Overview of Competition Law and Policy in Kenya

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OVERVIEW OF COMPETITION
LAW AND POLICY IN KENYA
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Overview of Competition Law and Policy in
Kenya
1
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.
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Overview of Competition Law and Policy in
Kenya: Legislative history
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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.
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Overview of Competition Law and Policy in
Kenya: Legislative history
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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
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Overview of Competition Law and Policy in
Kenya: Objectives
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Parts of current Act (Cap.504)
The Act is divided into six Parts
Part I- Preliminary
Part II- Provisions Relating to Restrictive Trade
Practices
Part III- Control of Monopolies and
Concentration of Economic Power
Part IV- Provisions Relating to the Control
and Display of Prices
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Overview of Competition Law and Policy in
Kenya: Parts
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Cont.
Part V- Establishment of the Restrictive Trade
Practices Tribunal
Part VI- Miscellaneous Provisions
Note: 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.
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Overview of Competition Law and
Policy in Kenya: Parts
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Implementing Institutions.
Monopolies and Prices Department
(Commissioner)
Minister for Finance
Restrictive Trade Practices Tribunal
(RTPT)
The High Court of Kenya
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Overview of Competition Law and Policy in
Kenya: Institutions
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Implementation approach
RTP’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.
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Overview of Competition Law and Policy in
Kenya: Implementation
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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.
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Overview of Competition Law and
Policy in Kenya: Sanctions & Penalties
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Sanctions and penalties.
Mergers and Takeovers
• Imprisonment for a term not exceeding three
years,
• A fine not exceeding Ksh. 200,000 or
• Both
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Overview of Competition Law and
Policy in Kenya:Sanctions and Penalties
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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
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Overview of Competition Law and
Policy in Kenya: Weaknesses
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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.
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Overview of Competition Law and
Policy in Kenya: Weaknesses
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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 :Minister
o Management: The Board and
o Implementation: Authority
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The Competition Bill, 2009
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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.
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The Competition Bill, 2009
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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.
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The Competition Bill, 2009
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Contin.
The Bill contains provisions on Consumer Welfare
 Part on Price Control was removed.
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The Competition Bill, 2009
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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.
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Benefits of regional interaction
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Cases Investigated
1. 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.
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Case:TOTAL KENYA LTD. AND
CHEVRON KENYA LTD.
18
Contin.
Analysis
The market with 29 players was found to be
highly concentrated where five multinationals
controlled 84.07%.
Post-merger CR5 was 87.41
Premerger HHI was 1627.36 and a post
merger HHI of 2069.485
There exist high entry barriers and the only
credible mode of entry can be through
acquisition of existing retail network.
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Case:TOTAL KENYA LTD. &
CHEVRON KENYA LTD.
19
Contin.
Assets with competition concerns were:
– Retail outlets
– Intoplanes facilities at airports
– Loading arms
– Depots
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Case:TOTAL KENYA LTD. &
CHEVRON KENYA LTD.
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Contin.
Conclusion
If approved the merger would create
competition concerns.
Recommendation
The 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.
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Case: 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.
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Case: BROOKSIDE DAIRY &
SPINKNIT DAIRY
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Cases Investigated continuation
Analysis
There 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.
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Case: BROOKSIDE DAIRY &
SPINKNIT DAIRY
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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.
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Case: BROOKSIDE DAIRY &
SPINKNIT DAIRY
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Contin.
Conclusions
The 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.
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Case: BROOKSIDE DAIRY &
SPINKNIT DAIRY
25
Cases Investigated continua
Recommendations
The Commission recommended that the
transaction be approved unconditionally.
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Case: BROOKSIDE DAIRY &
SPINKNIT DAIRY
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End
Thanks all.
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Overview of Competition Law and
Policy in Kenya
27
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