How a Competition Law Regime could boost Economic Growth in the EAC?

Business Daily, November 02, 2015

By Elizabeth Sisenda

Kenya, as well as the other East African Community (EAC) countries, is fast emerging as an investment destination for multinational companies, following the establishment of a Common Market in 2010. The common market is attractive to investors as it currently has over 153 million consumers.

The EU has been negotiating a bilateral agreement with the EAC – the Economic Partnership Agreements (EPAs) that could greatly impact the EAC market structure. Local firms stand to lose to foreign firms with greater capacity under the agreement in sectors such as agriculture, retail, horticulture, fisheries, textile and clothing, dairy, and meat if adequate safeguards are not established under the agreement.

This brings to light the need to enhance a competitive regional economy within the EAC though the implementation of a regional competition law regime to protect consumers and small enterprises from unfair business practices. A competitive market would mean more choice, better quality and lower priced products for consumers, and easier market access for new firms. Moreover, it would mean that measures would be put in place to curb abuse of dominance, market sharing, and concentrated mergers and acquisitions by firms with substantial market share. The most effective way to achieve this would be for the EAC member states to enforce regional competition legislation and encourage the enactment of national competition laws and establishment of independent competition agencies.

The EAC Competition Act, 2006 has already been ratified by member states, and national competition legislation enacted in all member countries except Burundi and Uganda. Prior to this competition legislation, price-fixing, poor quality products and services, market sharing and monopolization were rampant in the EAC region owing to increased cross-border trade. The most affected sectors across the region include: telecommunications, transport, insurance, beverages, banking and energy.

To prevent further distortion of competition in the common market, member countries are making efforts to establish a regional competition authority that will have mandate over the regional market in comparison to national competition agencies. Once established, the EAC competition authority will check cross-border anticompetitive practises and harmonize national competition regimes of the member states under the EAC competition regime to promote consumer welfare across the region.

Although the EAC Competition Regulations were adopted in 2010, there has been slow progress in the establishment of the EAC Competition Authority. There have been major challenges that have contributed to this. To begin with, there has been inadequate funding from member states to enable the authority to start its operations and function effectively across the region.

Secondly, there are legislative conflicts between national and EAC competition regimes leading to disharmony and enforcement hurdles. Similarly, amendments to the EAC competition legislation that would bring regional harmony have been delayed by national governments.

In addition, the economies of the EAC member countries are at different levels of development, and there is still a quest for protectionism by the governments of some of the EAC member states.

More importantly, there has been a lack of political will and vested interests by the governments of some member states, who have shown reluctance to be supervised at the regional level on national economic matters such as national procurement law and industrial policy.

Another major challenge is that the interface between sector regulators and national competition authorities has not been properly established. Thus, in most of the EAC countries, there has been poor cooperation and jurisdictional feuds between sector regulators and competition authorities. As a result, the competitive culture in these economies has been perceived as low and consumers have suffered due to unchecked anti-competitive practises.

There needs to be capacity building at the national and regional level in support of the EAC competition regime, which might involve training personnel on competition law and policy and its enforcement; funding regional and national competition agencies; and increasing advocacy on the benefits of a competitive market to all stakeholders. Media coverage of competition issues could help promote the culture of competition by increasing awareness among consumers and other stakeholders.

Plans are underway at the EAC Secretariat to have the EAC Competition Authority hosted by the EAC Department of Trade, Industry, Finance and Investment. An interim organisational structure and budget for the EAC Competition Authority has already been approved by member states, and the EAC Competition Authority is expected to begin its work in 2016.

Consumer Unity & Trust Society – Centre for International Trade, Economics and Environment, Nairobi (CUTS – CITEE) recently concluded the EACOMP Project at a Regional Advocacy Workshop held in Arusha, Tanzania from 12th October to 14th October 2015. The theme of the project was to accelerate the implementation of the East African Community competition law and policy regime for a well-functioning regional market. The project began with advocacy at the national level in each of the EAC member states, encouraging the establishment of national competition legislation and independent competition agencies, particularly in Burundi and Uganda. Key stakeholders from the EAC member states attended the event including: government officials, personnel from national competition authorities, civil society organisations, academia, the business community, media house representative and officials from the EAC Secretariat. The project was funded by Trade Mark East Africa.

*Lawyer at the Centre for International Trade, Economics and Environment

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