The Competition Authority of Kenya (CAK) will not investigate Elon Musk’s satellite firm Starlink over accusations that it is engaging in predatory pricing in Kenya to edge out competitors.
The watchdog said in an emailed response that, while the law allows it to investigate restrictive trade practices either on its own motion or upon receipt of information or complaint from any party, it has no basis to probe Starlink at this time as the company has a tiny market share.
The CAK’s position dealt a blow to local internet service providers, including Jamii Telecommunications Limited (JTL), which had reported Starlink to the competition watchdog and the Communication Authority of Kenya (CA), accusing it of setting unrealistically low prices to undercut local players and then hitting consumers with surprise price increases.
According to CAK, Starlink is new and lacks dominance and market power and, therefore, there is no need to investigate it at this stage. The watchdog cited Sections 23 and 24 of the Competition Act, which outlines the criteria for determining a dominance and the abuse of such a position.
“In order to investigate a case of predatory pricing under the Act, the law requires that the entity in question must either be dominant or possess market power in Kenya, and engage in conduct that would amount to an abuse such as predatory pricing,” said CAK.
“Since Starlink is a new entrant in the Kenyan market and currently lacks both dominance and market power in Kenya, the Authority has no basis to initiate an investigation against it for abuse of dominance through predatory pricing at the moment.”
Starlink launched in Kenya in July last year and had captured a market share of 0.5 percent at the end of June this year, gaining a subscriber base that totalled 8,063 users. Safaricom continued to the lead with a market share of 36.4 percent, followed by JTL (24 percent) and Wananchi Group (17.5 percent).
Section 23 of the Competition Act defines a dominant player as one who controls not less than 50 percent of goods or services sold, or controls between 40 percent and 50 percent of the market share, unless it can prove that it has no market power. An entity with a market share of less than 40 percent but with market power is also classified as dominant.
The Act defines market power as “the power of a firm to control prices, to exclude competition or to behave to an appreciable extent, independently of its competitors, customers or suppliers.”
Predatory pricing refers to the illegal business practice of setting unrealistically low prices for a product or service in order to eliminate the competition. The CAK lists this as a form of abuse of dominance under restrictive trade practices.
Starlink has faced accusations of predatory pricing in countries such as Indonesia and India, but the firm has argued that it maintains “absolute transparency” on pricing and performance around the world. In India, Reliance Jio and Bharti Airtel—the two main players— called for a level playing field as the country works out the norms for satellite communication spectrum.
When it launched in Kenya in July last year, the installation kit was priced at Sh89,000. The multinational later slashed the price to Sh45,500 early this year and in June introduced other enticements such as the Sh1,300 monthly price for a 50GB package.
JTL told CAK and CA that only few local operators would be able to sustainably match the Sh1,300 price, taking into account infrastructure rollout costs, operational and other antecedent expenditure associated with providing ICT services.
In May, Starlink offered a one-month promotional price of Sh39,500 for the kit and in August introduced a rental option for the same kit at a monthly rate of Sh1,950.
The firm has disrupted the internet service market in several African countries, including Kenya.
