By MUGAMBI MUTEGI, pmutegi@ke.nationmedia.com
In Summary
- Prof Githu Muigai hits out at ICT minister Fred Matiang’i for by-passing his office and taking Bill to Parliament.
The Attorney-General has asked ICT secretary Fred Matiang’i to withdraw from Parliament regulations seeking to have Safaricom
declared dominant on account of its large market share, giving the
telecommunications giant timely support in its fight with rival Airtel.
In a letter to Dr Matiang’i dated July 9, 2015, Githu
Muigai, the AG, has also hit out at the minister and the Communications
Authority of Kenya (CA) for drafting the controversial regulations
without his input contrary to the laid down law-making procedures.
“[Drafting of the regulations and forwarding to
Parliament] has been done without the input of this Office as per the
agreed procedure for the preparation of legislation or of the CAK
(Competition Authority of Kenya), the expert body in matters relating to
competition under the Competition Act,” Prof Muigai says.
“Accordingly, I advise that the Ministry withdraws
the regulations from the National Assembly and subject them to
discussions in all aspects as contemplated by the MoU (between CA and
CAK).”
The AG’s response was triggered by a letter the
competition authority wrote to the ICT secretary asking for revision of
the proposed set of 11 regulations, which the authority describes as
drastic.
The regulations have provisions that empowers the
CA to automatically declare a telecoms operator with more than 50 per
cent market share dominant, subjecting Safaricom to a restrictive
marketing and pricing business environment.
Dr Matiang’i forwarded the proposals to Parliament
last month, with spirited backing from Airtel, and the CA, leaving
Safaricom fighting a lone battle.
Prof Muigai’s support therefore comes as a welcome
relief to Safaricom, which has maintained that it is not abusing its
dominance and that it is being unfairly targeted by the stringent
guidelines.
Statistics released by the CA on Monday show that
Safaricom controlled 67.1 per cent of Kenya’s telecom market as of
March, down from 67.4 per cent in December.
Telkom Kenya (Orange) gained 0.8 percentage points
to reach 10.8 per cent market share while Airtel lost 2.4 percentage
points to close the period at 20.2 per cent market share.
CAK director-general Wang’ombe Kariuki in April
backed Safaricom in its battle with the CA, arguing that subjecting
restrictive dominance laws on the telecoms operator without proving
abuse rubbishes the tenets of competition law and international best
practice.
In a memo to his CA counterpart Francis Wangusi, Mr
Wang’ombe cited several clauses in the proposed law he considered
“retrogressive” and wanted repealed.
One of CAK’s main arguments, which were also
attached in the June 17 letter to Mr Matiang’i, is that the Fair
Competition and Equality of Treatment Regulations do not envision market
research as a basis to ascertain dominance and its abuse.
“The regulations can only be introduced after the
sector regulator has undertaken reviews of the telecommunications market
taking into consideration the general principles of competition law,”
Mr Kariuki said.
“The proposed regulations can only be introduced in a
scenario where a monopoly situation exists, and not dominance. They
should only be imposed in markets where competition remedies are not
sufficient to address the problem.”
The CA’s draft rules deleted a clause in the current law
requiring it to prove abuse of dominance before declaring an operator as
such. The regulator argued that the clause had made it “difficult” to
punish errant telecom firms.
A market review is meant to determine if an
industry has high barriers to entry, whether a dominant position is
expected to persist indefinitely and if application of the competition
laws alone cannot remedy the situation.
Mr Wang’ombe advised that the CA only apply
restrictive measures (price controls) in cases where there is a
catastrophic market failure, adding that the Kenyan telecoms market
still shows signs of being contestable.
If passed, the proposed law will also require dominant telecom firms to have their tariff adjustments vetted by the regulator before implementation, a requirement that would deny Safaricom the chance to respond speedily to changes by rivals.
If passed, the proposed law will also require dominant telecom firms to have their tariff adjustments vetted by the regulator before implementation, a requirement that would deny Safaricom the chance to respond speedily to changes by rivals.
The new regulation also introduces price controls
for dominant players, meaning the CA will have powers to set tariffs for
Safaricom as is the case in the petroleum sector.
The competition watchdog says this move seems to
support the “(mis)-interpretation” that being a dominant player is an
illegality that can only be addressed using price controls.
The new CA regulations will also empower the
regulator to publish proposed tariffs for regulated services in the
Kenya Gazette and invite consumers and competitors to comment.
Operators found abusing their dominance or engaged
in anti-competitive conduct will also be liable to a fine not exceeding
the equivalent of 10 per cent of gross revenue in the preceding year,
for each financial year that the breach persists.
The AG’s letter to Dr Matiang’i adds a fresh twist
to the ongoing supremacy war between the CA and the CAK. Prof Muigai
argues that the CA and the CAK need to abide by the MoU they signed on
May 6 committing to “collaborate in the preparation of
legislative…regulations.”
“I consider that the concerns raised by CAK require
discussion between your two bodies for the sake of harmony of
operations. The expected collaboration was not forthcoming in the
present case,” the AG says.
Airtel has in recent months been piling pressure on
the CA to declare Safaricom dominant, saying its position had made the
market uncompetitive, risking edging out rival firms.
Airtel, which has gone as far as lobbying the
Senate, argues that is has consistently made losses over the past five
years because the market “is concentrated and only one operator makes
profit.”
Safaricom has maintained that, not only is it not
abusing its dominance, but that it acquired the market power through
calculated investment and should therefore not be punished for it.
If passed, the proposed law would also require
Safaricom to split its massive business into independent units, a move
analysts say is targeted at M-Pesa — the telecom’s cash cow.
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