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OVERVIEW OF COMPETITION LAW AND POLICY IN KENYA. 6/6/2014. 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. . Legislative History continuation

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Overview of competition law and policy in kenya

OVERVIEW OF COMPETITION LAW AND POLICY IN KENYA

6/6/2014

Overview of Competition Law and Policy in Kenya


Legislative history
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.

Overview of Competition Law and Policy in Kenya: Legislative history


Overview of competition law and policy in kenya

  • 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.

6/6/2014

Overview of Competition Law and Policy in Kenya: Legislative history


Overview of competition law and policy in kenya

  • 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

Overview of Competition Law and Policy in Kenya: Objectives


Parts of current act cap 504
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

Overview of Competition Law and Policy in Kenya: Parts


Overview of competition law and policy in kenya
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.

Overview of Competition Law and Policy in Kenya: Parts


Overview of competition law and policy in kenya

  • Implementing Institutions.

  • Monopolies and Prices Department (Commissioner)

  • Minister for Finance

  • Restrictive Trade Practices Tribunal (RTPT)

  • The High Court of Kenya

6/6/2014

Overview of Competition Law and Policy in Kenya: Institutions


Overview of competition law and policy in kenya

  • 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.

6/6/2014

Overview of Competition Law and Policy in Kenya: Implementation


Sanctions and penalties
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.

Overview of Competition Law and Policy in Kenya: Sanctions & Penalties


Sanctions and penalties1
Sanctions and penalties.

  • Mergers and Takeovers

  • Imprisonment for a term not exceeding three years,

  • A fine not exceeding Ksh. 200,000 or

  • Both

Overview of Competition Law and Policy in Kenya:Sanctions and Penalties


Weaknesses of current law
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

Overview of Competition Law and Policy in Kenya: Weaknesses


Contin
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.

  • Overview of Competition Law and Policy in Kenya: Weaknesses


    The competition bill 2009
    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:

      • Policy formulation :Minister

      • Management: The Board and

      • Implementation: Authority

    The Competition Bill, 2009


    Contin1
    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.

    The Competition Bill, 2009


    Contin2
    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.

    The Competition Bill, 2009


    Contin3
    Contin.

    • The Bill contains provisions on Consumer Welfare

    • Part on Price Control was removed.

    The Competition Bill, 2009


    Benefits of regional interaction
    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.

    Benefits of regional interaction


    Cases investigated
    Cases Investigated

    • 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.

    Case:TOTAL KENYA LTD. AND CHEVRON KENYA LTD.


    Contin4
    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.

    Case:TOTAL KENYA LTD. & CHEVRON KENYA LTD.


    Contin5
    Contin.

    • Assets with competition concerns were:

      • Retail outlets

      • Intoplanes facilities at airports

      • Loading arms

      • Depots

    Case:TOTAL KENYA LTD. & CHEVRON KENYA LTD.


    Contin6
    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.

    Case: TOTAL KENYA LTD. & CHEVRON KENYA LTD.


    Contin7
    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.

    Case: BROOKSIDE DAIRY & SPINKNIT DAIRY


    Cases investigated continuation
    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.

    Case: BROOKSIDE DAIRY & SPINKNIT DAIRY


    Contin8
    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.

    .

    Case: BROOKSIDE DAIRY & SPINKNIT DAIRY


    Contin9
    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.

    Case: BROOKSIDE DAIRY & SPINKNIT DAIRY


    Cases investigated continua
    Cases Investigated continua

    • Recommendations

    • The Commission recommended that the transaction be approved unconditionally.

    Case: BROOKSIDE DAIRY & SPINKNIT DAIRY


    Overview of competition law and policy in kenya
    End

    Thanks all.

    Overview of Competition Law and Policy in Kenya