AAT, buyer power, East Africa, Kenya, Uncategorized

KENYA: COMPETITION AMENDMENT BILL INTRODUCES ONEROUS BUYER POWER PROVISIONS

* By Ruth Mosoti

In July 2019, the Competition Amendment Bill was gazetted and looks on course to be adopted by Parliament.

There are several proposed amendments to the current Competition Act although the focus of the Amendments, most notably, relates to the introduction of buyer power provisions which is a self -standing prohibition and does not require a complainant to first establish a dominance on the part of the buyer.

In regard to buyer power, the majority of the substantive provisions in the current  “Buyer Power Guidelines” previously published by the Competition Authority of Kenya (CAK) have been mirrored in the Act. We summarize below some of the features that the Bill seeks to introduce to the Act in regard to buyer power include:

  1. Introduction of a ‘buyer power code of practice’, developed by the CAK in consultation with stakeholders, relevant government agencies and the Attorney General;
  2. The CAK will have power to impose reporting measures on sectors that experience or are likely to experience abuse of buyer power reporting and prudential requirements, in addition to this, these sectors may be required to develop their own binding code of practice;
  3. The Bill proposes minimum requirements for an agreement between a buyer undertaking and a supplier undertaking. The amendment also provides that this agreement does not have to be in writing;
  4. A new section 29A (which is controversial as it appears to be aimed at the advocates remuneration order) is introduced that targets Professional Associations whose rules offend the provisions of the Competition Act and provides for the persons who will be held responsible for any guidelines that are issued by the association.
  5. It is notable that there are no monetary administrative sanctions introduced by these provisions rather non-compliance attracts criminal sanctions.

The Bill, if passed into law, will positively impact the enforcement of buyer power provisions as the  gap on the substantive provisions on the enforcement of buyer power provisions will be filled.

Michael-James Currie, a pan-Africa competition law practitioner notes that that the Buyer Power principles are similar to those typically found in consumer protection legislation and there are no clear benchmarks (such as a substantial lessening of competition) against which to measure or assess the alleged buyer power. The criteria for determining whether buyer power amounts to an contravention is guided by principles of fairness and reasonableness rather than any economic benchmark. This makes compliance as well as objective decision making all the more difficult. John Oxenham, director at Primerio echoes these sentiments and states that from a traditional competition law perspective, buyer power generally only raises concerns in the event that the buyer concerned is able to exercise a substantial degree of market power.

Currie suggests that absent a clear threshold as to what would trigger an offence in terms of the new buyer power provisions, coupled with the criminal liability (which includes a maximum prison sentence of five years), is particularly onerous on firms seeking to comply with the competition legislation. Currie suggests that it would be preferable to change the liability to an administrative penalty as opposed to a criminal offence so as not to hamper or overly prejudice firms operating in the market.

 

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