OVERVIEW OF COMPETITION LAW AND POLICY IN KENYA 6/10/2015 2:58:13 PM Overview of Competition Law and Policy in Kenya 16/10/2015.

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.

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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.

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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

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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

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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.

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Policy in Kenya: Parts6

Implementing Institutions.Monopolies and Prices Department

(Commissioner)Minister for FinanceRestrictive Trade Practices Tribunal

(RTPT)The High Court of Kenya

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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.

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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.

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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

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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

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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.

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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

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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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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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Contin.

The Bill contains provisions on Consumer Welfare Part on Price Control was removed.

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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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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.

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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.

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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.

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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.

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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.

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SPINKNIT DAIRY25

Cases Investigated continua

RecommendationsThe Commission recommended that the

transaction be approved unconditionally.

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SPINKNIT DAIRY26

EndThanks all.

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Policy in Kenya27