Competition law, also known as antitrust law, seeks to promote and maintain market competition by regulating anti-competitive conduct by companies. In Kenya, the Competition Act No. 12 of 2010 is the primary legislation governing competition matters. This article provides an overview of the prohibited practices under the Act and the enforcement mechanisms available.

Prohibited Practices

The Competition Act prohibits three main categories of anti-competitive conduct:

1. Restrictive Trade Practices: These are agreements, decisions or concerted practices that have as their object or effect the prevention, distortion or lessening of competition. Examples include:

o Price fixing: Agreements between competitors to fix prices or other trading conditions.

o Market allocation: Agreements between competitors to divide markets by territory, customers or product lines.

o Collective boycotts: Agreements between competitors to refuse to deal with certain suppliers or customers.

o Minimum resale price maintenance: Agreements that require resellers to sell at or above a specified minimum price.

Section 21 of the Act prohibits restrictive trade practices, with some exemptions for agreements that result in benefits like improved production or distribution, technical or economic progress, or promotion of small and medium enterprises.

2. Abuse of Dominance: This refers to conduct by a dominant firm that exploits its market power to the detriment of competitors and consumers. Examples include:

o Predatory pricing: Selling below cost to drive out competitors.

o Refusal to deal: Unjustifiably refusing to supply a product or service to a competitor or customer.

o Tying and bundling: Making the purchase of one product conditional on the purchase of another unrelated product.

o Margin squeeze: A vertically integrated firm charging a price for an upstream input that does not allow downstream competitors to make a profit.

Section 24 of the Act prohibits abuse of dominance. A firm is considered dominant if it has a market share of 50% or more, or if it can act independently of its competitors, customers and suppliers.

3. Mergers and Acquisitions: The Act requires notification and approval of mergers and acquisitions that meet certain thresholds. The Competition Authority of Kenya (CAK) assesses whether a merger is likely to substantially prevent or lessen competition, and can approve, conditionally approve or reject a merger. Sections 41-49 of the Act set out the merger control regime, including the notification thresholds, the assessment criteria, and the CAK's powers to investigate and remedy anti-competitive mergers.

Enforcement Mechanisms

The Competition Act provides for both administrative and judicial enforcement mechanisms:

1. Competition Authority of Kenya (CAK): The CAK is the primary enforcement agency for competition matters in Kenya. It has powers to:

o Investigate suspected violations of the Act, either on its own initiative or upon complaint.

o Issue cease and desist orders to stop anti-competitive conduct.

o Impose financial penalties of up to 10% of a firm's annual turnover for violations of the Act.

o Grant leniency to firms that disclose their participation in cartels and cooperate with investigations.

o Approve, conditionally approve or reject mergers and acquisitions.

The CAK's decisions are subject to appeal to the Competition Tribunal and the courts.

2. Private Enforcement: Persons who suffer loss or damage as a result of a violation of the Act can bring private actions for damages in the courts. Section 71 of the Act allows for follow-on actions, where a finding of a violation by the CAK can be used as evidence in a private action for damages.

3. Criminal Enforcement: Certain violations of the Act, such as price fixing and market allocation, are criminal offenses punishable by fines and imprisonment. The Director of Public Prosecutions is responsible for criminal enforcement, based on investigations by the CAK.

Recent Enforcement Actions

In recent years, the CAK has stepped up enforcement of the Competition Act, particularly in sectors like telecommunications, banking, and pharmaceuticals. Notable cases include:

In 2017, the CAK imposed a penalty of KES 12 million on outdoor advertising firm Magnate Ventures for abuse of dominance in the market for outdoor advertising space in Nairobi.

In 2018, the CAK approved the merger between Airtel Kenya and Telkom Kenya, subject to conditions to address potential anti-competitive effects in the telecommunications market.

In 2020, the CAK initiated investigations into suspected price fixing by manufacturers of edible oils, wheat and maize flour, and liquefied petroleum gas.

These enforcement actions demonstrate the CAK's growing assertiveness in detecting and remedying anti-competitive conduct.

Conclusion

Kenya's Competition Act provides a comprehensive framework for promoting competition and consumer welfare in the Kenyan economy. By prohibiting restrictive trade practices, abuse of dominance, and anti-competitive mergers, the Act seeks to create a level playing field for businesses and protect consumers from exploitation.

The CAK, as the primary enforcement agency, has a crucial role in investigating and sanctioning violations of the Act. Its recent enforcement actions have sent a strong signal that anti-competitive conduct will not be tolerated.

However, challenges remain, including the need for greater public awareness of competition law, the capacity constraints of the CAK, and the potential for political interference in competition enforcement.

Addressing these challenges will require sustained efforts to build a competition culture in Kenya, through advocacy, education, and stakeholder engagement. Strengthening the institutional capacity and independence of the CAK will also be crucial.

As Kenya's economy grows and integrates regionally and globally, a robust and effective competition law regime will be essential for promoting innovation, efficiency, and consumer welfare. The ongoing implementation and enforcement of the Competition Act, guided by international best practices and adapted to the Kenyan context, will shape the future of competition policy in Kenya.