Kenya: Lafarge faces possible price-fixing penalties due to cross shareholding

kenya

East Africa back on antitrust enforcer’s mat in hybrid unilateral / collusion case

The Competition Authority of Kenya (“CAK”) has alleged that Lafarge has engaged in price-fixing due to the company’s cross-shareholding in cement producer Eastern African Portland Company and Bamburi Cement. (Interestingly, http://www.lafarge.co.ke links to Bamburi Cement’s site).

The CAK is investigating whether Lafarge is responsible for an unwarranted concentration of economic power, given that Lafarge has a 41.7% interest in Eastern African Portland Company and a 58.9% interest in Bamburi Cement. A ruling as to whether Lafarge has “unwarranted concentration of economic power” is expected in June 2014.  In the event that Lafarge is found guilty of the charge against it, the Kenyan Competition Authority could direct the Lafarge to sell assets in one of the two businesses.  Furthermore, the directors could also be forced to pay up to USD115,000 in penalties or serve five years in prison if found guilty of price-fixing.

The CAK report comes four months after the Kenyan government, which together with the Kenyan National Social Security Fund, has a controlling stake of 52.3% in Eastern African Portland Company alleged that Lafarge tried to destabilise Eastern African Portland Company to protect Lafarge’s interests in Bamburi, the report noted. The CAK indicated that “cross-directorship could lead to price-fixing since this creates a position where a competitor is privy to the strategic decisions of another competitor. However, it is not conclusive that there is price-fixing going on.”  Lafarge has stated its minority interest in Eastern African Portland Company is insufficient to enable Lafarge to exert control over it.

This allegation comes at an interesting time given the spotlight on Lafarge due to its proposed merger with cement producer Holcim, which has already triggered insider-trading investigations elsewhere.  The proposed transaction will likely require notification in the European Union, United States, Russia, China, India, Morocco, South Africa and multi-national enforcer COMESA (which includes Kenya and would presumptively take priority over the CAK’s domestic review authority, although a jurisdictional fight between the two agencies would not be unheard of).

 

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