Back to Opinion and Analysis

A SNAP-SHOT OF ANTI-TRUST LAWS IN KENYA

By Joyce Karanja Monday, April 23, 2012
  • SHARE THIS ARTICLE

The Act covers restrictive trade practices, mergers and takeovers, unwarranted concentrations and price control.

The Act establishes the following four institutions for the enforcement, administration and settlement of competition-related disputes:

  • The Monopolies and Prices Commission (“MPC”), which is the investigative arm and a division within the Ministry of Finance. The MPC is empowered to make recommendations to the Minister of Finance.  The MPC is mandated to enforce competition principles and rules in accordance with the provisions of the Act.
  • The Minister of Finance takes decisions on cases investigated.
  • The Minister’s decisions can be appealed to the Restrictive Trade Practices Tribunal (the “RTPT”) which is an independent adjudicating arm that operates as the Court of First Instance.  However, administratively, the RTPT also falls under the Minister of Finance; and
  • The decision of the RTPT can be appealed to the High Court of Kenya within thirty (30) days of notification of the decision, being the final court of appeal in all matters relating to competition law.

As far as merger control is concerned, Kenyan law requires notification to the MPC of all mergers between two or more independent enterprises that are engaged in manufacturing or distributing substantially similar commodities or are engaged in providing similar services.  The Act is thought to have extra-territorial effect and strictly interpreted captures mergers which take place outside the Kenyan jurisdiction.  The MPC appears to be of the view that it has a wide remit under the Act and that if there is any question about whether to make an application for approval it is better to make a formal application and allow the MPC to investigate and report on the matter.

Mergers must be notified before the closing of a transaction.  No filing fees are payable.  The Act does not provide time periods within which the MPC must determine and application.

There is an absence of adequate regulatory or judicial interpretation of the provisions of the Act and the MPC will not issue guidance directives to help investors understand the workings of the Act nor will it commit its views to writing.  However, in practice the parties may request the MPC to confirm that the Act does not apply in matters where there is little or no effect on Kenyan commerce, although there is no statutory basis for this.

Mergers

Mergers are dealt with under section 27 of the Act.  This section lays down pre-notification requirements in terms of which a party to a merger should apply to the MPC and the MPC would, after the investigation, make a recommendation to the Minister of Finance. The final decision is made by the Minister of Finance.

In evaluating a merger, the MPC considers the following:

  • whether or not the merger will be advantageous to Kenya;
  • whether or not the merger will be disadvantageous to the extent that it reduces competition in the domestic market; and
  • whether or not the merger will be disadvantageous to the extent that it encourages capital-intensive production technology rather than labour-intensive technology.

As mentioned above, the parties have recourse in terms of the Act if they are not satisfied with the decision of the Minister by appealing to the RTPT. In terms of the Act, the RTPT is a standing body. However, the RTPT is only constituted if and when there is a case to be adjudicated upon. If the parties do not agree with the finding of the RTPT, they can still appeal to the High Court and the decision of the High Court is final.

At present, the legislation does not make provision for thresholds (or filing fees). This implies that all mergers, irrespective of size, have to be notified before implementation.

Unwarranted Concentrations

Unwarranted concentrations are dealt with under section 23 of the Act.  According to this section, the Minister is empowered to review any economic sector to determine whether there is a concentration of economic power which is detrimental to consumers.  The Minister may direct the MPC to investigate any economic sector, which s/he believes may contain some or other unwarranted concentration of economic power.

On completion of the investigation, the MPC makes its recommendations to the Minister who, in turn, may order any person holding unwarranted concentration of economic power to dispose of such portion of interest, as is necessary to eliminate the unwarranted concentration.

No investigations and subsequent actions regarding unwarranted concentrations are known to have taken place.

Price Control

Price control is dealt with under section 34 of the Act.  Initially, this was the sole mandate of the MPC and the law was reviewed to cover all the areas mentioned above.  It is understood that the mandate of the MPC to monitor and control prices is being reviewed with the purpose of repealing it.

As far as restrictive practices are concerned, an agreement or practice of a “price fixing” nature would likely constitute an unlawful restrictive practice under Kenyan competition law.

The Kenyan Competition Commissioner may be requested to or may initiate an investigation.  There have been some investigations but no prosecutions.  The legislation is poorly drafted and has been inconsistently applied.

Restrictive Trade Practices

The Kenya legislation on restrictive trade practices is intended to cover a wide spectrum of acts, including acts intended to lessen or purge the participation of legal and natural persons (indigenous citizens) in economic activities.  Such acts would include:

  • Trade agreements declared to be restrictive practices;
  • Practices of trade associations;
  • Refusal and discrimination in supply;
  • Predatory trade practices which eliminate competition;
  • Collusive tendering; and
  • Collusive bidding at auction sales.

Though the Act covers a wide range of anti-competitive conduct, section 5 exempts those trade practices which are allowed by another Act of Parliament and trade practices which are directly and necessarily associated with the licensing of participants in certain trades and professions by government agencies in accordance with authority conferred by an Act of Parliament.

Aggrieved or offended entities have the right to lodge complaints with the MPC, or the MPC can initiate an investigation where it suspects that there may be anticompetitive practices in an industry.  On completion of an investigation, the MPC makes a recommendation to the Minister of Finance who has the powers to inter alia order the offender to abstain from such anticompetitive practices.  This is done through Consent Agreements, which the Minister is required to publish in the Kenya Gazette (the official Government legal publication).

Offences and Penalties

Any person who is guilty of an offence under section 27 of the Act (requiring approval for take-overs and mergers) can be imprisoned for a period not exceeding three years or a fine not exceeding KES. 200 000 (equivalent to approximately R 24 000) or to both.

The Enactment of Regulations

The Act makes provision for the formulation of regulations. It appears, however, that these regulations have not been formulated.  The regulations are important in that they will lay down the procedures of conducting the proceedings before the MPC and also assist with implementation of the objectives of the Act. It was suggested that these regulations be introduced either under the current law or the reviewed law discussed below.  Regulations would arguably enhance the performance of the MPC.

Need For Legislative Review

Although Kenya’s competition policy covers all anticompetitive acts/conduct which are prohibited in most other jurisdictions, its effectiveness and success is curtailed by the fact that the MPC is a division within a Department.  In other words the MPC is not an autonomous entity.  As mentioned above, section 5 of the Act provides for the exemption of the behaviour of institutions mandated by other Acts of Parliament.  This limits the ambit of competition policy and leaves room for anti-competitive behaviour in other sectors of the economy.

The Commissioner has for a long time also acknowledged these loop holes and has been involved in reviewing Kenya’s competition policy.  The drafting of the new legislation has finally been completed resulting in The Competition Bill, 2009 which was published by Kenya Gazette dated 30th April, 2009 for introduction to Parliament.  The Bill aims to introduce clarity in Kenyan competition law, inter alia and notably to limit the extra-territorial operation of the Act to transactions which have some kind of effect on the Kenyan market and to introduce time periods within which the newly established Competition Authority must determine a notification for a proposed merger.  However, until such time as the Bill is enacted into law, the Act will continue to regulate competition in Kenya.