Competition Law in Kenya: What the Competition Act Means for Your Business

Competition law in Kenya is set by the Competition Act No. 12 of 2010 and administered by the Competition Authority of Kenya (CAK). The Act prohibits anti-competitive agreements, abuse of dominance, and mergers implemented without approval. Its dominance test sits well below a simple market-share majority, which matters for any business that assumes it is safely under the line.

Competition Law in Kenya: Restrictive Trade Practices

Section 21(1) prohibits agreements between undertakings, decisions of associations of undertakings, and concerted practices that have as their object or effect the prevention, distortion or lessening of competition in Kenya, unless exempt in accordance with Section D of that Part. Section 21(2) confirms this covers both horizontal relationships (undertakings trading in competition) and vertical ones (an undertaking and its suppliers or customers). Section 21(3) lists the practices caught, including price fixing, market allocation, collusive tendering, minimum resale price maintenance, and limiting production or market access.

Section 21(4) allows a supplier to recommend a resale price, provided it is expressly stated not to be binding and any price marked on the product carries the words “recommended price”. Binding minimum resale prices remain caught. Contravening Section 21 is a criminal offence. Section 21(9) provides for imprisonment of up to five years, a fine of up to ten million shillings, or both. The CAK can separately impose an administrative penalty under Section 36(d), capped at ten per cent of the preceding year’s gross annual turnover in Kenya of the undertakings concerned.

The Intra-Group Exclusion

Section 21(8) disapplies Section 21(1) to an agreement or practice between a company and its wholly owned subsidiary (or a wholly owned subsidiary of that subsidiary), and between undertakings other than companies that are each owned or controlled by the same person or persons. Ordinary arrangements between a parent and a wholly owned subsidiary therefore fall outside the prohibition. The wording is limited to wholly owned subsidiaries. A partly owned subsidiary or joint venture with minority co-investors should not assume the exclusion applies and should take advice before relying on it.

Abuse of Dominant Position

Dominance is not itself prohibited; abuse of it is, under Section 24(1). Section 23 sets out how dominance is established:

First, an undertaking that controls not less than one-half of the goods or services in Kenya, or a substantial part of Kenya, is a dominant undertaking (Section 23(1)). Second, an undertaking with at least forty per cent but not more than fifty per cent of the market share is deemed dominant unless it can show that it does not have market power (Section 23(2)(a)). Third, an undertaking with less than forty per cent of the market can still be found dominant if it is shown to have market power (Section 23(2)(b)).

A business below fifty per cent of its market has therefore not finished the analysis. Section 24(2) lists abuses that include imposing unfair purchase or selling prices or trading conditions, limiting production, market outlets or technical development through predatory or other practices, applying dissimilar conditions to equivalent transactions, tying supplementary conditions to contracts, and abusing an intellectual property right. Section 24(3) makes abuse of dominance an offence carrying the same five-year and ten million shilling maximums.

Section 24A separately prohibits abuse of buyer power, so a large purchaser should review its supplier terms as well as its selling practices.

Merger Control

Under Section 42(2), no person may implement a proposed merger to which Part IV applies unless the CAK has approved it and it is implemented in line with any conditions. Section 43 requires each undertaking involved in a proposed merger to notify the CAK. The CAK may approve a merger, decline approval, or approve it with conditions (Section 46(1)).

The consequences of skipping approval are serious. Under Section 42(3), a merger carried out without an authorising order has no legal effect and its contractual obligations are unenforceable in legal proceedings. Section 42(5) makes contravention an offence with the same five-year and ten million shilling maximums, and Section 42(6) allows a penalty of up to ten per cent of the preceding year’s gross annual turnover in Kenya. The thresholds that exclude small mergers are set by the CAK by notice in the Gazette under Section 42(1), so they should be checked against the current notice for each deal.

Compliance Programmes

A documented compliance programme reduces the risk of violations and shows good faith if the CAK investigates. Effective programmes include training for staff who negotiate pricing, supply or distribution terms, a plain internal policy on prohibited conduct, legal review of agreements before signature rather than after, and a route for employees to raise concerns internally. A business with a market share near forty per cent should treat dominance risk as a live issue and revisit its assessment whenever its share shifts materially.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.