The Competition Authority of Kenya (CAK) has fined Directline Assurance Company Limited Ksh85 million after finding the insurer guilty of misusing its buyer power to the detriment of two small automobile repair businesses in Nairobi.
The ruling comes after months of investigation into claims that Directline associated with media mogul and Royal Media Services owner SK Macharia had repeatedly delayed payments owed to the garages, even after repair work on insured vehicles had been completed.
According to CAK, the two garages had been contracted in 2023 and 2024 to carry out panel beating, spray-painting, and mechanical repairs on vehicles covered by Directline. The garages were selected following assessments commissioned by the insurer, and both fulfilled their obligations, only to face prolonged delays in payment.
The matter escalated in May 2024 when the garages separately lodged complaints with CAK, each detailing how Directline’s failure to settle invoices had put their operations at risk. They submitted supporting documents including authorisation letters, invoices, customer satisfaction notes, and email correspondence.y
At the time the complaints were filed, Directline owed one garage Ksh7.6 million and the other Ksh5 million. Following CAK’s intervention, Directline made partial payments, reducing the amounts to Ksh4.7 million and Ksh1.3 million respectively still significant sums for businesses already grappling with thin margins and tight cash flow.
For the mechanics and panel beaters behind those businesses, the delayed payments meant stalled operations, strained supplier relationships, and months of uncertainty. One mechanic, speaking on condition of anonymity due to ongoing talks with the insurer, described the period as “a constant juggle between paying staff, keeping the lights on, and begging suppliers for more time.”
Insurer Cites Frozen Accounts, But CAK Unmoved
Directline attributed the delays to temporary inaccessibility of its bank accounts a concern the authority acknowledged but ultimately found insufficient, particularly after the insurer failed to respond to at least 19 formal reminders from CAK during the inquiry.
The authority determined that Directline indeed wielded superior bargaining power over the garages and had misused that influence, in violation of competition rules designed to protect smaller businesses from unfair treatment.
As a result, CAK imposed a fine of Ksh42.5 million for each of the two violations and ordered the insurer to clear all remaining invoices. Directline must also revise its supplier contracts to include interest penalties for late payments.
CAK: Delays Can Destroy Small Enterprises
Speaking after the ruling, CAK Director-General David Kemei underscored the gravity of the offence.
“The penalties levied are commensurate with the gravity of the offence, as well as the conduct of the accused party during the investigation,” Kemei said. “Misuse of buyer power, which cripples suppliers, defeats the country’s aspiration of promoting inclusive economic development.”
He stressed that small and medium-sized enterprises (SMEs) rely heavily on consistent cash flow.
“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,” he added.
It remains unclear whether Directline already navigating ongoing ownership disputes intends to appeal the CAK decision or comply fully with the directives.
For now, the two garages wait, hoping the ruling finally brings closure to a saga that has stretched their resilience, tested their finances, and highlighted the vulnerability of small businesses when powerful corporate clients neglect contractual obligations.
