Unfair trade practices hurting East Africa’s investment climate

Delayed enactment of the region’s competition law has created loopholes for firms to engage in cartels. PHOTO | FILE 

By JAMES ANYANZWA

In Summary

• The operationalisation of the Act requires EAC member countries to have in place national competition laws and institutions.
• The EAC Council of Ministers is working on the EAC Competition (Amendment) Bill 2015, which seeks to amend the Competition Act to establish a mechanism to eliminate counterfeiting and piracy in the region.
• The Bill is further expected to create a conducive investment climate, free of unfair competition practices and also promote intellectual property rights in the region

East Africa’s competitiveness as an investment destination is at risk from the rising incidence of unfair trade practices among firms operating across the region.

The delayed enactment of the East African Community Competition Act (2006) has created loopholes for trade associations and firms operating across the region to engage in exclusive agreements, and from cartels, forcing consumers to pay relatively higher prices for goods and services.

The operationalisation of the Act, however, requires EAC member countries to have in place national competition laws and institutions.

Kenya and Tanzania already have fully functioning national competition laws while Burundi has enacted its own Competition Act and is in the process of creating the necessary institutions.

Although Rwanda already has various laws in place to regulate unfair trade practices, a specialised authority to enforce the competition and consumer protection laws has not been established. Uganda is also in the process of enacting competition laws.

“There is a serious problem of cartels as some of these companies operate across the region. We have advised our government to ensure that the East Africa Community Competition law comes into force from July 1,” said Wang’ombe Kariuki, director-general of the Competition Authority of Kenya (CAK).

The EAC Council of Ministers is working on the EAC Competition (Amendment) Bill 2015, which seeks to amend the Competition Act to establish a mechanism to eliminate counterfeiting and piracy in the region.

The Bill is further expected to create a conducive investment climate, free of unfair competition practices and also promote intellectual property rights in the region.

“The 16th meeting of the Legal and Judicial Affairs Sectoral Council advised the 30th Council of Ministers that the East African Competition Amendment Bill 2015 meets the legal requirements of the Treaty and may be introduced in the East African Legislative Assembly,” an official from Kenya’s Ministry of East African Community Affairs told The EastAfrican last week.

“The 30th Council of Ministers held in Nairobi on November 20-28, 2014 decided that the Bill be introduced in EALA.”

Kenya is set to launch investigations into the conduct, practices and procedures of trade associations, which have come under the spotlight for colluding with its members to fix consumer prices.

It has been established that despite clear provisions in the Kenyan competition law, many trade associations continue to have rules, practices and procedures that contravene the Act. These trade malpractices are undermining the region’s competitiveness as an investment destination.

Top on the list of trade associations to be probed are those in the financial, agriculture and agro-processing sectors. The probe, to be undertaken under a newly-introduced Special Compliance Process (SCP), will inform further inquiries into the conduct of member firms.

Through a notice in the Kenya Gazette to be published in June this year, the Competition Authority of Kenya will give powers to the SCP to require trade associations in the financial services and agriculture sectors to align their operations with the competition law.

The proposed Special Compliance programme is expected to grant associations a chance to streamline their operations and adhere to the competition law.

The SCP is expected to address and resolve inadvertent contraventions of the competition law and foster better practices in the future.

The competition body said individuals found engaging in restrictive trade practices will, if convicted, be liable to imprisonment for a term not exceeding five years or to a fine not exceeding $107,526.88.

Trade associations have been blamed for being at the centre of many cartels, which are partly responsible for the high prices of goods and services in Kenya.

CAK said the high cost of living in the country is partly driven by unscrupulous practices and a cartel-like business environment.