Directline Insurance Fined Sh85 Million for Abusing Buyer Power in Garage Payment Dispute
The Competition Authority of Kenya (CAK) has imposed an Sh85 million fine on Directline Insurance after finding the underwriter guilty of abusing its buyer power by delaying payments owed to two motor repair garages.
CAK further directed the insurer to immediately settle a total of Sh6,063,235 in outstanding dues owed to Kilele Motors Limited and Midland Autocare Limited for completed repair works.
Delayed Payments Hurt Suppliers, CAK Says
According to CAK, the insurer used its superior bargaining position to delay payments without any valid justification, an act the watchdog classified as economic exploitation of suppliers.
“Abuse of buyer power, which cripples suppliers, is against the country’s aspirations of economic development,” the Authority stated.
Kilele Motors and Midland Autocare provide essential services including panel beating, spray-painting, and mechanical repairs for insurance claimants’ vehicles.
Garages Filed Complaints After Months of Unpaid Invoices
The two garages lodged complaints with CAK in May 2024, reporting that Directline had repeatedly failed to honor invoices for repair work carried out in 2023 and 2024.
They told the regulator that despite satisfactorily completing various repair assignments, Directline did not settle the payments as agreed, pushing the businesses into severe financial strain.
To support their complaints, the garages submitted evidence including:
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Authorization letters
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Re-inspection reports
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Invoices
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Release notes
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Customer satisfaction forms
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Email correspondence on pending payments
The garages argued that the delays left them unable to pay employees, landlords, and suppliers, and hindered their ability to invest in or expand their businesses.
What Constitutes Abuse of Buyer Power?
In its decision, CAK explained that buyer power refers to a large or influential buyer’s ability to impose unfair, unfavorable, or disproportionate terms on suppliers.
The Competition Act lists common examples of abuse of buyer power, including:
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Delayed payments owed to suppliers
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Unilateral termination of contracts without justification
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Forcing suppliers to accept lower prices
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Returning goods or refusing delivery without valid reason
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Transferring undue costs or risks to the supplier
CAK concluded that Directline’s conduct fell squarely within these practices.
Directline Ordered to Pay Up and Reform
Aside from the Sh85 million fine, Directline Insurance must clear all overdue payments and implement corrective measures to ensure suppliers are paid within the agreed timelines in future contracts.
The CAK decision underscores ongoing regulatory efforts to curb predatory buyer practices in Kenya’s insurance and manufacturing sectors.