature.
33:10
SPEAKER_03: And because of that, then the authority has to innovate and look at ways in which it can also be at par.
33:17
SPEAKER_03: We are looking at evolving with technologies, just being one step ahead of the cartel members.
33:22
SPEAKER_03: For example, they're thinking about AI.
33:24
SPEAKER_03: We are also within that particular space,
33:27
SPEAKER_03: either by introducing regulation or introducing strategy,
33:30
SPEAKER_03: investigation techniques and strategies to detect such kind of conduct.
33:35
SPEAKER_03: The other limitations we do have is because of the lack of sufficient information.
33:40
SPEAKER_03: Because cartels operate in a very clandestine manner and they're based basically on mutual trust.
33:47
SPEAKER_03: They'll be a member of a community or a member of an association.
33:51
SPEAKER_03: And the advantages that they gain or derive from that are more than them cheating on that cartel.
33:57
SPEAKER_03: And because of that,
33:58
SPEAKER_03: we are coming up with these strategies like the informant reward scheme and the
34:01
SPEAKER_03: leniency product,
34:02
SPEAKER_03: which we are hoping to sensitize the members of the public and even the cartel
34:05
SPEAKER_03: members themselves to take advantage of these programs.
34:09
SPEAKER_03: And hopefully we'll be able to detect the cartels.
34:12
SPEAKER_02: Prisca,
34:13
SPEAKER_02: tell me,
34:13
SPEAKER_02: what advice does CAK have for businesses to ensure they don't accidentally engage
34:18
SPEAKER_02: in anti-competitive behavior?
34:20
SPEAKER_02: And you did mention some of the industries that are prone to it.
34:23
SPEAKER_02: Perhaps you can just speak to some of the businesses,
34:26
SPEAKER_02: maybe smaller,
34:27
SPEAKER_02: maybe startups,
34:28
SPEAKER_02: that could find themselves caught up in situations that they may not have planned
34:33
SPEAKER_02: to be in,
34:33
SPEAKER_02: but because they're the smaller players,
34:35
SPEAKER_02: they just find themselves in those spaces.
34:37
SPEAKER_03: The thing goes that ignorance of the law is not a defense.
34:40
SPEAKER_03: So some of the strategies that businesses can employ is ensuring that they have,
34:45
SPEAKER_03: one,
34:45
SPEAKER_03: a competition compliance policies within their programs.
34:49
SPEAKER_03: So that within the onboarding package,
34:51
SPEAKER_03: when you're onboarding your staff members,
34:53
SPEAKER_03: you're also informing them or training them constantly on competition law and policy.
34:58
SPEAKER_03: They can also seek advisory opinions when there is a gray area to the authority,
35:04
SPEAKER_03: which we are happy to provide at free of cost at any given point of time.
35:09
SPEAKER_03: So when the authority is open to advise and give advisory opinion,
35:13
SPEAKER_03: does it relate to an agreement that they are not clear whether it's going to
35:16
SPEAKER_03: infringe the law,
35:17
SPEAKER_03: then they can approach the authority in the basis of an advisory opinion.
35:20
SPEAKER_03: They can also engage experts,
35:22
SPEAKER_03: lawyers,
35:23
SPEAKER_03: and when they're doing their legal audit,
35:24
SPEAKER_03: then competition enforcement can be introduced as an aspect of the legal compliance,
35:29
SPEAKER_03: which experts right now can look at their policies and ensure that they comply with
35:35
SPEAKER_03: the law.
35:36
SPEAKER_03: They can speak for exemption within the authority,
35:38
SPEAKER_03: for example,
35:39
SPEAKER_03: if they have good reason to believe that engaging in that practice is likely to
35:43
SPEAKER_03: give the public more
35:46
SPEAKER_03: public interest benefits than the lessening of competition,
35:49
SPEAKER_03: then the law itself gives some framework where the parties can approach it for an
35:53
SPEAKER_03: exemption and that will be allowed,
35:55
SPEAKER_03: they will be allowed to engage legally in that practice.
35:59
SPEAKER_03: Obviously,
35:59
SPEAKER_03: they can conduct self-assessment and if they think they fall within the scope of
36:04
SPEAKER_03: the block exemption guidelines that are provided already by the law,
36:07
SPEAKER_03: then they can then proceed to engage in the practices within the framework of the
36:12
SPEAKER_03: block exempt,
36:13
SPEAKER_03: yes.
36:13
SPEAKER_03: obviously take advantage of the leniency program and the informant word scheme.
36:17
SPEAKER_02: All right.
36:18
SPEAKER_02: Thank you so much, Friska.
36:19
SPEAKER_02: And I just want us to make a bit of a comparative to the global perspective.
36:23
SPEAKER_02: And perhaps you can tell us, how does cartel enforcement in Kenya compare to other countries?
36:29
SPEAKER_02: Are there lessons we can learn from international efforts?
36:32
SPEAKER_02: And I'd like you to respond to that.
36:34
SPEAKER_02: And I'd also like to rope Mugambi back into the conversation as we wind up.
36:39
SPEAKER_02: But Prisca, let's start with you.
36:41
SPEAKER_03: In the East African community, I think Kenya is ahead in terms of competition enforcement.
36:46
SPEAKER_03: Our neighbors here, Uganda, have recently enacted the act.
36:49
SPEAKER_03: We are looking forward to see the jurisprudence that will emanate from the application of their law.
36:55
SPEAKER_03: But originally we do benchmark a lot with South Africa.
36:59
SPEAKER_03: We have exchange programs with them.
37:01
SPEAKER_03: We have joint capacity building initiative.
37:05
SPEAKER_03: We have staff exchange programs with South Africa,
37:07
SPEAKER_03: a collaboration framework whereby we are able to exchange information relating to a
37:13
SPEAKER_03: particular sector.
37:14
SPEAKER_03: Then we also have in the regional space,
37:16
SPEAKER_03: we have the commissar competition authority who are making good efforts in
37:20
SPEAKER_03: competition enforcement and all that.
37:22
SPEAKER_03: We are able to borrow from their good practices and the precedences they are
37:27
SPEAKER_03: setting in the enforcement of the cartel.
37:30
SPEAKER_03: Globally,
37:31
SPEAKER_03: we look at the UK mostly and the EU,
37:34
SPEAKER_03: and that's mainly because our law is very similar to their law,
37:38
SPEAKER_03: unlike the US.
37:41
SPEAKER_03: Internationally, we borrow a lot from the UK and the US.
37:44
SPEAKER_03: For example,
37:45
SPEAKER_03: right now,
37:45
SPEAKER_03: they're having the Digital Market Act that has recently been enacted,
37:49
SPEAKER_03: and the authority is also looking into ensuring that we have that in our amendments
37:56
SPEAKER_03: that we are proposing.
37:59
SPEAKER_02: All right.
37:59
SPEAKER_02: Thank you so much, Priska Mugambi.
38:01
SPEAKER_00: Thank you.
38:01
SPEAKER_00: I was also learning quite a bit from my colleague, Priska.
38:06
SPEAKER_00: In terms of the global space, as she said, we mostly align ourselves with the EU.
38:12
SPEAKER_00: For instance, cartel enforcement is not a new thing.
38:15
SPEAKER_00: It's been there for so many years, from way over 100 years.
38:19
SPEAKER_00: I think just yesterday in Italy, I saw the competition agency there raided some big companies.
38:24
SPEAKER_00: They are well-known.
38:25
SPEAKER_00: Novartis is another one called Biogen.
38:27
SPEAKER_00: They think there was a collusion.
38:28
SPEAKER_00: They wanted to delay delivery of eye medication into the country so that they can remain competitive.
38:34
SPEAKER_00: That's the allegation that I think came out yesterday.
38:36
SPEAKER_00: In December 2023, Malaysia, there was a chicken feed cartel.
38:40
SPEAKER_00: Between five companies, they raised prices.
38:42
SPEAKER_00: Again,
38:43
SPEAKER_00: closer home in Egypt,
38:44
SPEAKER_00: I think last year in Feb,
38:45
SPEAKER_00: there was the poles,
38:47
SPEAKER_00: the lampposts in the street,
38:49
SPEAKER_00: they had colluded in terms of
38:50
SPEAKER_00: bid rigging, which also speaks to the question that we'd been asked.
38:54
SPEAKER_00: Cartel enforcement is not new.
38:56
SPEAKER_00: As Priska has well elaborated,
38:58
SPEAKER_00: what we can do is that since enforcement in those jurisdictions has been there for
39:03
SPEAKER_00: quite a while,
39:04
SPEAKER_00: we draw our lessons from them.
39:06
SPEAKER_00: We are members of ICN, as has been mentioned.
39:08
SPEAKER_00: ICN is an international network that has majority of these big boys,
39:13
SPEAKER_00: so to speak,
39:14
SPEAKER_00: our elders when it comes to enforcement of competition law.
39:17
SPEAKER_00: So we don't reinvent the wheel sometimes so much in terms of where the trends are going.
39:21
SPEAKER_00: We can see them already.
39:23
SPEAKER_00: As Prisca has mentioned earlier in the conversation,
39:25
SPEAKER_00: we have current support in terms of forensics training,
39:29
SPEAKER_00: the hands-on knowledge,
39:31
SPEAKER_00: but also the equipment.
39:32
SPEAKER_00: We are upgrading our system.
39:34
SPEAKER_00: We don't rely on others so much.
39:35
SPEAKER_00: The assistance is coming from all over.
39:37
SPEAKER_00: America, there are some partners from OECD.
39:40
SPEAKER_00: There's a lot of partnerships and being brought up to speed so that when new things
39:45
SPEAKER_00: are happening in cartel enforcement,
39:46
SPEAKER_00: they're not left behind.
39:47
SPEAKER_00: And the new things that you'll see,
39:49
SPEAKER_00: digital,
39:50
SPEAKER_00: basically what you're learning from what they're doing and also coming to
39:54
SPEAKER_00: tailor-make them for home.
39:56
SPEAKER_00: It's not a copy and paste sort of regime.
39:58
SPEAKER_00: We see what is happening, then we'll tailor-make the solutions, the laws for ourselves.
40:03
SPEAKER_00: So things in digital markets,
40:05
SPEAKER_00: We are seeing a lot of cross-border cartels.
40:07
SPEAKER_00: Now we have to answer how the EU and other places do it.
40:11
SPEAKER_00: What happens if we detect a cartel has crossed the border into Tanzania that the
40:14
SPEAKER_00: companies are in five jurisdictions?
40:17
SPEAKER_00: So we have engagements, ongoing engagements with the competition commission.
40:21
SPEAKER_00: IACA, the regional body, Prisca has mentioned, Uganda's law, a bill, has long been a bill, is now a law.
40:29
SPEAKER_00: So even locally, a lot of enforcement power is coming to us.
40:32
SPEAKER_00: The last thing is data forensics, that machine learning caters to the new thing.
40:37
SPEAKER_00: People don't leave notes, don't write.
40:40
SPEAKER_00: You may go and write people and...
40:42
SPEAKER_00: you won't find notepads or price lists strewn around their offices.
40:46
SPEAKER_00: But if you dig deep into their laptops, into their phone, you get evidence that the cartel is existing.
40:52
SPEAKER_00: So I think that's how we compare.
40:54
SPEAKER_00: Terry?
40:54
SPEAKER_02: Mugambi,
40:55
SPEAKER_02: both to you and Priska,
40:56
SPEAKER_02: we've got a question from Dr.
40:58
SPEAKER_02: Shad Katu,
40:59
SPEAKER_02: and he says,
41:00
SPEAKER_02: without revealing sensitivities,
41:01
SPEAKER_02: and he says in brackets,
41:02
SPEAKER_02: methods and sources,
41:04
SPEAKER_02: what lessons can be drawn from the forensic activities undertaken by the authority?
41:12
SPEAKER_03: The lessons that we are learning is that we need to constantly upgrade our forensics, right?
41:18
SPEAKER_03: Because you see,
41:19
SPEAKER_03: you might find the software that we've acquired right now,
41:22
SPEAKER_03: perhaps it can mine a certain version of a phone and perhaps the manufacturer has
41:27
SPEAKER_03: upgraded certain things in the next update or the next.
41:31
SPEAKER_03: I saw on a particular phone that they, and perhaps now our softwares are not sufficiently mine the data.
41:39
SPEAKER_03: So it is just being up to date on what is happening within the forensic world and
41:44
SPEAKER_03: ensuring that our softwares and our equipment is up to date and what is currently
41:51
SPEAKER_03: provided for in the market,
41:53
SPEAKER_03: because what we are using today may not be useful.
41:57
SPEAKER_02: All right.
41:57
SPEAKER_02: Thank you so much, Prisca.
42:00
SPEAKER_02: We're coming to the end of our conversation.
42:02
SPEAKER_02: I'd like to hand it to Mugambi to give us some final remarks,
42:06
SPEAKER_02: maybe some things that have stood out for you before we proceed.
42:10
SPEAKER_00: Thank you very much, Terian.
42:12
SPEAKER_00: Also, Eric and our main speaker, Prisca.
42:16
SPEAKER_00: My takeaway is that the cartels are not beneficial to you and I as Konesi Umal.
42:22
SPEAKER_00: Some people will say that businesses in cartels, the people behind them are just thieves in suits.
42:27
SPEAKER_00: So they basically look like they've made it and big business.
42:32
SPEAKER_00: But at the core of their success, perhaps it's not right.
42:35
SPEAKER_00: It's not competitive.
42:36
SPEAKER_00: They're not allowing other people to thrive in the market.
42:39
SPEAKER_00: So as we had mentioned that why cartels are bad is that where they are allowed to thrive,
42:45
SPEAKER_00: The prices in particular, the other thing that Priska has mentioned, there's no innovation.
42:50
SPEAKER_00: Your access to choice is limited.
42:52
SPEAKER_00: Investments don't come in.
42:53
SPEAKER_00: But the main issue is that prices go up.
42:55
SPEAKER_00: CAK's mandate is not to set a price and say that your price of this commodity should be this.
43:01
SPEAKER_00: No, that would be anti what we stand by.
43:04
SPEAKER_00: But you will find that where cartel exists, the prices typically up to that 5% more than they should be.
43:10
SPEAKER_00: Back in the day, I think maybe six years ago, we did some work in the cement sector.
43:15
SPEAKER_00: We also did,
43:16
SPEAKER_00: as Pritika has mentioned,
43:17
SPEAKER_00: a few years back,
43:18
SPEAKER_00: we did some work in the steel sector that ended up with a 66 million penalty being
43:22
SPEAKER_00: penalized on the big players in that sector.
43:25
SPEAKER_00: So,
43:25
SPEAKER_00: for instance,
43:25
SPEAKER_00: in the cement sector,
43:27
SPEAKER_00: once we came back and did our analysis,
43:28
SPEAKER_00: we had saved consumers up to 2.3 billion Kenya shillings.
43:32
SPEAKER_00: In the paint sector, we had saved consumers up to 930 million Kenya shillings.
43:37
SPEAKER_00: Don't ask me the specifics of how these amounts arrived at.
43:41
SPEAKER_00: They are done by our research team,
43:42
SPEAKER_00: go to the market,
43:43
SPEAKER_00: they have their way of drawing the data from the sector,
43:46
SPEAKER_00: the specific sectors,
43:48
SPEAKER_00: the consumers,
43:48
SPEAKER_00: and then they make and they draw these conclusions.
43:51
SPEAKER_00: So as you can see, the benefit to a consumer is there, it exists.
43:55
SPEAKER_00: The harm, if we don't do anything in terms of CAK,
44:00
SPEAKER_00: And lastly, as you said, there was a comment about public sector procurement.
44:05
SPEAKER_00: I've seen another comment, which I cannot repeat, but it's there.
44:07
SPEAKER_00: Majority, 40% of government budget goes to procurement.
44:11
SPEAKER_00: So if we allow bid rigging to continue, the things we are working with, maybe with the PPRA,
44:19
SPEAKER_00: You can critique maybe the speed of it, but it's there.
44:22
SPEAKER_00: We are trying to ensure that people don't bid rig,
44:25
SPEAKER_00: people don't do cover bidding,
44:27
SPEAKER_00: they don't separate or segregate that this,
44:29
SPEAKER_00: anything that goes to this side is mined,
44:31
SPEAKER_00: another one that goes this side is mined.
44:33
SPEAKER_00: So there's some work which is going on.
44:35
SPEAKER_00: If you have information,
44:37
SPEAKER_00: evidence regarding this,
44:38
SPEAKER_00: we've done some work in polls in terms of public procurement.
44:41
SPEAKER_00: It involved REREC.
44:43
SPEAKER_00: So I'm not just saying that these are aspirations.
44:45
SPEAKER_00: There's evidence of work that we have done,
44:48
SPEAKER_00: penalized some entities and concluded cases,
44:50
SPEAKER_00: even in government procurement.
44:52
SPEAKER_00: So I think with that, for me, just to thank you, tell you that you can go to our website, www.cak.go.ke.
45:00
SPEAKER_00: If you go to the publication section,
45:01
SPEAKER_00: you'll get a ton of information about the work we do,
45:04
SPEAKER_00: specifically what Priska has talked about.
45:06
SPEAKER_00: You can call us, plus 254-20-277-9000.
45:07
SPEAKER_00: You can walk into our offices.
45:09
SPEAKER_00: We are at CBK Pension Towers.
45:16
SPEAKER_00: It's in between the Deputy President's office and the National Police HQ.
45:20
SPEAKER_00: So the new building there,
45:22
SPEAKER_00: 15th floor,
45:23
SPEAKER_00: you can come and see us if you have some information you want to give us.
45:26
SPEAKER_00: And lastly,
45:27
SPEAKER_00: it would be remiss of me to end without indicating to our listeners that on 14th to
45:33
SPEAKER_00: 16th of October,
45:34
SPEAKER_00: we have an annual training every year.
45:36
SPEAKER_00: This information is disseminated as wide as possible through various channels.
45:41
SPEAKER_00: If you go to our Twitter page,
45:42
SPEAKER_00: I think the fifth post from the top,
45:44
SPEAKER_00: you'll get more details about the training,
45:46
SPEAKER_00: various topics,
45:47
SPEAKER_00: including cartels,
45:48
SPEAKER_00: 14th to 16th this year,
45:50
SPEAKER_00: October.
45:50
SPEAKER_00: Then we'll finalize the symposium on 17th and 18th of October, 2024.
45:55
SPEAKER_00: So you're all welcome.
45:56
SPEAKER_00: The details are on our page.
45:58
SPEAKER_00: Thank you very much to Mokaya, TC, and Triska for the engaging discussion.
46:02
SPEAKER_00: Thank you.
46:03
SPEAKER_01: Thank you so much, all of you, for joining us on Spaces this evening.
46:06
SPEAKER_01: Once again, very informative discussion.
46:08
SPEAKER_01: Prisca, thank you so much for the detailed information.
46:11
SPEAKER_01: And Mugambi, always a pleasure hosting you.
46:13
SPEAKER_01: We hope to have you again.
46:14
SPEAKER_01: Thank you once again for joining us today.
46:16
SPEAKER_01: See you next week for another edition of Mango Spaces.
46:19
SPEAKER_01: Mugambi and Prisca, maybe you can say bye as we close the Spaces.
46:22
SPEAKER_03: Thank you very much,
46:23
SPEAKER_03: Eric and the team from Muango Spaces,
46:26
SPEAKER_03: Tyrion,
46:27
SPEAKER_03: for being a nice host and all my colleagues for joining and all the listeners.
46:32
SPEAKER_03: It's been a pleasure sharing my experiences and the experience of the authority.
46:36
SPEAKER_03: Let's continue engaging.
46:38
SPEAKER_03: Thank you.
46:38
SPEAKER_03: Mugambis.
46:39
SPEAKER_00: I think I've spent my closing remark.
46:42
SPEAKER_00: Thank you all to all the listeners who've joined in.
46:45
SPEAKER_00: It's always a pleasure engaging you.
46:47
SPEAKER_00: And as I've said,
46:48
SPEAKER_00: for more information,
46:48
SPEAKER_00: go to our website,
46:50
SPEAKER_00: www.pke.go.ke for more information regarding what we do,
46:55
SPEAKER_00: how to engage us,
46:56
SPEAKER_00: and everything in between.
46:58
SPEAKER_00: Thank you very much to the host, the moderator, Terry-Ann.