Why EAC competition law is key in efforts to spur growth

Bikers participate in a promotion dubbed Karibu East Africa organised by East African Community in Kampala recently. PHOTO | MORGAN MBABAZI 

By ELIZABETH SISENDA

Posted  Monday, November 2   2015 at  16:19

In Summary

• We need to enhance a competitive 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.

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 because it currently has more than 153 million consumers.

The European Union 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 companies 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 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 monopolisation were rampant in the EAC region owing to increased cross-border trade.

The most affected sectors in the region include: telecoms, transport, insurance, beverages, banking and energy.

To prevent further distortion of competition in the common market, member countries are making efforts to establish a 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.