Competition Authority of Kenya issues notice on the prescription of minimum fees by professional associations

On 5 October 2021, the Competition Authority of Kenya (CAK) published a notice addressed to professional associations cautioning them against setting minimum fees or prices that may be charged by their members, without observing the requirements of the Competition Act 12 of 2010 (Act). The Act describes a professional association as “the controlling body established or registered under any law in respect of recognised professions but does not include trade associations and industry lobby institutions or bodies whether incorporated or not”.

20 Oct 2021 2 min read Competition Law Alert Article

At a glance

  • The Competition Authority of Kenya (CAK) warns professional associations against setting minimum fees without complying with the Competition Act.
  • Recent attempts by professional associations to prescribe minimum prices or fees have raised concerns about competition and customer detriment.
  • Setting minimum fees may be seen as price fixing and minimum resale price maintenance, which are prohibited under the Act and can result in penalties and fines. Professional associations can apply for exemptions if the restrictions are necessary for professional standards.

The CAK has noted that there have been renewed attempts by various professional associations to prescribe minimum prices or fees, to the detriment of customers. The National Treasury recently invited public comments on the Draft Accountants (Remuneration) Order, 2021 that seeks to set minimum fees accountants can charge clients who engage their services. Similarly, the Engineers Board of Kenya called for public participation for the proposed Engineers (Scale of Fees for Professional Engineering Services) Rules, 2021 which seek to regulate the fees chargeable by its members. The Director General of the CAK, Dr Wang’ombe Kariuki, noted that “the envisaged arrangements of setting minimum rates / fees highlighted in the media recently, are only meant to extinguish competition among members of professional associations to the detriment of clients / customers”.

Further, the CAK opined that decisions by professional associations to set minimum fees or prices that may be charged by their members could be construed as price fixing and minimum resale price maintenance. These actions are restrictive trade practices and are prohibited by section 21(1) of the Act, which bars any undertaking or association of undertakings from entering into agreements or making decisions which “have as their object or effect the prevention, distortion or lessening of competition in trade in any goods or services … unless they are exempt in accordance with the provisions of section D of this part”.

An association that engages in the aforementioned conduct risks the imposition of a financial penalty of up to 10% of the previous year’s gross annual turnover in Kenya. In addition, any person who engages in this conduct commits an offence and, if convicted, is liable to a fine not exceeding KES10 million or imprisonment for a term not exceeding five years, or both.

If a professional organisation wishes to amend its rules to include provisions that will prevent, distort or lessen competition in any market, the professional associations will need to apply to the CAK for an exemption in accordance with section 29(2) of the Act. The CAK has the power to exempt all or part of the rules of the professional association for a specific period of time if the restriction is reasonably required to maintain professional standards or the ordinary function of the profession.

It will be interesting to see the actions taken by various professional associations given that a number of these associations have already prescribed minimum fees or prices and their members have been charging such fees to their customers. The CAK has grounds to act against these professional associations and we await their next course of regulatory action.

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