EAC, East Africa, legislation, new regime, Protectionism, Unfair Competition

Protecting competition vs. competitors: Calls for an EAC competition regime

Protecting competition vs. competitors: Calls for an EAC competition regime

In an opinion piece by Elizabeth Sisenda, a competition lawyer at the Centre for International Trade, Economics and Environment, the author calls for region-wide adoption, implementation, and enforcement of competition law, for the greater good of local business in the East African Community.  While generally in favour of increased competition-law recognition in Africa, we at AAT believe that there may be a protectionist undertone in the editorial, however:

Ms. Sisenda notably writes, “The EU has been negotiating a bilateral agreement with the EAC … Local firms stand to lose to foreign firms with greater capacity under the agreement in agriculture, retail, horticulture, fisheries, textile and clothing, dairy, and meat — if adequate safeguards are not established under the agreement.  This brings to light the need to enhance a competitive regional economy within the EAC through the implementation of a regional competition law regime to protect consumers and small enterprises from unfair business practices.

As antitrust attorneys will be quick to point out, pure competition law does not invariably act to protect small companies against so-called “unfair” competition by larger (or foreign) entities.  Granted, certain abuses of dominance or — of course — cartelist conduct is prohibited by proper antitrust legislation.  However, the mere arrival of a more powerful competitor in a local economy does not amount to “unfair competition” per se.  If a larger company can source its products and inputs at a lower cost than a local, established entity (say, Wal Mart compared to a ‘mom-and-pop’ corner store), this may hurt the incumbent but is not necessarily unlawful.

Calls for “African” competition enforcement must be careful not to commingle the notions of protectionism of domestic incumbents with actual competition-law enforcement.

UPDATE: Ms. Sisenda, the author of the original article, wishes to clarify that by “adequate safeguard” her intention was not protectionism but ensuring that dominant firms do not undertake anti-competitive practices such as price-fixing, raising barriers to entry or other illicit conduct.  She is clear in disavowing any notion of protectionism that AAT might have perceived, noting that “By using the term ‘unfair business practices,’ I did not impute any regulatory measures to prop local entities and lock out foreign firms. I simply meant abuse of dominance by more capable foreign firms such as predatory pricing.”

Andreas Stargard, a partner at Africa advisory practice Pr1merio, agrees with Miss Sisenda on two key points, however.  Says Stargard:

The author correctly notes that “there is still a quest for protectionism by the governments of some of the EAC member states.”  Truly anti-competitive practices must be curbed, whereas the inefficient protection of smaller incumbent domestic companies versus more efficient new entrants must not be encouraged.  In the words of one influential court, over 53 years ago, good antitrust laws are designed to protect “competition, not competitors”

Moreover, Ms. Sisenda rightly points to the great need within the EAC (and elsewhere in Africa) for “capacity-building at the national and regional level in support of the … competition regime, which might involve training personnel on competition law and policy and its enforcement.”  Workshops and publications such as AfricanAntitrust.com aid greatly in these efforts, including raising awareness of the need for proper competition-law enforcement, what it can do and also what it cannot accomplish on its own.

The EAC Competition Authority has an interim organisational structure & budget and is expected to start being operational next year.

PS: we note that Ms. Sisenda also raised, in our follow-up conversation with her, some notable questions that we invite our readers or future contributing authors (maybe Ms. Sisenda herself?) to address:

  • In your view, are there any parameters to antitrust such as exemptions granted under legislation for the purpose of promoting economic efficiency (be it allocative or productive) that are justified?
  • Is there a place for economic regulation in antitrust?

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Burundi, EAC, East Africa, Kenya, new regime, Rwanda, Sudan, Tanzania, Uganda

Proliferation of active multi-nation competition regimes continues

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.

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