Category: Kenya

The Big Picture (AAT): East Africa & Antitrust Enforcement

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AAT the big picture

East-Africa & Antitrust: Enforcement of EAC Competition Act

By AAT guest author, Anne Brigot-Laperrousaz.

Introduction: Back in 2006…

The East African Community (the “EAC”) Competition Act of 2006 (the “Act”) was published in the EAC Gazette in September 2007. The Act was taken as a regulatory response to the intensification of competition resulting from the Customs Union entered into in 2005. This was the first of the four-step approach towards strengthening relations between member States, as stated in Article 5(1) of the Treaty Establishing the EAC.

Challenges facing the EAC

As John Oxenham, an Africa practitioner with advisory firm Pr1merio, notes, “10 years have passed since the adoption of the EAC Act, yet it remains unclear when (and if) the EAC will develop a fully functional competition law regime.”

The EAC Competition Authority (the “Authority”) was intended to be set up by July 2015, after confirmation of the member States’ nominees for the posts of commissioners. Unfortunately Rwanda, Uganda and Burundi failed to submit names of nominees for the positions available, and the process has become somewhat idle, leaving questions open as to future developments.

The main challenges facing the EAC identified by the EAC’s Secretariat is firstly, the implementation of national competition regulatory frameworks in all member States; and secondly, the enhancement of public awareness and political will[1].

The first undertaking was the adoption of competition laws and the establishment of competition institutions at a national level, by all member states, on which the sound functioning of the EAC competition structure largely relies.

Apart from Uganda, all EAC member States have enacted a competition act, although with important discrepancies as to their level of implementation at a national level.

The second aspect of the EAC competition project is the setting up of the regional Competition Authority, which was to be ensured and funded by all members of the EAC, under the supervision of the EAC Secretariat. Although an interim structure has been approved by member States, the final measures appear to be at a deadlock.

As mentioned, the nomination of the commissioners and finalisation of the setting up of the EAC Competition Authority came to a dead-end in July 2015, despite the $701,530 was set aside in the financial budget to ensure the viability of the institution[2]. It is widely considered, however, that this amount is still insufficient to ensure the functionality of the Competition Authority.  Andreas Stargard, also with Pr1merio, points out that “[t]he EAC has been said to be drafting amendments to its thus-far essentially dormant Competition Act to address antitrust concerns in the region.  However, this has not come to fruition and work on developing the EAC’s competition authority into a stable body has been surpassed by its de facto competitor, the COMESA Competition Commission.”

Furthermore, inconsistencies among national competition regimes within the EAC are an important impediment to the installation of a harmonised regional enforcement. Finally, international reviews as well as national doctrine and practice commentaries have highlighted the lack public sensitization and political will to conduct this project.

A further consideration, as pointed out by Wang’ombe Kariuki, Director-General of the Competition Authority of Kenya, is the challenge posed by the existence of the Common Market for Eastern and Southern Africa (“COMESA”).

Conclusion

The implementation of the EAC has not seen much progress since its enactment, despite its important potential and necessity[3]. It therefore remains to be seen how the EAC deals with the various challenges and whether it will ever become a fully functional competition agency.

A quick summation of the status of the national laws of the various EAC members can be seen below. For further and more comprehensive assessments of the various member states competition law regimes please see African Antitrust for more articles dealing with the latest developments.

EAC Member States Status

Tanzania

The Tanzanian Fair Competition Act (the “FCA”) was enacted in 2003, along with the institution of a Commission and Tribunal responsible for its enforcement. The FCA became operational in 2005. Tanzania’s competition regime was analysed within the ambit of an UNCTAD voluntary peer review in 2012[4]. The UNCTAD concluded that Tanzania had overall “put in place a sound legal and institutional framework”, containing “some of the international best practices and standards”.

This report, however, triggered discussions on major potential changes to the FCA, which would impact, in particular, institutional weaknesses and agency effectiveness[5]. One of the most radical changes announced consisted in the introduction of criminal sanctions against shareholders, directors and officers of a firm engaged in cartel conduct[6], although there is no sign that this reform will be adopted.

Kenya

Kenya, following a 2002 OECD report[7] and the European Union competition regulation model, replaced its former legislation with the 2010 Competition Act, which came into force in 2011, and established a Competition Authority and Tribunal. Under the UNCTAD framework, the 2015 assessment of the implementation of the recommendations made during a voluntary peer review conveyed in 2005[8] was generally positive. It was noted, however, that there was an important lack of co-operation between the Competition Authority and sectoral regulators, and that there was a need for clear merger control thresholds[9].

Burundi

Burundi adopted a Competition Act in 2010, which established the Competition Commission as the independent competition regulator. To date, the Act has not yet been implemented, and accordingly no competition agency is in operation[10].

A 2014 study led by the Burundian Consumers Association (Association Burundaise des Consommateurs, “Abuco”) (which was confirmed by the Ministry of Trade representative) pointed to the lack of an operating budget as one of the main obstacles to the pursuit of the project[11].

Rwanda and Uganda

Rwanda enacted its Competition and Consumer Protection Law in 2012, and established the Competition and Consumer Protection Regulatory Body.

As for Uganda, to date no specific legal regime has been put in place in Uganda as regards competition matters, although projects have been submitted to Uganda’s cabinet and Parliament, in particular a Competition Bill issued by the Uganda Law Reform Commission, so far unsuccessfully.

 

Footnotes:

[1] A Mutabingwa “Should EAC regulate competition?” (2010), East African Community Secretariat

[2] C Ligami, “EAC to set up authority to push for free, fair trade” (2015), The EastAfrican

[3] O Kiishweko, “Tanzania : Dar Praised for Fair Business Environment” (2015), Tanzania Daily News

[4] UNCTAD “ Voluntary Peer Review on competition policy: United Republic of Tanzania” (2012), UNCTAD/DITC/CLP/2012/1

[5] S Ndikimi, “The future of fair competition in Tanzania” (2013), East African Law Chambers

[6] O Kiishweko, “Tanzania: Fair Competition Act for Review’ (2012), Tanzania Daily News.

[7] OECD Global Forum on Competition, Contribution from Kenya, “ Kenya’s experience of and needs for capacity building/technical assistance in competition law an policy “ (2002), Paper n°CCNM/GF/COMP/WD(2002)7

[8] UNCTAD, “ Voluntary Peer Review on competition policy: Kenya” (2005), UNCTAD/DITC/CLP/2005/6

[9] MM de Fays, “ UNCTAD peer review mechanism for competition law : 10 years of existence – A comparative analysis of the implementation of the Peer Review’s recommendations across several assessed countries” (2015)

[10] Burundi Investment Promotion Authority “Burundi at a Glance – Legal and political structure”, http://www.investburundi.com/en/legal-structure

[11] Africa Time, “Loi sur la concurrence : 4 ans après, elle n’est pas encore appliquée” (Competition Law : 4 years after, it is still not implemented) (2014), http://fr.africatime.com/burundi/articles/loi-sur-la-concurrence-4-ans-apres-elle-nest-pas-encore-appliquee

Can antitrust law ensure a competitive Kenyan marketplace?

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Competition law as a tool for promoting consumer welfare & maintaining a competitive market in Kenya 

By contributing author Elizabeth Sisenda, LL.M (London) LL.B (CUEA) PGD Law (KSL)

Elizabeth Sisenda, LL.M (London) LL.B (CUEA) PGD Law (KSL)

The core aim of enforcing competition law revolves around balancing between beneficial market power and market power that is detrimental to consumer welfare. Market power can be defined as the ability of a firm to raise and maintain price above the level that would prevail under competitive market conditions, without being destabilised by consumers switching to other products/services or new competitors entering the same market. Often the actual price is above cost leading to high profits for the firm with market power. In practice, the pursuit of market dominance can be a great incentive for investment, cost efficiency and innovation. Therefore, the acquisition of a dominant position through superior product or customer services, better pricing, innovation, efficiency and investment is not illegal. Only the abuse of dominance is prohibited. Where a firm exercises market power, competition law functions to protect the openness of the market by ensuring that the dominant firm does not impose unfair trading conditions for actual or potential competitors, or abuse its intellectual property rights. It also intervenes to prevent direct harm to consumer welfare through conduct or transactions that limit output or production artificially in order to price-fix.

Merger control is another important function of competition law and policy, that is designed to prevent positions of market power from being established through acquisition, unless there is a strong economic efficiency rationale that will mitigate for the loss of competition between the merging firms. A company should therefore earn market power and not simply buy out competitors.

Thus, an important ideal of competition policy is to promote a contestable market for as long as it promotes consumer welfare, and a feasible market structure for a particular sector of the economy. In a contestable market, the sunken costs required to join the sector are negligible and other entry barriers are so low that the threat of new entrants is sufficient to check the conduct of the incumbent firm with market power. The costs of exiting the market are also negligible.

In relation to competitors, competition law cannot intervene on behalf of a particular firm in the market, without taking into account the broader effects of the conduct in question on competition in the relevant market. A firm would have to show, on the face of it, that its competitors in that market are engaged in concerted or collusive practices. For instance, competitors can tacitly seek to exercise market power through anti-competitive agreements that enable them to concentrate the market. This often results in one or more firms becoming large enough to be in a position to affect the market’s outcomes in a manner that causes consumer welfare or public interest to be compromised.

Under these circumstances, competition law intervenes and investigates to ensure that there is no unwarranted concentration of economic power in a particular market through collusive agreements between competitors. Unwarranted concentrations of economic power exist where there is cross-directorship or sharing of a senior employee or executive between two distinct firms providing substantially similar goods or services, and whose combined market share is more than 40%. Competition legislation regulates this conduct because it often results in board decisions being made that could lead to collusion among the firms involved, such as price fixing and dividing markets, thereby lessening competition.

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For instance, in Kenya, the cement sector has been under investigation for unwarranted concentrations of economic power. Although there are a number of cement-producing companies in the market, the dominant multinational firm – Lafarge Limited, has a 58.6% stake in the leading producer, Bamburi Cement Limited and a 42% shareholding in another leading company, East African Portland Cement Limited. Market concentration concerns have arisen because Bamburi Cement Limited, which has a market share of 39%, has had cross-directorship with the 3rd largest producer in the market – East African Portland Cement Limited to an extent that may dampen competition. Kenya’s cement prices have been the second highest out of six eastern and southern African countries including South Africa, Zambia and Tanzania between 2000-2014 according to a sector report. In 2014, the Kenyan government recommended that Lafarge dilute its shareholding in East African Portland Cement Limited. However, it was not conclusive whether price fixing was going on.

On the other hand, Kenya’s cement sector may experience increased competition from imports as a result of the East African Community (EAC) reducing the common external tariff (CET) on cement from 35% to 25% through an EAC gazette notice of February 2015. Cement has also been removed from the list of sensitive products that require protection until domestic industries can compete according to the same gazette notice. Although local cement producers are protesting the move, consumers stand to gain, as the liberalized market will lead to lower prices of the commodity, and possibly have a positive impact on the construction industry.

Trade & Competition in Africa: Opportunity Beckons

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Trade & Competition in Africa: Opportunity Beckons

By Peter O’Brien

Continuing the original AAT series, ECONAfrica, Peter O’Brien addresses the WTO’s upcoming MC10 conference.

From 15-18 December Nairobi will host the 10th Ministerial Conference (MC10) of the World Trade Organization (WTO). This will be a meeting of many firsts. Till now, no sub-Saharan African country had hosted a Ministerial Conference organised by the WTO. Nairobi will bring into force the Trade Facilitation Agreement (TFA), the first occasion in the now 21 year history of WTO that a new agreement has been signed (all others were established at the inception of WTO). This is the first MC to take place against the backdrop of an agreement in Africa, concluded this year, to work for a continent wide area of free trade. Today more than one quarter (43 countries in total) of all WTO Members (more than 160) are African. Moreover, the  Accession Package for Liberia was agreed in Geneva on 6 October, and it can be expected that it too will join in the course of 2016.

Apart from celebrating the firsts, are there any reasons for business in Africa to pay attention to events in Nairobi? The answer is an emphatic yes:

  • The TFA is the one WTO agreement that promises real advantages on the logistics of trade. Detailed studies have shown that, on average, the sheer movement of goods within Africa accounts for roughly one fifth of all costs. Serious steps to cut those costs, which is what TFA is about, represent a win/win for producers, traders, consumers and indeed the public authorities. Since Africa is the region of the world where intra-trade (transactions among African countries themselves) is by far the lowest, and where most national markets are small, the gains from logistics savings are potentially huge.
  • The TFA will commit WTO Members to help the least developed countries, a group of over 30 States of whom the majority are African. For the first time, there are straight advantages to be obtained without a condition of reciprocity. Funding, technical assistance, streamlining of trade administration, are just some of the things that can be expected. The TFA allows governments and business together to formulate their requests, so this is the chance to utilize an organized offer of support.
  • MC10 will seek to reinforce the whole network of disciplines concerned with non-discrimination and competition that constitute the core of WTO agreements. That progress is very positive for the growth of competitive markets on the continent.
  • The meeting will be attended by numerous international and regional observer organizations from the private sector, as well as by non-governmental organizations (NGOs) whose normal activities are overwhelmingly directed towards improving trade and welfare in African countries. Their presence serves to strengthen the lobby for growth and welfare improvement.

In the world of yesterday, tariffs and quantitative limitations dominated trade negotiations. In tomorrow’s world, the critical subjects are technical barriers to trade (meaning formal legal resolutions that control trade for purposes of national security, public health and so on), voluntary norms and standards (which in practice frequently acquire a market force equivalent to a legal provision), and a host of other regulatory issues that determine who will be best placed in the market.

More or less all African countries, with the partial exception of South Africa, have always been on the receiving end of these instruments. Africa has thus far played a very minor role in shaping “the rules of the international competitive game.” But with the continent now the fastest-growing region in the world economy, with the race for its natural resources continuing (despite the current lows in resource prices), with the ongoing investments (from within the continent and without), and the steady improvements in governance observable in the majority of countries, Africa is well placed to make its voice heard.

Nairobi and the MC10 offer the ideal stage on which the continent can begin its future path as one of the designers of competitive change.

Proliferation of active multi-nation competition regimes continues

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6-member East African Community (EAC) to finalise competition law amendments

The EAC, a regional intergovernmental organisation comprising Burundi, Kenya, Rwanda, Tanzania, Uganda and South Sudan, is said to be drafting amendments to its thus-far essentially dormant regional fair Competition Act (dating back to 2006, EAC Competition Act 2006, 49 sections) to address antitrust concerns in the region.  The EAC’s legislative body is in the final stages of completing its work on the East African Community Competition (Amendment) Bill (2015).

In a 2010 paper, Alloys Mutabingwa (then Deputy Secretary General of the EAC Community Secretariat) writes:

As the EAC begins the implementation of the Common Market, one is pushed to wonder, which kind of competition do we currently have in the East African Community? Is it the kind of competition that constantly pushes companies to innovate and reduce prices? Does it increase the choice of products and services available to EAC consumers? Or, is it the type of competition that is defined by companies colluding to highjack the market? The answer lies somewhere in the middle but one thing is certain, with the intensification of competition in the EAC there will be frictions between companies across the region as they seek to gain advantage over their competitors.

In this short and worthwhile read, he stresses the importance of having a multi-national competition framework vs. a purely domestic network of independent enforcers.  Mr. Mutabingwa uses the example of the merger case of East African Breweries and South African Breweries, in which the Kenyan and Tanzanian competition authorities were “allowed by law to handle national practices only.”

According to an October 2014 article, “statistics show that the EAC’s total intra-regional trade soared from $2 billion in 2005 to $5.8 billion in 2012, while the total intra-regional exports grew from $500 million to $3.2 billion in the period under review.”  The  piece quotes an EAC competition official as saying that the enforcement agency would be online by December 2014.

In addition to the EAC efforts, a report also states that the head of economic affairs of the Tanzanian Fair Competition Tribunal (FCT), Nzinyangwa Mchany, recently emphasised the importance of member-state level enforcement, such as that of the country’s FCT and FCC, “to increase efficiency in the production, distribution and supply of goods and services to Tanzanians,” especially in economies that were centrally planned until only a few decades ago, and which have had to struggle with the ill after-effects of unregulated trade liberalisation and privatisation of state-owned enterprises.

Which economy is growing 2-3% above global average…?

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… Africa’s

AAT the big picture

According to a recent article in Polity, “Africa’s economy is projected to continue growing at between 2% and 3% above the global average over the next five years, helping it retain its position as one of the key emerging markets for 2015.”

It quotes a GIBS (Gordon Institute of Business Science) study showing that sub-Saharan Africa’s growth “outstripped global growth for the past 15 years,” which has “slowed down somewhat, owing to a number of challenges, including the drop in commodity prices.”  The GIBS study is the result of an assessment of countries’ institutional evolution, measuring how countries were performing in terms of developing competitive business and living environments across political, social and economic spheres.

Kenya was highlighted, with the authors noting that “Kenya, in terms of perceptions, is a very important country on the continent; it has, since 2007, put in place a number of reforms to build competitiveness. However, it doesn’t come out very well when you look at the data behind industry and comes out poorly in [the DMI], but what you find on the ground is that there is [an entirely] different sentiment.”

EU gives Kenya until October 1 to sign Partnership Agreement

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Kenya is currently at risk of losing preferential access to European markets

As of next year, this risk will expose the country’s exporters of flowers, fish, fruits and vegetables to high tariffs and logistical problems.

Lodewijk Briët, the European Union Ambassador has indicated that the bloc would remove Kenya from the preferential list again, if the East African Community fails to ratify the new Economic Partnership Agreements by October 2015. The removal of Kenya from the list would result in Kenya accessing the European Union market under the Generalised System of Preferences which results in tariffs of up to 15 per cent.  The deadline is apparently not a “must-beat” time limit, according to a quote from the Daily Nation article on the topic:

Negotiations between EU and EAC started in 2002, culminating in the two trading blocs signing an interim EPA in 2007 that ensured duty-free, quota-free access for its products under the Market Access Regulation that will end in October.

Kenya exports flowers to the European Union worth Ksh46.3 billion and vegetables worth Ksh26.5 billion annually resulting in the horticulture sector being one of the most important contributors of foreign exchange. The European Union takes about 40 per cent of Kenya’s fresh produce exports. The horticulture industry has also created job opportunities for about 90 000 Kenyans.

In October 2014, the European Union removed Kenya from its list of duty-free exporters after the East African Community failed to meet the Economic Partnership Agreements deadline which subjected fresh produce to levies of Ksh100 million per week.

Tech antitrust news: disrupting M-Pesa mobile payment monopoly? cashless NFC mandatory?

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Disruption & entry — mandatory cashlessness — and alleged collective dominance

Perhaps they don’t realise it themselves, but the journalists at ITWeb Africa have written antitrust/competition law strories in three of their recent reports, covering the rapidly growing and lucrative tech world in Africa: their stories range (in antitrust terms) from collective dominance in Africa’s tech sphere, to a challenger’s new entry in mobile payments, to a mandatory government-backed mobile NFC system for Kenyan transit commuters that allegedly causes more consumer harm than benefit by going cashless and giving the spoils all to one monopolist.

We take each in turn.

Disruption to M-Pesa’s mobile payment crown?

It looks as though the M-Pesa crown may be taken through the competitive process (and without active intervention by the competition authority) after all:

Equity Bank is about to join Airtel’s challenge to the leading position of Safaricom Limited’s M-Pesa service (on which AAT has written extensively before).  The magazine reports that an ultra-thin SIM card technology and the Kenyan bank have reached a pact that will allow them to compete with M-Pesa’s service, on top of existing user SIM cards.

Equity Bank is “determined to challenge” Safaricom’s M-Pesa mobile money service with the help of Taiwanese headquartered Taisys, which claims that the Communications Authority of Kenya “last month tentatively gave Equity Bank the go-ahead to use thin SIMs for one year.”  Equity is reported to be the “largest bank in East Africa with almost 9 million bank accounts.”

The new technology of a “stick-on” slim-SIM card allows the user “to execute mobile banking transactions, releasing the bank from the limitations of a telco-issued banking SIM.”  Safaricom had previously complained to the authority, arguing that PIN theft and denial of service are real risks that counsel against use of new SIMs.

In other related news, second M-Pesa challenger Airtel has secured a contract with the Kenyan Revenue Service that allows Kenyan citizens to pay their taxes using Airtel’s mobile money service.
The cashless economy: is the imminent Kenyan My1963 NFC payment system anti-competitive?

In this story about Nairobi’s public transport system’s much-derided effort to go entirely cashless – dubbed “My1963” -, the magazine reports that the Consumer Federation of Kenya (Cofek) claims that the digital payment system benefits “all except the consumer”.  In Cofek’s statement (“7 reasons why Cofek will fight to stop the #My1963 PSV’s cashless payment fraud“), the federation makes seven distinct arguments against the legality of the scheme.  Two relevant criticisms from the competition-law perspective are the following:

  1. no competitive bidding process: the body alleges that, due to politicians’ ties to banking and other interests, the correct process for entertaining competitive bids was not followed in accordance with proper public procurement rules.
  2. supra-competitive (monopolistic) pricing: an “exorbitant” 3% commission is being charged by the service provider of the system, as agreed between the Kenyan National Transport Safety Authority and the banks.

Cofek also urges the Competition Authority of Kenya (CAK) to “investigate the #My1963 and entire cashless payment system with a view to finding it uncompetitive, predatory and anti-consumer and market interest” [sic].

Viber, WhatsApp, YouTube: dominant in Africa?

In its report on alleged dominance by three tech companies, the paper begins by pointing out the (some more and some less) startling statistics:

WhatsApp is the leading third-party messaging application, Viber has overtaken Skype as the leading VoIP service on several networks and YouTube is the top video streaming app. … on Africa’s mobile networks WhatsApp accounts for 7% of total traffic, while Viber has overtaken Skype as a VoIP service. Streaming video accounts for just over 6% of downstream traffic – significantly lower than North America and Europe where it accounts for more than 30%.

WAP Browsing has seen a significant decline in traffic share thanks to increased adoption of smartphones throughout the region [–Ed.: on the latter point, the journal also has an interesting separate piece, discussing the new era of WiFi connectivity in Africa].

Being called “dominant” may be a badge of honor to the sales staff, but it is a dangerous moniker when viewed by the competition-law enforcers through their monopolisation lens.  WhatsApp, Viber and YouTube (whose parent is, of course, the already dominant Google) may therefore have to begin thinking about treading more lightly in terms of their dealings with competitors on the African continent, lest they wish to prompt governmental scrutiny from the likes of the South African Competition Commission, the Kenyan Competition Authority, or COMESA’s CCC.

Antitrust enforcer subjects mobile payment operator to central bank oversight

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CAK settles with Safaricom, requires non-exclusivity of outlets and forces Central Bank oversight of payment operator

The mobile payments sphere, particularly growing in African countries as we reported previously, is abuzz with news that a competition regulator has now expressly subjected Safaricom (a prominent Kenyan operator) to oversight by the country’s Central Banking authority.  It also cements the (already preemptively and unilaterally undertaken) commitment by M-Pesa to remove the exclusivity provision that previously requred its 85 thousand network members to operate exclusively on the Safaricom mobile-payment network.

The official Kenyan Gazette notice 6856 contains the full, if short, language of the agreement:

IT IS notified for public information that in exercise of the powers conferred by section 38 of the Competition Act, the Competition Authority of Kenya, after an investigation into an alleged infringement of Part III of the prohibitions set out in the Act by Safaricom Limited and its Mobile Money transfer agents, entered into a settlement with Safaricom Limited on the following terms-

(a) that all restrictive clauses in the agreements between Safaricom Limited and its Mobile Money Transfer Agents be expunged immediately, but in any event not later than 18th July, 2014;

(b) that the Mobile Money Agents be at liberty to transact the Mobile Money Transfer Businesses of any other mobile money transfer service providers;

(c) that oversight by Safaricom Limited be thereafter limited to its business with the Agentsl and

(d) that each Mobile Money Service Provider be responsible for ensuring compliance with Central Bank of Kenya Regulations.
Dated the 22nd September, 2014.
WANG’OMBE KARIUKI. Director-General.

MobileWorld Live has reported the following on the settlement between the recently rather active CAK and Safaricom:

A settlement between the Competition Authority of Kenya and Safaricom leaves M-Pesa agents free to work with rival mobile money providers.

An announcement, made in the Kenya Gazette, follows a CAK investigation into an alleged infringement by the operator under the country’s Competition Act.

Back in July, the watchdog said all restrictive clauses in agreements between Safaricom and its agents must be expunged no later than 18 July (actually the operator pre-emptively removed exclusivity ahead of the CAK’s decision).

As we noted in our prior reporting on Safaricom’s troubles with the Kenyan Competition Authority (CAK):

Safaricom offers a product named “M-Pesa” to its customers in Kenya and Tanzania.  M-Pesa is a mobile-phone based money transfer and micro-financing service, launched in 2007 for Safaricom and Vodacom, the two largest mobile network operators in Kenya and Tanzania. The service enables its users to deposit and withdraw money, transfer money to other users and non-users, pay bills, purchase airtime and transfer money between the service and, in Kenya, a bank account.  Users of M-Pesa are charged a service fee for sending and withdrawing money.

By 2010, M-Pesa became the most successful mobile-phone-based financial service in the developing world.

In light of the imminent launch of the Airtel product, Airtel has lodged a complaint with the Competition Authority of Kenya on the basis that Safaricom currently holds 78% of the voice market in Kenya, 96% of the short message service market and 74% of the mobile data market.  In addition, Airtel is of the view that these market shares make it impossible for Kenyan consumers to have a choice in operators. By 2012, 17 million M-Pesa accounts were registered in Kenya alone, which has a population of over 40 million.

There are a total of approximately 31 million mobile-phone subscriptions in Kenya in 2013, of which Safaricom accounted for 68%, Airtel 17%, Essar Group’s “yuMobile” 9% and Telkom Kenya Limited 7%.

 

Kenya competition landscape active

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Zuku pay-TV launched complaint against DStv in Kenya

As we reported in “Your Choice“, MultiChoice has been an active (if unwilling) player in African antitrust news.  Zuku pay-TV has recently requested the Competition Authority of Kenya (CAK) to impose a financial penalty on DStv for refusing to re-sell some of its exclusive content like the English Premier League to its rivals.

In its letter to the CAK, Zuku pay-TV accuses MultiChoice, the owners of DStv, of abusing its dominance and curbing the growth of other, competing pay-TV operators. Furthermore, Zuku pay-TV requested the CAK to compel DStv to re-sell some of its exclusive content and impose a financial penalty, which can be up to 10 per cent of a firm’s annual sales, on the South Africa firm. According to Zuku pay-TV, DStv has a market share of 95% in Kenya.

The CAK has not indicated whether it is investigating the complaint yet.

Mr Wang’ombe Kariuki, director of the CAK
Kenya to get leniency policy

In addition to the ongoing pay-TV antitrust dispute, the CAK has drafted a law (the Finance Bill of 2014) which will create a Kenyan cartel leniency programme in order for whistleblower companies and their directors to get off with lighter punishment, for volunteering information that helps to break up cartels, as AAT reported here.

To recap the leniency programme will either grant full immunity for applicants or reduce the applicant’s fines, depending on the circumstances. The Finance Act 2014 is awaiting its third reading in Parliament.

The introduction of a leniency programme in Kenya is a pleasing sight due to leniency programmes’ proving to be an integral and vital tool for uncovering cartels in every jurisdiction in which it has been deployed.

Antitrust amnesty: new regime to go online soon

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Kenya to become latest competition jurisdiction with cartel leniency scheme

As Mugambi Mutegi of the Business Daily reports, Kenya is the latest antitrust jurisdiction to embrace a self-reporting leniency programme.
Mr Wang’ombe Kariuki, director of the CAK

Self-reporting of “hard-core” competition-law offences (such as price-fixing cartel conduct, market division, bid rigging, or group boycotts among horizontal competitors) has long been a staple of antitrust enforcement in the most developed jurisdictions, including the United States and the European Union.  In South Africa, cartel-whistleblowing leniency has just passed its 10th anniversary, and in the EU, the European Commission’s “Notice” on the non-imposition of fines in certain cartel cases (i.e., the EU’s leniency regime) recently celebrated its 18th birthday — nowadays, more than 75% of the EC’s cartel matters are uncovered thanks to one or many cartel members “snitching” on their counterparts, in exchange for full or partial amnesty from antitrust prosecution and attendant fines.

The Competition Authority of Kenya (CAK) has recently upped its rhetoric, threatening criminal sanctions against various business sectors’ potential cartel members and disputing jurisdiction of the multi-national, but still feeble, COMESA competition authority in merger cases.

In Africa, Kenya (AAT archive on CAK issues here) is now becoming a new member of the “Leniency Club”, rewarding whistleblowers with eased penalties for volunteering relevant tips and information on the workings of the cartel.  The CAK is acting to implement the provision of the Kenyan Finance Bill 2014, which allows it to terminate cartel investigations with lighter punishment for whistleblowers, all the way to a full pardon.

“The Authority (CAK) may operate a leniency programme where an undertaking that voluntarily discloses the existence of an agreement or practice that is prohibited by the Competition Act and co-operates…in the investigation of the agreement may not be subject to all or part of a fine…”

The agency’s web site — which otherwise (unusually) refers to the Business Daily article quoted here, instead of issuing its own press release — tersely provides as follows:

Cartel firms get amnesty in new CAK regulation

The competition regulator has drafted a law that will see whistleblower companies and their directors get off with lighter punishment for volunteering information that helps to break up cartels.

The Competition Authority of Kenya (CAK) says introduction of this law, which is already in the Finance Bill 2014, will attract informers that can help to bust unlawful business agreements between cartels and other secretive pacts that facilitate anti-competitive behaviour.

Whistleblowers whose evidence leads to the successful termination of such agreements and punishment (fines and jail sentences) of the participants will either get reduced fines or full pardon.

The CAK’s Director General, Francis Wang’ombe Kariuki, is quoted as saying that the authority’s is merely awaiting Parliament’s amendment of the law, and that “[t]he settlement policy we have drafted includes offering leniency to the directors of companies who come forward individually or as a group to report on cartels or unlawful business pacts“.