Introduction
The principal object of the Bill is to amend the Competition Act (Cap. 504) (“The Principal Act”). These amends aim to strengthen the Legal Framework governing market dynamics with an emphasis on digital markets, to enhance consumer protection in Kenya. The Bill aims at redefining critical terms, introducing new terms, proposing forward-thought provisions as well as erasing certain provisions in the Principal Act which may no longer be crucial.
The Amends
Under section 2, the definition of “person” is now aligned with Article 260 of the Constitution, and “recognized consumer body” is replaced with “accredited consumer body.” Additionally, the definition of “undertaking” now includes natural persons. New definitions are added for “business consumer,” “digital activities,” “product information standards,” “strategic market position,” and “superior bargaining position.”
The Bill enhances the regulation of digital markets by amending Section 4 to allow dominance to be established with market shares below forty percent (40%) in digital activities, considering factors like network effects, economies of scale, switching costs, and innovation-driven competitive pressure. Section 9 is proposed to be amended to expand the functions of the Competition Authority, including the recognition of consumer bodies and the authority to carry out inquiries, studies, and research related to competition and consumer interests. The authority is also empowered to recommend competition and consumer protection policies in coordination with other agencies. Section 18’s amendment replaces “abuse of buyer power” with “abuse of superior bargaining position,” reflecting a broader scope of regulatory oversight. Amendments to Section 23 introduce the term “intermediates” and emphasize the importance of market power in digital activities. Section 23 is also proposed to be amended, to provide criteria for determining a dominant position, including conditions under which an undertaking controlling less than 50% of the market may still be considered dominant.
Also introduced is a new Part IIIA addressing the abuse of superior bargaining position in Kenya’s market. This conduct is prohibited, and the Competition Authority is empowered to monitor sectors or undertakings at risk of such abuse, ensuring compliance through reporting and prudential requirements. The Authority can develop and publish a code of practice for compliance in consultation with stakeholders. In assessing the presence of superior bargaining position, factors like dependence on transactions, market position, the ability to switch partners, and the criticality of the business partner are considered. The Bill defines abusive conduct to include delays in payment, unilateral termination or variation of contracts, transferring costs or risks to counterparties, demanding preferential terms, and unreasonable data collection. Violations can lead to imprisonment for up to five years or fines of up to ten million shillings. Additionally, the Bill amends several sections of the principal Act, allowing public input on proposed mergers, enhancing consumer protection by mandating disclosure of product information, and increasing penalties for non-compliance with the Authority’s orders. It further clarifies terms related to “recognized” and “accredited” bodies, expands the scope of consumer welfare issues, and outlines enforcement mechanisms for orders through financial penalties and legal actions like property attachment, debt collection, or appointing receivers.
In a nutshell, the Bill aims to amend the Principal Act to provide definitions for technical terms, include digital activities in dominant positions interpretation, expand the Competition Authority’s functions, align with a new part on superior bargaining position abuse, regulate intermediaries, delete section 24A, include prohibitions on strategic market positions and superior bargaining positions, and include mergers of privatized institutions, involve the public in mergers, streamline offenses related to false or misleading information, introduce financial penalties for non-compliance, and repeal section 92. These amendments aim to enhance the Act’s effectiveness and ensure fair market practices.