Competition watchdog clears millers of price-fixing claims

KENYA – The Competition Authority of Kenya (CAK) has cleared millers of price-fixing claims, throwing the government back to the drawing board in its bid to keep flour prices down.

The agency’s acting director-general, Gideon Mokaya, said a preliminary study has found no collusion between members of the Cereal Millers Association (CMA) and other stakeholders in the setting of flour prices.

“We have received documentation from CMA and the preliminary findings have not pointed to any form of anti-competitive practices. However, the final report with conclusive findings will be out next month,” said Mr Mokaya.

The agency opened preliminary studies into the activities of millers last year in April after the Agriculture ministry complained about the high prices of flour despite low cost of white maize and wheat at the time.

The ministry also instructed the Agriculture, Fisheries and Food Authority to study the actual cost of milling and recommend an ideal price.

The price-fixing claims were also lodged by the Consumer Federation of Kenya (Cofek), which named three major millers as the firms holding Kenyans at ransom by manipulating prices of flour.

While the cost of procuring raw material (maize and wheat) is supposed to account for 80 per cent of the flour price, the shelf price of the commodity has frequently defiled the market dynamics, especially during harvest time glut. The final report is expected next month.

If it confirms the preliminary study, government will be forced to look for other sources of inefficiency in the flour value chain.

The government had hoped to uncover malpractice such as use of the millers’ lobby group to recommend pricing formulas or fix terms of sales such as discount, credit, delivery as well as product and service guarantee terms to members.

Mr Mogaka said the agency has so far been engaging with the millers under the special compliance programme that requires banks, microfinance institutions, forex bureaus, capital markets, agriculture and insurance lobbies to disclose their dealings.

The competition law allows CAK to impose a financial penalty equivalent to 10 per cent of a firm’s sales. In the case of trade associations that do have direct sales, the authority can charge each member firm independently.

The Cereal Growers Association (CGA) of Kenya has also challenged the manner in which millers act in hiking the prices of flour at the expense of poor households.

 “When the price of maize goes up slightly, millers act promptly by raising the price of flour, but they take long before reducing the cost of the commodity when the price of the raw material drops,” said CGA chief executive Anthony Kioko.

The price of wheat flour and bread remain high in the market despite “oversupply” of cheap imports that have forced local millers to stop buying farmers’ produce.

January 22, 2016; http://www.businessdailyafrica.com/Competition-watchdog-clears-millers-of-price-fixing-claims/-/539546/3048802/-/b3won5/-/index.html

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