Facilitating Well-Functioning Regional
Markets in the EAC
How can an effective regional competition regime help?
Susanne Rabisch, CUTS
George Owuor, TMEA
Supported by
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Outline
1.
Introduction
2.
National and Regional Competition
Regimes in the EAC
3.
Progress and Challenges in the
Implementation of EAC Competition
Law
4.
Cross-border Competition Concerns
in the EAC - an overview
5.
Conclusion and Suggested Way
forward
1.Introduction

With the enactment of the EAC Competition Act in 2006 foundation for a
regional competition regime has been laid

However, implementation of the EAC Competition Act has not seen much
progress in spite of its relevance and need

CUTS implementing a project to contribute to the process of harmonising
the national and regional competition laws in the EAC region (EACOMP
project)

This presentation will outline some of the research findings and suggested
way forward
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1. Introduction: The Concept of Competitiveness
Competitiveness
Trade Competitiveness
Export
Competiveness
Export
Structure
Trade
performance
4
1. Introduction: Export Competitiveness
“Export competitiveness is the ability of the
producers to sell goods in the global market
place at a price, quality and timeliness
comparable to competing foreign
producers.”
5
1. Introduction: How does competition help?
 Low
Entry Barriers
 Increase
in efficiency
 Investor
Confidence
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1. Introduction: Practical Examples
 Logistics
Industry
 Financial
Industry
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2.National and Regional
Competition Regimes in the EAC
2.1. Competition Laws, Regulations & Institutions
Competition
Act
Competition Competition
Regulations Department in
Ministry of
Trade /EAC
Sec.
Independent Competition
Competition Tribunal
Authority
Tanzania
✔
✔
-
✔
✔
Kenya
✔
✔
-
✔
✖
Rwanda
✔
✖
✔
✖
✖
Burundi
✔
✖
✔
✖
✖
Uganda
✖
✖
✖
✖
✖
EAC
✔
✔
✔
✖
✖
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2.2. Readiness for Implementation of EAC
Competition Act (relevant national policies/laws)

Effective enforcement of a competition regime on the national and regional level
requires certain flanking policies and laws to be aligned with the “spirit of
competition”

From a regional competition perspective it is therefore critical to review a
number of related policies and laws in the EAC countries.






Industrial Policy
National Procurement
Trade and Investment
Labour
Competition policy and national laws
This will be necessary to assess whether they act as “enablers of a competitive
regional market” and determine any needed amendments to the national or
regional law
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3. Progress and Challenges in the
Implementation of EAC
Competition Law
3.1.Progress in the Implementation of the EAC
Competition Act, 2006
Progress and Current Status
EAC Competition Regulations adopted
in 2010

Section 38 of Act amended to allow
appointment of 5 Commissioners

Jun. 2013 - Sectoral Council on Trade,
Industry, Finance & Investment (SCTIFI)
adopted Roadmap for establishment of
EAC Competition Authority

May 2014 - SCTIFI directed EAC Sectt.
to establish the EACCA in FY 2014-15.

EACCA to be housed under EAC
Department of Trade, Industry, Finance
& Investment

Challenges and Hindrances
Harmonization of competition laws not
done, as anticipated by Sept.2013
(Roadmap)
 Officer responsible for competition
issues at the Secretariat was vacant for a
long period
 Difference in the levels of economic
development and institutional/legal
readiness to implement EAC Act
 Varying levels of national capacity for
implementation
 No agreement on implementing EAC
Competition Act, without national
laws/insitutions in place in all members

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3.2. Stakeholder Views: Challenges in the
Implementation of EAC Comp. Law
Institutional Challenges:
- Competition Authorities are not yet established in all EAC member states
- Capacity of national institutions to fulfill role according to the EAC Act is not given
- Resources for the establishment of EAC Comp. Authority are to be provided by members
National Vs EAC Competition Laws
- National legal framework needs to be in alignment with EAC Act - not yet undertaken
- Different levels of national economic development and quest for protectionism
- Amendments to the EAC Competition Act in this regard have been delayed
-
Political Economy Challenges
- Lack of political will to advance the implementation of EAC Comp. Act  Vested interests
- National reluctance for regional supervision of national procurement and industrial policy
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4. Cross-Border Competition
Concerns in the EAC
4.1. Possible factors causing competition
concerns in the EAC

Inland transport costs are very high, thus reducing the ability of regional
firms to exert competitive pressures on local dominant firms

Exchange rate volatilities within the EAC region has slowed down market
entry and exit in the face of sunk costs related to currency movements
therefore incentivizing anticompetitive behaviour among dominant firms

The EAC region is characterized by firms with significant market power,
dominant firms are able to operate outside competition pressures, abuse
their dominant position and keep prices high
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4.1.Possible factors causing competition
concerns in the EAC (Contd.)

The existence of Non-Tariff Barriers (NTBs) in the EAC region are a regional
competition concern as they restrict the free movement of goods in
response to supply and demand

Customs administrative entry and passage procedures

Government participation in trade and restrictive practices tolerated by it


Distribution Restrictions

Specific limitations

Technical barriers to trade and sanitary and phyto-sanitary measures (World Bank 2012)
The operation of MNCs in the regional EAC market pose threat to local
firms and consumers  dominance by distribution arrangements through
local subsidiaries or distributor firms (esp. exclusive distributorship = vertical
arrangement)
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4.2. Common Types of Cross-Border
Anticompetitive Practices
Anticompeti
tive Mergers
and
Acquisitions
Abuse of
dominance
Market
sharing
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4.3. Some Red-Flags in Key Sectors in the EAC

Breweries:


leading players such as MNCs have been engaging in different tactics
aimed at increasing their market shares at the expense of their rivals, e.g.
shareholding in dominant firms in their won markets  linkages among
players in different markets in the EAC
Cement:

Subsidiary companies of MNCs with presence in more than one country in
the EAC have been engaged in fierce price competition which can easily
breed anticompetitive tendencies
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4.3. Some Red-Flags in Key Sectors in the EAC
(Contd.)


Banking:

Foreign-owned banks in general have a strong presence in the EAC banking sector,
controlling more than half the total assets of the banking sectors in Uganda (79%),
Rwanda (54%), Tanzania (51%), Kenya (45%) and Burundi (41%) and have a natural
advantage over local banks (Sanya and Gaertner, 2012)

Kenyan banks are a dominant force in the region – 19 of top-30 in the region.
Kenya's network is most formidable

Alleged collusion between banks through concentrated market structure (interest)
Telecommunication:

Negotiations among national telcom providers for borderless roaming are
beneficial for consumer, however, may be breeding ground for collusive practices
among national providers across borders including on tariff charges
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5. Possible Ways Forward

Political will must be created to ensure the motivation of stakeholders to
prioritize implementation of the regional and national competition laws

The general public/consumers and the private sector need to be educated
and made aware of the benefits that EAC and national competition regimes
foster

sensitize policy makers in partner states who do not have competition
regulations/institutions in place to appreciate the benefits of national and
regional level competition policy and law
 public/consumer support can be generated to influence the political process
in the advancement of the operationalization of the law
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5. Possible Ways Forward

Capacity building of regional and national structures to implement the the
EAC competition law to address anticompetitive practices in the region
effectively

EAC Partner States should implement the decisions of the SCTIFI of June
2013 urging Partner States that have not enacted competition laws and/or
constituted Competition Authorities to do so.

The Partner States should harmonize their respective national laws with
the regional law, and possible amendments to the EAC Act have to be made
a priority on the summit level
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6. Planned Project Advocacy Activities: “Accelerating the
Implementation of EAC Competition Policy and Law”

National Advocacy and Training Workshops (October/November 2014)





Dissemination of research findings on “State of Play of National Competition
Reforms”
Presentation of analysis of the alignment of national competition legislation and EAC
competition law, challenges and solutions
Presentation of findings on Cross-Border Competition Concerns in the EAC
Training: Fundamentals of anti-competitive practices, strategies to address crossborder competition concerns, Advocacy strategies
Regional Advocacy Workshop (March 2015, Arusha)



Presentation of research findings of EAC Synthesis Report on State of
Implementation of EAC Competition Law
EAC secretariat presentation on current state of EAC competition law
implementation and the way forward
International experience: regional competition regimes
If interested to attend a workshops please email: sur@cuts.org
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7. Endpoints

Many potentially anticompetitive practices are going unchecked due to the
absence of an overall regional regulator to deal with cross-border
competition issues
 Leaving weaker market players and consumers exposed to unfair business
conduct by dominant firms (private or public sector owned)

National representatives at the EAC level must prioritize the implementation
of the EAC Competition Act 2006 in order to promote a level-playing ground
to promote fair competition and consumer welfare

Fair competition in the region is expected to lead to better access to goods
and services, lower prices, better quality and private sector growth
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Thank you