CAK Denies Request by East African Tea Trade Association for Exemption

The Competition Authority of Kenya (CAK) rejected an application for exemption by the East African Tea Trade Association (EATTA) to set brokerage commission and warehouse prices.

EATTA, which operates the weekly Mombasa Tea Auction, had sought to be exempted from the provisions of section 21 and 22 of the Competition Act No. 12 of 2010 on some of its activities for an indefinite period.

According to a statement from the authority, the rejection came along due to a number of reasons such as The setting of broker fees and commissions under the auspices of the EATTA was a hardcore contravention under Section 22 (1) (b) of the Act as it is a form of price fixing;

It added that setting of brokerage fees was beneficial to the brokers with no express benefits to consumers and tea producers;

“The Kenyan brokerage fees were higher compared to those in Sri Lanka and India and have remained unchanged for a long period of time,” read the statement.

CAK further noted that warehousing, happens to be an important element in the tea value chain and that fixing of warehouse fees would undermine innovation and improvement of the value proposition to customers given that warehousemen will be assured of the minimum fees set by EATTA. This the Authority concluded that it will encourage inefficiencies in warehousing thus impacting on the trade negatively.

The justification provided by EATTA for the exemption did not meet the threshold set under section 26(3) of the Act where the benefit to the public would outweigh the lessening of competition.

However, CAK allowed, for a period of three (3) years), the trading to be permitted amongst membership; specialization of brokers to offer tea for sale and produce Auction Catalogues and; EATTA to oversee the determination of penalties.

In arriving at the decision, the Authority took consideration that granting of the exemption for an indefinite period is not in tandem with international best practice as situations relied upon to grant the exemption might change substantially over time.

The exemption period of three years was thus considered sufficient to enable the Authority to re-evaluate application in light of market dynamics.