 TRAINING FOR TRADE PRACTICE INVESTIGATION COMMISSION (TPIC) MAY 2008 ADDIS ABABA, ETHIOPIA  PRESENTED BY: Peter G. Kanyi - Monopolies and Prices Commission –Kenya 9/12/ Kanyi:MPC KENYA

HORIZONTAL RESTRAINTS/AGREEMENTS Definition of restraints to trade. Are acts perpetrated by two or more enterprises whose effect(s) is/are likely to eliminate or limit competition. attributable to firms, which are horizontally related. Competition laws postulate a competitive marketplace in which rival firms compete with respect to prices, products, and services. Any arrangement, countering this principle conduct among competitive entities, is accordingly suspect. 9/12/2015Kanyi:MPC KENYA2

NATURE OF HORIZONTAL AGREEMENTS Always anti-competitive agreements.  These agreements have a direct adverse effect on competition and are very unlikely to bring consumers any real benefits. Agreements with pro- and anti-competitive effects.  Best analyzed on a case-by–case basis that considers and weighs both sets of effects. Such a “rule of reason” approach is applied to horizontal agreements on: 9/12/2015Kanyi:MPC KENYA3

Agreements subject to varied treatment.  These are evaluated basing on the different views on underlying economic models on markets.  “ Small” agreements.  Declining/Shrinking markets.  Import and Export Cartels. 9/12/2015Kanyi:MPC KENYA4

Agreements subject to varied treatment continued…  “Vertical restraints with horizontal consequences: -Most-Favored-Customer Provisions. -Facilitating Horizontal Coordination. -Dampening Competition. -Raising Rivals' Costs. 9/12/2015Kanyi:MPC KENYA5

Efficiencies advanced in favor of most favored customer.  most-favored-customer provision helps a buyer lower his/her costs by purchasing inputs for less.  where firms must write long-term contracts with their customers knowing that supply and demand conditions might change unpredictably. 9/12/2015Kanyi:MPC KENYA6

Conditions likely to facilitate anti- competitive agreements.  Relatively small number of enterprises;  High entry barriers;  Homogeneous or standardized products;  Sales made in frequent small amounts rather than infrequently in large amounts;  Facilitating practices such as the “Most Favored Nation”;  Patterns 9/12/2015Kanyi:MPC KENYA7

SOURCES OF INFORMATION ON COLLUSION Correspondence and meeting files; Interviews with former management and marketing executives; Former and current customer complaints; Interviews with customers; Bid records; 9/12/2015Kanyi:MPC KENYA8

 Interviews with small suppliers about pricing behavior of major competitors;  Interviews with importers and new entrants;  Correspondence and trade association records; and  Correspondence of the trade association director. 9/12/2015Kanyi:MPC KENYA 9

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