Directline Assurance has been slapped with KES85 million in fines for abusing buyer power in its dealings with two motor vehicle garages that offered customers a range of services including panel beating, spray painting and auto mechanical repairs.

In an update on Wednesday, the Competition Authority of Kenya (CAK) directed that Directline Assurance Company Ltd should move with speed and pay longstanding payments totaling KES6,063,235 to Kilele Motors Ltd and Midland Autocare Ltd.

According to CAK, buyer power refers to the ability of a large influential purchaser to obtain supply terms that are more favourable than would arise under normal commercial situation, or that are simply disproportionate, unfair and detrimental to a supplier.

CAK noted that Directline repeatedly delayed payments for completed repair work, occasioning undue financial strain for both Kilele and Midland garages.

In May last year, Kilele and Midland garages accused Directline of causing financial strain in their businesses, rendering them unable to honour their commercial obligations to workers, suppliers and landlords.

"Guided by sections 2 and 24A(4) of the Competition Act, and the Authority's Buyer Power Guidelines, 2022, the Authority confirmed both issues. This determination was arrived at after Directline was granted several opportunities to respond to the allegations in line with the provisions of the Fair Administrative Action Act," CAK report stated in part.

No update on settlement

Investigations revealed that Directline owed Midland a total of KES7.62 million while Kilele deserved KES5 million in payment for works done.

"Following the authority's (CAK) intervention in the course of investigations, the insurer partly settled the outstanding invoices, leaving a balance of KES1.34 million owed to Kilele and KES4.72 million to Midland."

Unfortunately, Directline has remained mute on when it plans to settle these balances, "or provide an update about challenges it may be facing," CAK explained.

The authority added: "The insurance firm has been penalised KES42.5 million for each count, and ordered to honour the outstanding invoices. In addition, the Authority has directed Directline to amend its supply contracts to comply with the provisions of section 21A (7) of the Competition Act, specifically by providing for interest payable on late payments."

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