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Corporate

Spotlight turns on Monopolies office’s potency

Safaricom and Zain face off via adverts. Safaricom says the new rules are meant to clip its growth wings. Photo/JOSEPH KANYI
Safaricom and Zain face off via adverts. Safaricom says the new rules are meant to clip its growth wings. Photo/JOSEPH KANYI  

Monopolies Commissioner Wang’ombe Kariuki will on Friday host a group of agitated visitors, a team from seven companies that have joined forces to oppose the proposed merger of the country’s biggest advertising agencies ScanGroup and Ogilvy East Africa.

The advertisers say the merger, which will see ScanGroup acquire a 50 per cent stake in Ogilvy East Africa, will create a large entity that will stifle competition.

Before Mr Kariuki can skim through the volumes of the petition by the advertisers, a fellow senior government official just streets away will be making final arrangements to fly in experts from the US to look at a similar issue.

This will perhaps be the most recent indirect act that potentially punches holes in the role, effectiveness and capacity of the office of the Monopolies and Prices Commission.

This is the body charged with promoting fair competition in the economy which, among other things, entails ensuring that companies are not involved in anti- competitive behaviour or price fixing.

Information and Communications minister Samuel Poghisio says he plans to hire experts on competition and pricing from the US to help it unravel the controversy surrounding the new set of telecoms regulations which have left players sharpening their spears with leading mobile operator Safaricom saying the rules are meant to clip its growth wings.

The new regulations are meant to streamline the telecommunications sector, two of which Safaricom says target to curtail its growth.

But on Thursday, the ministry announced it had temporarily suspended the implementation of the rules, pending a review by experts.

Safaricom singled out two of the regulations as unacceptable; the fair competition and equality treatment, and the Tariff regulations and compliance — specifically sections, 8 and 9 of the Tariff Regulations which state that dominant operators cannot review or reduce retail tariffs without the approval of CCK.

Chief executive officer Michael Joseph says part of the rules are aimed at punishing a dominant operator irrespective of whether or not that operator had acted in an anti-competitive manner and in abuse of its position.

Most operators agree that the regulations will benefit the industry even as some of their counterparts vigorously oppose them.

The decision to hire experts to help redraft the controversial new telecoms regulations, a move that was announced by Information permanent secretary Bitange Ndemo on Tuesday, puts the Monopolies Commission under scrutiny.

Industry players say the mandate falls right at the doorstep of the Monopolies Commission.

“This commission has not been able to keep in pace with the rapidly developing sectors such as telecommunication which are experiencing stiff competition and require closer monitoring and regulations that ensure that all operators are treated equally and playing at a level field,” said Dr Ndemo.

Legal experts reckon that the commission’s lack of legal clout to punish firms found guilty of unfair practices and the light sentences meted out are unlikely to deter culprits.

Evaluated and approved

The current Restrictive Practices Act provides for a range of penalties including a maximum fine of Sh200, 000 or a jail term of up to three years for offending companies, a light sentence for companies whose annual turnovers are in excess of Sh10 billion and pales in comparison with international practice where firms such as software giant Intel was fined Sh127 billion or four per cent of its annual sales for restrictive business practice.

In its recent report for the year ending June 2009, the Monopolies and Prices Commissioner says a total of 19 merger/takeover notifications were received, 10 of which were evaluated and approved.

But Treasury has sponsored a Bill in Parliament, the Competition Bill 2009, which is before the House seeking creation of an independent competition authority.

Experts want the body de-linked from Treasury and given more powers to better serve Kenya’s liberalised market.

Kwame Owino, a programmes co-ordinator at the Institute for Economic Affairs, says the current competition laws are archaic and best served the country before deregulation of the market in 1994.

“In its present state, the Commission is poorly designed and is not cushioned from influence by the Finance ministry which can use it to do its bidding in the marketplace.” Mr Kariuki is hopeful the efficiency of his office lies in the hands of strengthened legal backing.

“Enactment of a new competition law should be expedited to effectively address challenges that come with the adoption of free market policies like collusion to fix prices, charging of excessive prices, and abuse of market dominance,” said Mr Kariuki in a previous interview.

A major limitation that the Monopolies Commissioner faces however is the fact the he cannot act on perceived cases of unfair trade practices such as exorbitant pricing of consumer commodities as was the case in the days before liberalisation of the economy when prices were controlled.

Those powers were reduced in the early 1990s, allowing the Commission to only take action on traders who are suspected of fixing consumer prices in a cartel-like manner.

Nairobi-based lawyer Catherine Mputhia says ignorance on the side of business practitioners is another factor hurting efforts at eliminating unfair practices and regulation.

“Unfair trade practices are something we experience day to day, but proprietors are ignorant of the fact that the law exists,” says Ms Mputhia.

The Monopolies Commissioner also has powers to analyse and approve or reject mergers and take-over notifications.

The authority, under the proposed law, will have powers to institute public hearings or investigations to determine if a company or a manufacturer has unreasonably increased prices and will be ordered to rescind the decision to increase prices.

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