EAC Competition Law could spur cross-border investments

EAST African Community is currently integrating at a pace faster than any other Regional Economic Community in Africa, today. On July 1, 2010, EAC became the first Regional Economic Community in Africa to begin the process of implementing a Common Market and is on course to become a Monetary Union in 2012.

EAST African Community is currently integrating at a pace faster than any other Regional Economic Community in Africa, today. On July 1, 2010, EAC became the first Regional Economic Community in Africa to begin the process of implementing a Common Market and is on course to become a Monetary Union in 2012.

The region has also witnessed a series of mergers and acquisitions as firms seek to break into new markets. However, all these activities are taking place in absence of functional laws regulating competition.

Experts define Competition Law as laws that promote or maintain market competition by regulating
anti-competitive conduct.

Basically, it is believed that monopolies or firms with very large market share can easily abuse their market dominance by engaging such activities as price fixing, sharing of markets, reducing quality of product, among others, to the detriment of consumers.

In 2004, the East African Community Council of Ministers adopted East African Competitions Policy subsequently the East African Legislative Assembly enacted the East African Competitions Act in 2006.

The Act seeks, among others, to promote fair trade and ensure consumer welfare and to establish the East African Community Competition Authority.

Although the EAC Competition Act was enacted in 2006, it has not been operational.  Operationalisation of the Act will require EAC Partner States to have in place National Competition laws and institutions.

Currently, only Kenya and Tanzania have fully functioning National competitions laws and institutions. Burundi recently enacted a Competitions Act and is in the process of establishing the responsible institution while Uganda and Rwanda are also at different stages of enacting their own competition laws. National competition laws are necessary in sense that National competitions commissions are expected to enforce some of the provisions within the EAC Competitions Act.

However, the coming into force of EAC Common Market has revealed a legal gap regarding regulating firms with cross-border investments. National competition laws and regulations have a jurisdiction limited to national borders which leaves a question on how to regulate companies whose activities have cross-border effects.

It is for this reason that EAC Secretariat is now looking to operartionalise the East African Competitions Act, 2006.
The Act contains several provisions to deal with competition issues such as mergers and acquisitions, Counterfeits and other Intellectual Property Rights Violations Act, Abuse of Market dominance, and prohibits Partner States Subsidies, among others.

The Act also prescribes punitive measures for violators of the law.

The European Union as well as other regions have enacted competition laws that regulate firm’s activities that have Cross Border effects. The last decade has seen an increase in the number of enacted Competition Laws as more countries embrace competition laws as way for the future.

However, EAC is still lagging behind with only Kenya and Tanzania with functioning competition laws in place while the rest of EAC partner States are at different stages of enacting the laws. Absence of competition laws in other EAC Partner States appears to have curtailed efforts by EAC Secretariat to operationalise the EAC Competitions Act, 2006.

The central importance of Competition Law is that it lays down rules for fair competition where small and big firms co-exist in a market controlled by market forces. It gives consumers an opportunity to choose goods and services in an open market at a price and quality that fit the consumer’s needs and fosters opportunity for business by ensuring a level playing field. In absence of competition law, big firms can easily drive small firms out of the market through abuse of dominance such as predatory pricing, while exploiting consumers through price fixing as a result of cartels.

It is therefore important that EAC Partner States support operationalisation of EAC Competition ACT, 2006 and that Uganda, Rwanda, and Burundi expedite the establishment of national competition authorities to supplement the workings of the regional authority.

Communications Officer, East African Business Council

 

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