Thursday 23rd February 2012

Why Uganda Needs A Strong Competition Law Regime

By Brenda Ntambirweki

With the coming into force of the Protocol on the Establishment of the East African Community Common Market, it has become essential for Uganda and the EAC to have strong regulatory regimes on competition to address issues concerning competition in their respective markets and in the common market. Competition Law generally aims at protecting competition in a free market economy, where allocation of resources is ordinarily determined solely by supply and demand.

Competition Law objective

The major economic goal of Competition Law is making the markets work well for consumers, or consumer protection. The interests of consumers are protected not only by protecting the competitive process (supply and demand) itself, but by taking direct action against offending undertakings, for example, by requiring dominant undertakings to reduce their prices or prosecuting them for arbitrarily increasing prices of goods.

Another objective of Competition Law is the dispersal of economic power and the redistribution of wealth; in other words, the promotion of economic equity rather than efficiency. It has been argued that the very notion of democracy can be threatened by aggregation of resources in the hands of monopolists, multinational corporations and conglomerates. This would be at the expense of the ever-growing number of small and medium enterprises (SMEs) that are common-place and are driving our market today.

Competition Law also aims at protecting competitors. In many jurisdictions with common markets such as the European Union, Competition Law has been applied to protect small firms against their more powerful rivals. This notion that Competition Law must protect competitors as well as the competition process also has a strong appeal in the USA which has vibrant anti-trust laws.

The focus of the law

Competition Law is concerned with three main areas. The laws would be concerned with behaviour in markets carried out by the business collectively and usually as a consequence of agreement or concerted action. An example would be where suppliers of a commodity agree to arbitrarily increase prices. Tacit collusion where firms act in the same way, without necessarily colluding, would also be of interest to the regulatory authority.

Behaviour in the market which is consequent on a dominant firm would also be a concern. There would be regulation of dominant firms that decide to control the market because they have a large market share and therefore can control supply.

The effect of mergers on competition would also be of interest. Mergers would be dealt with prospectively by determining what effect the mergers are likely to have on competition as opposed to existing behaviour; the question revolving around what happens if a merger takes/does not take place and its effect on competition.

Uganda needs a strong Competition Law

In order to have a strong regulatory regime, the EAC countries will need: (i) a strong national institution that will be the regulatory body; (ii) the supervisory jurisdiction of our Courts of law that will be able to review decisions of the regulatory body by appeal or otherwise (iii) criminal sanctions in particular heavy penalties for those who are found to be in breach of the competition laws. At the community level, the EAC now has to pass a protocol on competition so that questions for disputes arising at the community level can be dealt with by the East African Court of Justice.

Currently, Uganda has a draft Competition Bill which has not been presented before Parliament for debate or circulated to stakeholders for discussion. We have to realise that all the EAC countries have vibrant markets and that leaving competition unregulated can only be disastrous in the long run. Discussion and passing of a competition law will be a step in the right direction.

The writer is an Associate with Sebalu and Lule Advocates
This article was published in The New Vision on 22nd October 2010