Government tables bill to prevent market domination from mergers

A new bill, which the government tabled before Parliament on Thursday, February 13, seeks, among other things, to prevent anti-competitive practices such as mergers and requisitions that result in market domination. ALSO READ: Proposed consumer protection law seeks to tackle 'unfair' market practices The lower chamber of Parliament approved the relevance of this bill relating to competition and consumer protection. It is now set to be analysed by the Lower House’s responsible standing committee, prior to being put to a vote into law by its plenary sitting. While explaining the relevance of the bill, the Minister of Trade and Industry, Prudence Sebahizi, told MPs that the draft law intends to tackle anti-competitive conduct and unfair trading practices, among other issues. He told The New Times that the bill comes to repeal the law that was enacted in 2012, and it is proposing a number of changes by improving the previous provisions, but also addressing new challenges of the market. “The overall objective of the consumer protection and competition law is to protect the consumer, but also to ensure the level playing ground for all businesses, where small and medium enterprises cannot be affected by big companies that can have what we call anti-competitive practices,” Sebahizi said. ALSO READ: Consumer Rights Day: Rwanda banks on trust in digital market to go cashless Among those potential anti-competitive practices, he said, are mergers and acquisitions, pointing out that, for instance, if two big companies come together to form one company in a small market, they may end up taking the biggest share of the market, or the lion's share of the market. Such a practice, he pointed out, is not allowed, and if two companies intend to come together, the regulator has to assess the impact of that merger on the market. “If, for example, there is a threshold, you say a company that has a turnover of $50 million in a sector, cannot come together with another company of the same size of the turnover, if the merger is going to take, let's say, more than 60 per cent of the market. So, this means they can be the price maker,” he said, indicating that if you have the biggest share of the market, you can impose the price. “So that's what the competition law has to prevent,” he stated. ALSO READ: Why micro-finance institutions must have consumer protection policies Improved merger regime to enhance the regulatory framework for mergers In order to avoid the potential unfair competition as a result of the merger, the bill defines the concept and scope of mergers and outlines various forms of mergers, including the combination of previously independent enterprises, acquisition of controlling interests, and the creation of fully functional joint ventures. The regulatory authority – a state organ in charge of competition and consumer protection – considers and assesses such a merger whether it will not affect the competition negatively. Regulating mergers to prevent market domination The bill requires the regulatory authority to publish a notice of the merger review initiation, to ensure that the public and stakeholders are informed about the merger, including details about the parties involved, their activities, and the nature of the transaction. The rationale of publication of the initiation of the review of the notified merger is to promote transparency and public participation in the review process of notified mergers, according to an explanatory note of the bill. Sebahizi said stakeholders are those people who are involved in the same sector, giving an example that, if two banks want to merge, the stakeholders are other commercial banks because they are in the same sector. He underscored the importance of stakeholders’ involvement in the review process of mergers in question with a view to prevent practices that can stifle competitiveness in the market, such as in the financial sector. “If two big banks in a country come together and form one bank, they may end up taking up the lion's share of the market. They may end up imposing, let's say, interest rates. They may end up taking all the savings. So, other commercial banks will also have a role to play in that process of merger or acquisition of a bank, and to make sure that the newly created bank does not affect the market,” he said. Effective market inquiries The draft law empowers the regulatory authority to initiate market inquiries across all sectors, with the authority to gather information and publish findings, and to provide recommendations to the Minister for further action. The existing law does not provide so. The regulatory authority may initiate a market inquiry where it has reasonable grounds to suspect that there is a restriction or distortion of competition within a particular sector of the economy, the bill provides.

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Government tables bill to prevent market domination from mergers