By Peter Muchoki Njoroge Chairman COMESA COMPETITION COMMISSION

PART ONE:EXPERIENCE AS A CP&L PRACTITIONER IN KENYAPART TWO: A CONSPECTUS OF THE COMESA COMPETITION COMMISSION By Peter Muchoki Njoroge Chairman COMESA COMPETITION COMMISSION

Mr Philippe Brusick, Ex-Head of Competition Affairs at UNCTAD in KENYA

PART ONE:CP&L IN KENYALack of a competition culture in Kenya • Competition is a fairly new phenomenon in the developing and least developing countries. As long as there are competing manufacturers, wholesalers, retailers etc., many people will think that there is adequate competition. As a new phenomenon Competition has not been understood well. • For example, when the Kenyan Law was being debated in parliament some members of parliament thought that competition law and policy should be applied to curtail the preponderance in business by a certain group of Kenyans vis-à-vis those deemed to be indigenous. • Yet another member of parliament felt that competition law should be applied to prohibit the practice of requiring new entrepreneurs to pay goodwill. • If law makers did not understand the law they were promulgating, then the common citizenry is obviously less informed.

Lack of support by the policy makers, public and the business community • Policy makers do not accord competition Authorities required support. Recently, when two members of parliament wanted to reintroduce price controls in the areas of Banking and Petroleum, the amount of support they got from parliament, the public and the unaffected sectors of the business community was phenomenal. • Businesses only support the idea of competition when they are affected negatively. In the developing countries, Kenya included, policy makers are often the owners of key businesses. This reality poses veritable challenges to the enforcement of competition policy and law. • Quite often the law makers promulgating competition law own the businesses which may require regulation. Possibilities of conflicts of interest are legion.

The Judiciary • The Restrictive Trade Practices Tribunal in Kenya has handled very few cases. Very few competition cases have gone to the High Court. • As a result there is no guiding jurisprudence and there are no precedents. • It is necessary that the judiciary is brought on board through requisite education and advocacy programmes. • That way, the business community and the public may be more willing to face tribunals and courts.

Lack of Adequate Financial Resources • In developing countries such as Kenya, Competition Authorities are not accorded adequate financial resources. • This may be understood when we juxtaposition the requirements of Competition Authorities with more mundane needs such as clean water, health, roads, education etc. • Even these supposedly more immediate needs do not receive adequate funds as enough funds are not there in the first place.

Lack of Adequate Human Resources • Almost all Competition authorities in developing countries lack adequate human power. • To a politician, it does not make sense to train one highly qualified competition expert abroad when the same resources could be expended, for example, in training thirty health nurses. • There is need to sensitize policy makers on the need to have qualified practitioners. • The private sector has contributed a lot to lack of qualified personnel. In a number of instances, the private sector has poached from the competition authorities’ employees who have been highly trained. This is because the private sector offers better salaries.

Lack of Legal and Financial Ability to Delve into the Areas of Education and Advocacy • There is need to give legal, financial and operational authority to competition authorities. This will allow competition authorities to handle education and advocacy matters. • Regarding inadequacy of financial resources, it is hoped that effective advocacy will facilitate the increase of the competition authority’s budget. • Autonomy will also have a positive effect in this area as the competition authority can impose fees to cover costs of its services in areas such as mergers and takeovers.

Sector Regulators • Sector Regulators in Kenya, as in other countries, are created by separate pieces of legislation. Quite often, the law creating a sector regulator contains a portion dealing with competition in the sector. • There should be deliberate harmonization of sectoral laws with the competition law. • The competition authority should, at least, have concurrent jurisdiction with sector regulators in all matters spawning competition issues. • On purely competition issues, the competition authority should have the final word.

Prosecution of offenders • The Restrictive Trade Practices, Monopolies and Price Control Act has provided for offences and penalties under Sections 21 (Restrictive Trade Practices) and 26 (control of monopolies and concentrations of economic power). • The prosecution of the offenders is, however, not done by the competition authority. • This has to be executed by the national police force and/or the Attorney General’s office. • This problem is replicated in many commonwealth countries.

Difficult economic realities • In the area of mergers and takeovers, developing countries sometimes find themselves between the rock and hard place. • For example, a company will be placed under receivership. Eventually a proposal will be forwarded to the competition authority for its takeover by a competitor. • The Competition Authority may find that no other competitor was interested in the failed firm. • Considering the dearth of locally harnessed investable capital in these economies, in order to save employment and to guard against expensive equipment going to waste, and for lack of an alternative, the Competition authority is forced by circumstances to approve the proposal. • This will also apply in the takeover of businesses and assets of foreign companies divesting from developing countries.

Access to Redress by members of the Public • Section 66 of the Restrictive Trade Practices, Monopolies and Price Control Act restricts the right of appeal to the Competition Tribunal, and hence to the High Court, to those parties involved in the dispute right from the beginning. • This disqualifies other legal and natural persons from accessing legal redress. • This is an area which may require improvement and this problem is replicated in many other jurisdictions.

Part 2: A CONSPECTUS OF THE COMESA COMPETITION COMMISSION • COMMISSION MEMBERS with Minister of Trade, Malawi and key officials from the region. Blantyre, Malawi will be the Commission’s HQS.

Introduction • The COMESA Competition Commission is a COMESA institution as is the PTA Bank, the Clearing House, the re-insurance company (ZEP-Re), the Leather and leather Products Institute (LLPI) and the Court of Justice. • It has a specific mandate which seeks to contribute to the equitable and harmonious integration and development of the COMESA region. • COMESA members are: Burundi, Comoros, Congo DR, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Uganda, Sychelles, Swaziland, Sudan, Zambia and Zimbabwe.

Relations with Other Organs/Institutions of COMESA • As an institution of COMESA, it is related to other Policy Organs of COMESA in a structured manner to ensure that its contribution to the realisation of COMESA’s short and long-term objectives is synchronised, supportive and in tandem with the activities and programmes of other COMESA organs and institutions. • The Competition Commission, like the Court of Justice, will promote and enhance COMESA’s rules-based character. • The Board of Commissioners,the superior organ, has oversight responsibilities over the Commission in both administrative arrangements and operations - determination of cases. • The executive arm of the Commission will issue initial determinations which can be confirmed or varied by the Board.

Relations with other institutions-Contd • Appeals against Board decisions will be taken to the COMESA Court of Justice. • The relationship between the Commission and other Policy Organs of COMESA relate to appointment of members of the Board. This is done by the Council of Ministers. • The Board is empowered to formulate Competition Rules but these must be confirmed by the Council. • Administratively, the Council will approve the Commission’s budget. • Council shall also approve the terms and conditions of appointment of the Director of the Commission which shall be fixed by the Board of Commissioners.

Relations with national competition authorities • National competition authorities will relate directly with the Competition Commission and such co-operation will be essential for the Commission and the Board to carry out their functions properly. • The Role of Secretary-General • As is the case with the Court of Justice, it is expected that the Secretary General may refer an issue to the Competition Commission under powers vested in him by Article 17 paragraph 8 of the Treaty. • The Chairperson of the Board shall also liaise with the Secretary-General on matters of policy including budgetary issues.

Functions and Powers of the Commission • The functions and the powers of the Competition Commission are • contained in Articles 7 and 8 which are reproduced in full here-below. • Article 7 • Functions of theCommission • 1. The Commission shall apply the provisions of these Regulations with regard to trade between Member States and be responsible for promoting competition within the Common Market. • 2. In order to accomplish that which is set out in paragraph 1 above, the Commission shall: • monitor and investigate anti-competitive practices of undertakings within the Common Market, and mediate disputes between Member States concerning anti-competitive conduct; • regularly review regional competition policy so as to advise and make representations to the Council with a view to improving on the effectiveness of the Regulations;

Article 7 Contd • help Member States promote national competition laws and institutions, with the objective of the harmonisation of those national laws with the regional Regulations to achieve uniformity of interpretation and application of competition law and policy within the Common Market; • co-operate with competition authorities in Member States; • co-operate and assist Member States in the implementation of its decisions; • provide support to Member States in promoting and protecting consumer welfare;

Article 7 Contd • Facilitate the exchange of relevant information and expertise; • enter into such arrangements as will enhance its ability to monitor and investigate the impact of conduct outside the Common Market but which nevertheless has, or may have, an impact on trade between Member States; • be responsible for developing and disseminating information about competition policy and consumer protection policy; • co-operate with other agencies that may be established or recognised by COMESA to monitor and regulate any specific sector.

Article 8 • Any person who contravenes or fails to comply with any provision of these Regulations or any Rules made hereunder, or any directive or order lawfully given, or any requirement lawfully imposed under these Regulations or any Rules made hereunder, for which no penalty is provided shall be determined to have breached the Regulations and shall be liable pursuant to that determination to a fine (in an amount to be determined by Rules) and/or such other penalty as may be assessed. • The Commission may enter into such arrangements for the provision of goods and services as may be necessary for the efficient performance of its functions. • The Commission, pursuant to the provisions of Article 55 of the Treaty, may establish its own rules of procedure to effectively implement the Regulations. • The Commission may appoint, on such terms and conditions as it may determine, such other staff as it considers necessary for the performance of its functions under these Regulations.

Article 8 contd • The Commission shall, to the extent required to remedy or penalise anti-competitive activity: • order the termination or nullification as the case may require of agreements, conduct, activities or decisions prohibited by Part 3 of these Regulations; • direct the enterprise to cease and desist from anti-competitive conduct and to take such steps as it believes may be necessary to overcome the effects of abuse of its dominant position in the market, or any other business conduct inconsistent with the principles as set out in these Regulations; • order payment of compensation to persons affected; • impose fines for breaches of the provisions of these Regulations

Article 8 Contd • Article 8 • Powers of the Commission • 1.The Commission may, in respect of trade between Member States, monitor, investigate, detect, make determinations or take action to prevent, inhibit and/or penalise undertakings whose business activities appreciably restrains competition within the Common Market. • 2.In conducting its investigations, the Commission may, in accordance with the applicable provisions of these Regulations and in keeping with the principles of natural justice: • order any person to appear before it to give evidence; • require the discovery or production of any document or part thereof; and • take any other reasonable action which may be necessary in furtherance of the investigation. • 3.Based on the findings of the investigation, the Commission may make a determination that there has been a breach of the Regulations in that the conduct at issue has, or is likely to have, an appreciable negative competitive impact and is inconsistent with the objectives of the Common Market.

Composition of the Board of Commissioners • Matters to do with the Composition of the Board of Commissioners, which is the policy and oversight body of the Commission, are contained in Article 13 which is reproduced in full herebelow:

Article 13 • Article 13 • Composition of the Board of Commissioners • The Board shall consist of not less than nine (9) and not more than thirteen (13) Commissioners appointed by the Council on the recommendation of the Secretary-General. The nominations of the Secretary-General shall reflect the regional character of the Common Market. • The Chairperson and the Vice-Chairperson shall be elected by the Board from among its members. • The persons to be recommended under paragraph 1 above shall be chosen for their ability and experience in competition law and policy, industry, commerce, public administration, labour, economics, law, consumer protection and small scale business matters.

Article 13 contd • No person shall be recommended for appointment as a Commissioner unless he/she is a citizen of a Member State. • The Chairperson shall assign three of the Commissioners to be full-time members of the Board. The full-time Commissioners shall each have suitable qualifications and experience in law and economics and will form the committee responsible for initial determinations. • No member of the Board shall involve himself/herself in any way in the day to day administration of the Commission.

APPRECIATION • I wish to thank CUTS and our Ghanaian hosts for inviting me to this function. • Goodbye. Au revoir. Tres Bien, Merci.

Sweet Waters Camp, Nanyuki, KENYA

By Peter Muchoki Njoroge Chairman COMESA COMPETITION COMMISSION