The Competition Authority of Kenya (CAK) has fined Directline Assurance Company Limited a total of Ksh85 million for misusing its buyer power against two Nairobi-based automobile repair centres.
The decision follows an investigation which revealed that the company associated with media mogul and Royal Media Services (RMS) owner, SK Macharia, had delayed payments to small businesses despite the completion of repair work.
According to CAK, the affected garages provide services including panel beating, spray-painting and mechanical repairs on motor vehicles. They had been contracted by Directline in 2023 and 2024 to repair insured vehicles following assessments commissioned by the insurer.
In May 2024, the two garages lodged separate complaints with CAK, alleging that Directline had failed to honour invoices for completed work, leaving the small businesses in a precarious financial position.
In their complaints, they supplied authorisation letters, invoices, customer satisfaction notes, and correspondence to support their claims.
During the investigation, the authority reviewed the commercial relationship between Directline and the two garages to determine whether the insurer held superior bargaining power and if it had been misused, with the CAK confirming both issues.
At the time the complaints were lodged, the insurer owed one of the garages Ksh7.6 million and the other Ksh5 million. Following the CAK’s intervention, the insurer partially settled the invoices, leaving balances of Ksh4.7 million and Ksh1.3 million for the auto service providers.
However, the authority noted that Directline justified the delays, citing the temporary inaccessibility of its bank accounts. Despite this explanation, the insurer repeatedly failed to respond to the CAK’s communications or provide updates on the issues, ignoring at least nineteen formal reminders.
In line with CAK’s mandate, Directline was fined Ksh42.5 million for each count of misuse of buyer power and ordered to honour the outstanding invoices in full.
The insurer has also been directed to amend its supply contracts to include interest payable on late payments.
Speaking on the ruling, CAK Director-General David Kemei said, “The penalties levied are commensurate with the gravity of the offence, as well as the conduct of the accused party during the investigation. Misuse of buyer power, which cripples suppliers, defeats the country's aspiration of promoting inclusive economic development.”
He added, “SMEs are liquidity-constrained enterprises. Failure to honour payments for work done can destroy a business and render thousands jobless. Supply contracts between parties to a commercial relationship should be equitable and the product of candid engagements.”
Even so, it was not immediately clear whether the insurer, which has in the recent past been battling ownership wrangles, will appeal the outcomes or honour them in totality.
