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

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 /10/2015 2:58:13 PM Overview of Competition Law and Policy in 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 /10/2015 2:58:13 PM Overview of Competition Law and Policy in Kenya: Legislative history 36/10/2015

 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 6/10/2015 2:58:14 PM Overview of Competition Law and Policy in Kenya: Objectives 4

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 6/10/2015 2:58:14 PM Overview of Competition Law and Policy in Kenya: Parts 5

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. 6/10/2015 2:58:14 PM Overview of Competition Law and Policy in Kenya: Parts 6

 Implementing Institutions.  Monopolies and Prices Department (Commissioner)  Minister for Finance  Restrictive Trade Practices Tribunal (RTPT)  The High Court of Kenya 6/10/2015 2:58:14 PM Overview of Competition Law and Policy in Kenya: Institutions 76/10/2015

 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. 6/10/2015 2:58:14 PM Overview of Competition Law and Policy in Kenya: Implementation 86/10/2015

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. 6/10/2015 2:58:14 PM Overview of Competition Law and Policy in Kenya: Sanctions & Penalties 9

Sanctions and penalties.  Mergers and Takeovers Imprisonment for a term not exceeding three years, A fine not exceeding Ksh. 200,000 or Both 6/10/2015 2:58:14 PM Overview of Competition Law and 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 6/10/2015 2:58:14 PM Overview of Competition Law and Policy in Kenya: Weaknesses 11

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. 6/10/2015 2:58:14 PM Overview of Competition Law and Policy in Kenya: Weaknesses 12

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 6/10/2015 2:58:14 PMThe Competition Bill,

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. 6/10/2015 2:58:14 PMThe Competition Bill,

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. 6/10/2015 2:58:14 PMThe Competition Bill,

Contin. The Bill contains provisions on Consumer Welfare Part on Price Control was removed. 6/10/2015 2:58:14 PMThe Competition Bill,

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. 6/10/2015 2:58:14 PMBenefits of regional interaction17

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. 6/10/2015 2:58:14 PM 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  Premerger HHI was and a post merger HHI of  There exist high entry barriers and the only credible mode of entry can be through acquisition of existing retail network. 6/10/2015 2:58:14 PM Case:TOTAL KENYA LTD. & CHEVRON KENYA LTD. 19

Contin.  Assets with competition concerns were: – Retail outlets – Intoplanes facilities at airports – Loading arms – Depots 6/10/2015 2:58:14 PM Case:TOTAL KENYA LTD. & CHEVRON KENYA LTD. 20

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. 6/10/2015 2:58:14 PM 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. 6/10/2015 2:58:14 PM Case: BROOKSIDE DAIRY & SPINKNIT DAIRY 22

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. 6/10/2015 Case: BROOKSIDE DAIRY & SPINKNIT DAIRY 23

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. 6/10/2015 2:58:14 PM Case: BROOKSIDE DAIRY & SPINKNIT DAIRY 24.

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. 6/10/2015 2:58:14 PM Case: BROOKSIDE DAIRY & SPINKNIT DAIRY 25

Cases Investigated continua  Recommendations  The Commission recommended that the transaction be approved unconditionally. 6/10/2015 2:58:14 PM Case: BROOKSIDE DAIRY & SPINKNIT DAIRY 26

End Thanks all. 6/10/2015 2:58:14 PM Overview of Competition Law and Policy in Kenya 27