NAIROBI: Supremacy tussles between Kenya’s communications and competition authorities over the jurisdiction and enforcement of competition-related laws and regulations began with the amendment of the Kenya Information Communications Act 1998. Through the amendment, Parliament sought to compel the Communications Authority to consult with the Competition Authority prior to declaring a person or institution “a dominant telecommunications service provider”, which appeared to erode the powers of the former. In 2015, the Competition Authority thwarted attempts by the Communications Authority of Kenya to declare Safaricom a dominant player in the telecommunications sector.
The criteria for determination of dominant position in the two legislations vary. Whereas section 23 of the Competition Act has an expanded scope in the definition, the latter is specific. Section 84W5 (a) of the Kenya Communications and Information Act, 1998 stipulates the threshold for market dominance in the telecommunications sector as being at least 25 per cent of the total revenue of the entire telecommunications market. In addition, the Competition Act has no provision for what the authority should do after an investigation into potential abuse as should have been contained in section (36).
Dominance can be over-inclusive if Kenya is part of a larger market in which no Kenyan firm has power over price even if it has a large share of Kenyan sales. On the other hand, it can be under-inclusive when it exempts firms from being labelled dominant if they have less than 50 per cent of the market even if all their rivals are very small and it has considerable power over price. Hence, it should not simply be determined by a firm’s absolute size or market share.
These are pointers to the ambiguities and contradictions existing in the competition-related laws. There are three types of regulations guiding production and provision of services: Economic, technical and competition-related regulations. Economic regulation involves setting prices, increasing service standards and encouraging choices, while technical regulation encompasses technical oversight; quality, safety and protection of health and the environment. Regulations ensure markets operate effectively and fairly.
The common practice is that sector-specific regulatory agencies regulate economic and technical regulations, while enforcement of competition-related regulations is shared between the sector-specific regulators and the national completion authority through four main approaches. The first is the enforcement of technical and economic regulation by a sector-specific regulator and competition enforcement exclusively left to a competition authority. The second involves the combination of technical and economic regulation in a sector-specific regulator with some competition law enforcement functions. The third approach involves the combination of technical and economic regulation and enforcement of competition laws in consultation with the competition authority through negotiated agreements. The final approach involves technical regulation organized as a standalone function for the sector regulator and includes some economic regulation within the competition authority.
The conduct of competition and related regulations requires fundamental reforms. For instance, the retail and wholesale petroleum prices are being fixed by the Energy Regulatory Commission on a monthly basis since 2010, despite being glaringly anti-competitive.
In modern liberalised economies, price controls send wrong signals and should be temporary as the regulator seeks to address market imperfections. The market conduct in the telecommunications raises eyebrows with one service provider dominating the sector for close to two decades and rival firms hardly making a foothold.
To curb this, Parliament should strengthen section 9(1) of the Competition Act by making it mandatory for the Competition Authority to negotiate and sign agreements to coordinate the exercise of jurisdiction over competition matters in all regulated sectors as is the practice in jurisdictions with modern competition laws such as Europe and South Africa.
Furthermore, potential mechanisms for abuse, including predatory pricing and tied selling should be included in the list in section 24(2) of the Competition Act. As the laws stand, actual results of abuse of dominance depend on whoever is establishing the existence of market power.
Regulatory bodies should build partnerships amongst themselves, law enforcers and other Government agencies. This will help develop a framework for management of misunderstandings for building and championing an effective competition ecosystem in Kenya’s business sector.
The ultimate objective of competition regulatory mechanisms is to provide powerful incentives for regulated firms to reduce costs and improve service quality; stimulate introduction of new products and encourage efficient investment pricing to spur private sector development. Kenya’s economy yearns for modern competition laws to claim her position as a regional economic and business powerhouse.
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