The Competition Authority of Kenya (CAK) has fined Directline Assurance Sh85,019,847.32 after determining that the insurer abused its buyer power in dealings with two Nairobi-based garages, Kilele Motors Limited and Midland Autocare Limited. The penalty follows a series of complaints filed in May 2024, in which the two SMEs reported persistent delays in payments for repair work completed between 2023 and 2024. The action places Directline Assurance fined among the most notable enforcement decisions this year.
The garages—Kilele Motors and Midland Autocare—were contracted by Directline to provide services including panel beating, spray-painting and mechanical repairs on insured motor vehicles. The firms told the regulator that Directline failed to honour agreed payment timelines, leaving them with unpaid invoices totalling Sh5,038,094 for Kilele and Sh7,616,456 for Midland at the time the complaints were lodged. Both businesses submitted documentation to support their claims, including authorization letters, inspection reports, invoices, release letters, customer satisfaction notes and correspondence showing repeated follow-ups. These details formed the basis of what became widely referenced as Kilele and Midland allegations against Directline Assurance.
Following the complaints, CAK initiated an Abuse of Buyer Power (ABP) investigation, a process guided by Sections 2 and 24A(4) of the Competition Act and the Authority’s Buyer Power Guidelines, 2022. The Authority first assessed whether Directline held a superior bargaining position and then evaluated whether that position had been abused. The findings confirmed both elements.
According to CAK, Directline Assurance ignored at least 19 formal reminders to clear pending payments, including letters, emails and follow-up calls despite being granted several opportunities to respond under the Fair Administrative Action Act. While the insurer later made partial payments, the Authority reported that outstanding balances of Sh1,343,331 remained for Kilele and Sh4,719,904 for Midland. Directline said the delays were caused by temporary inaccessibility of its bank accounts and stated that it was aware of the importance of timely payments. However, CAK noted that the insurer repeatedly failed to provide updates or respond to communication seeking clarity on the delays.
The Competition Act outlines several practices that may constitute abuse of buyer power, including delaying payments without justification, imposing reduction in supply prices, unilateral contract changes, refusing to receive or return goods without valid reasons and shifting undue costs to suppliers. CAK said the conduct exhibited by Directline fit within these parameters. The ruling, widely captured as Competition Authority of Kenya fined Directline Assurance, also requires the insurer to settle the full outstanding amount of Sh6,063,235 owed to both garages.
Beyond the monetary penalty, the Authority directed Directline to amend its supply contracts to comply with Section 24A(7) of the Competition Act by including interest payable on late payments. The insurer must also stop any practices that contravene ABP regulations. CAK described these steps as essential to ensuring that SMEs are not disadvantaged in supply relationships where the buyer is a larger, more influential entity.
CAK Director General David Kemei said the action reinforces the importance of fair commercial engagement between businesses of different sizes. In his remarks, he explained that delayed payments can destabilize suppliers, especially SMEs that rely on consistent cash flow to meet expenses and retain employees. He noted that Kilele and Midland reported challenges in paying staff, suppliers and landlords because of the unpaid invoices.
CAK said the company’s position in this supply chain placed it in a stronger bargaining position relative to the SMEs, and that this influence was used in a way that the Act defines as detrimental to suppliers.
CAK stated that it intends to deter large purchasers from practices that expose smaller suppliers to financial strain. The decision places the case firmly within the growing list of actions aimed at ensuring suppliers and buyers operate under contracts that are transparent, enforceable and mutually fair.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.