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OVERVIEW OF COMPETITION LAW AND POLICY IN KENYA
04/18/23 08:34 PMOverview of Competition Law and Policy in
Kenya 104/18/23
Legislative History
• The Working Group on Government Expenditure proposed the need for a market driven economy which was later echoed in the Sessional Paper no. 1 of 1986.
04/18/23 08:34 PMOverview of Competition Law and Policy in
Kenya: Legislative history 2
Legislative History continuation• This mooted the need for a legislation to
curb RTP’s and abuse of dominance, hence the current Restrictive Trade Practices, Monopolies and Price Control Act, Cap.504 of the Laws of Kenya.
• The Law was promulgated in 1988 and operationalized in 1989.
04/18/23 08:34 PMOverview of Competition Law and Policy in
Kenya: Legislative history 304/18/23
Objectives• Regulate market conduct through
prohibiting restrictive trade practices and abuse of dominance (predatory behaviors).
• Regulate market structure through regulation of horizontal mergers and acquisitions as well as unwarranted concentration of economic power
04/18/23 08:34 PMOverview of Competition Law and Policy in
Kenya: Objectives 4
Parts of current Act (Cap.504)
The Act is divided into six PartsPart I- PreliminaryPart II- Provisions Relating to Restrictive
Trade PracticesPart III- Control of Monopolies and
Concentration of Economic PowerPart IV- Provisions Relating to the Control
and Display of Prices
04/18/23 08:34 PMOverview of Competition Law and Policy in
Kenya: Parts 5
Cont.
Part V- Establishment of the Restrictive Trade Practices Tribunal
Part VI- Miscellaneous ProvisionsNote: Part IV of the Act is redundant but was
retained because of the opposition of liberalization from some constituents. It also indicates that the current Act is transitory.
04/18/23 08:34 PMOverview of Competition Law and
Policy in Kenya: Parts6
Implementing Institutions.Monopolies and Prices Department
(Commissioner)Minister for FinanceRestrictive Trade Practices Tribunal
(RTPT)The High Court of Kenya
04/18/23 08:34 PMOverview of Competition Law and Policy in
Kenya: Institutions 704/18/23
Implementation approachRTP’s are investigated by the
Commissioner, orders are issued by the Minister.
Concentration of market power, order to investigate any sector is given by the Minister to the Commissioner.
Application for mergers & acquisitions is made to the Minister through the Commissioner.
04/18/23 08:34 PMOverview of Competition Law and Policy in
Kenya: Implementation 804/18/23
Sanctions and penalties.
RTP’s• Imprisonment for a term not exceeding two
years.• Fine not exceeding Ksh. 100,000• Both.Unwarranted concentration of economic
power.• Disposal of interest on condition that this
should not create an inefficient units.
04/18/23 08:34 PMOverview of Competition Law and
Policy in Kenya: Sanctions & Penalties9
Sanctions and penalties.
Mergers and Takeovers• Imprisonment for a term not exceeding three
years,• A fine not exceeding Ksh. 200,000 or• Both
04/18/23 08:34 PMOverview of Competition Law and
Policy in Kenya:Sanctions and Penalties
10
Weaknesses of current Law
Lack of autonomy.Difficulties in implementation process (RTP’s).Mergers:
there is no thresholds, no time limit, The Minister is not required to give reasons for
rejecting a merger,The Act covers horizontal mergers only
04/18/23 08:34 PMOverview of Competition Law and
Policy in Kenya: Weaknesses11
Contin.
No fee is charged to file a merger.Lack of harmony between Cap 504 and other
Sectoral laws.Lack of power to conduct dawn raids.The Act does not cover consumer welfare
issues.
04/18/23 08:34 PMOverview of Competition Law and
Policy in Kenya: Weaknesses12
The Competition Bill, 2009• The Bill is awaiting Second Reading.• The Bill, among others intends to set up an
autonomous Authority. • The Bill intends to separate the three main
functions of:o Policy formulation :MinisteroManagement: The Board ando Implementation: Authority
04/18/23 08:34 PM The Competition Bill, 2009 13
Contin.The Bill intends to mitigate the weaknesses
of current Law by:Creating an autonomous Competition Authority, Enhancing sanctions hence making them more
deterrent .Granting the Director General authority to hire
private investigators.
04/18/23 08:34 PM The Competition Bill, 2009 14
Contin.
Granting power to search and seizure during investigations,
Providing for exemptions.Granting the Authority power to process all types
of mergers. Setting time limit for processing a merger,Requiring the Authority to give reasons for
approving or rejecting a merger,Granting the Authority power to charge fees.
04/18/23 08:34 PM The Competition Bill, 2009 15
Contin.
The Bill contains provisions on Consumer Welfare Part on Price Control was removed.
04/18/23 08:34 PM The Competition Bill, 2009 16
Benefits of regional interaction.
• Information sharing on competition matters. • Broadening of knowledge and experience in
competition field. • Strengthening interaction leading to positive
comity.• Offers an opportunity for benchmarking.
04/18/23 08:34 PM Benefits of regional interaction 17
Cases Investigated1. ACQUISITION OF CHEVRON KENYA LTD. BY TOTAL
KENYA LTD. Total Kenya Ltd. Applied for a merger with
Chevron Kenya Ltd. Relevant market Product market was defined as importation
and distribution of petroleum products. Geographic market was defined as national
but further broken down into major roads in the whole country.
04/18/23 08:34 PMCase:TOTAL KENYA LTD. AND
CHEVRON KENYA LTD.18
Contin.AnalysisThe market with 29 players was found to be
highly concentrated where five multinationals controlled 84.07%.
Post-merger CR5 was 87.41Premerger HHI was 1627.36 and a post
merger HHI of 2069.485There exist high entry barriers and the only
credible mode of entry can be through acquisition of existing retail network.
04/18/23 08:34 PMCase:TOTAL KENYA LTD. &
CHEVRON KENYA LTD.19
Contin.Assets with competition concerns were:
– Retail outlets– Intoplanes facilities at airports– Loading arms– Depots
04/18/23 08:34 PMCase:TOTAL KENYA LTD. &
CHEVRON KENYA LTD.20
Contin.ConclusionIf approved the merger would create
competition concerns.RecommendationThe Commission therefore recommended
that the acquisition be approved on condition that some of the Chevron’s retail outlets, intoplane facilities, loading arms and shares in lubricant plants be sold to other interested buyers.
04/18/23 08:34 PMCase: TOTAL KENYA LTD. &
CHEVRON KENYA LTD.21
Contin.2. MERGER BETWEEN SPINKNIT DAIRY LTD.
AND BROOKSIDE DAIRY LTD. Relevant Market Product market was defined as processed
milk products while geographical market was national.
Brookside Dairy intended to acquire 100% of the issued share capital of SpinKnit Dairy Ltd.
04/18/23 08:34 PMCase: BROOKSIDE DAIRY &
SPINKNIT DAIRY22
Cases Investigated continuationAnalysisThere are many small players (some regional),
with consumers exhibiting loyalty to these regional dairies. There is however, one large Government parastatal Kenya Co-operative Creameries (KCC) with a market share of 35% which is also the sole producer of powdered milk.
Risk of manipulation of domestic prices in terms of collusion to fix prices is non existant because KCC is a government parastatal.
04/18/23Case: BROOKSIDE DAIRY &
SPINKNIT DAIRY23
Contin.
Entry barriers are fairly low and it is therefore difficult for the resultant firm to abuse its position in the long run
The transaction was expected to increase job opportunities both directly and indirectly.
The two firms intended to combine resources to set up a milk drying plant which would be expensive for either of the firms.
04/18/23 08:34 PMCase: BROOKSIDE DAIRY &
SPINKNIT DAIRY24
.
Contin.ConclusionsThe proposed transaction would boost
export potential.This consolidation would equip Kenyan firms
to compete with imports.It would also enhance competition and
efficiency.The resultant firm would be large enough to
compete with market leader (KCC) challenging its monopoly in processing powdered milk.
04/18/23 08:34 PMCase: BROOKSIDE DAIRY &
SPINKNIT DAIRY25
Cases Investigated continua
RecommendationsThe Commission recommended that the
transaction be approved unconditionally.
04/18/23 08:34 PMCase: BROOKSIDE DAIRY &
SPINKNIT DAIRY26