Kenya: Dominance Comparative Guide

1 Legal and enforcement framework

1.1 Which legislative and regulatory provisions regulate dominance in your jurisdiction?

The legislation governing dominance and the abuse thereof is the Competition Act (12/2010), as amended by the Competition Amendment Act (27/2019) – in particular, Part III (C). Further guidance can be found in the Consolidated Guidelines on Restrictive Trade Practices issued under the Competition Act.

1.2 Do any special regimes apply in specific sectors?

The telecommunications sector is subject to specific regulations under the Kenya Information and Communications Act. Both the Communications Authority of Kenya (CA) and the Competition Authority of Kenya (CAK) have jurisdiction over competition matters affecting telecommunications entities.

1.3 Is the legislation intended purely to protect economic interests or does it have other aims?

No, the object of the Competition Act is "to enhance the welfare of the people of Kenya by promoting and protecting effective competition in markets and preventing unfair and misleading market conduct throughout Kenya" in order to protect consumers, among other things.

Hence, while the Competition Act aims to promote and protect economic interests, an important additional consideration to take into account when evaluating dominance cases in Kenya is the promotion of public welfare.

1.4 Which authorities are responsible for enforcing the legislation?

In terms of Section 9(1)(a) of the Competition Act, the CAK is the competent authority for the promotion and enforcement of compliance with the act. The Competition Tribunal has jurisdiction over appeals of decisions made by the CAK pursuant to Section 53 of the act.

1.5 How active are the enforcement authorities in taking action against abuse of dominance in your jurisdiction? What key decisions have the enforcement authorities adopted most recently?

Historically, the CAK has been hesitant to declare any entity as dominant, much less engaging in abuse of dominance. However, the CAK has previously conceded during a parliamentary proceeding that Safaricom – a large telecommunications firm – had a dominant position. That said, as this occurred outside of the formal CAK decision-making process, this finding has neither lawful effect nor precedential value, as an official decision was never taken by either the CA or the CAK on the Safaricom issue.

Further, on 21 August 2021, the Competition Tribunal handed down its first dominance judgment in which it concluded that Majid Al Futtaim Hypermarkets Limited – the owner of Carrefour – had abused its buying power in contravention of Section 24(2A) of the Competition Act (the complaint, dated 26 April 2019, was brought under Section 24(2A) of the act, which was since deleted in December 2019 by Amendment Act 27/2019 and replaced by Section 24A).

This recent decision emphasises the vitality and the firm stance of the Kenyan competition authorities in enforcing the abuse of dominance provisions.

2 Definitions and scope of application

2.1 What parties are covered by the dominance legislation? Are any exemptions available?

Any legal person – in almost all circumstances, a corporation – that engages in economic activity with a nexus to the Kenyan economy may be found to have a dominant position. Section 4 of the Competition Act states that:

Section 24(1) of the Competition Act provides that it is only the abuse of a dominant provision that triggers the application of the act's dominance provisions. In this regard, the mere possession of a dominant position is not banned outright in Kenya; it is rather the abuse of that position that falls within the ambit of the act, which is consistent with internationally accepted antitrust principles of abuse of dominance and monopolisation offences.

According to Section 26 of the act, the Competition Authority of Kenya (CAK) has the power to grant an exemption where exceptional and compelling reasons of public policy exist, by taking into account the extent to which the agreement, decision or concerted practice contributes to, results in, or is likely to contribute to or result in:

1. maintaining or promoting exports;
2. improving, or preventing decline in the production or distribution of goods or the provision of services;
3. promoting technical or economic progress or stability in any industry;
4. obtaining a benefit for the public which outweighs or would outweigh the lessening in competition that would result, or would be likely to result, from the agreement, decision or concerted practice or the category of agreements, decisions or concerted practices.

2.2 How is 'dominance' defined in your jurisdiction?

'Dominance' is defined in Section 23 of the Competition Act ("Criteria for determining dominant position"), which provides that a 'dominant undertaking' is one that produces, supplies, distributes or controls "not less than one-half" of the total goods which are produced, supplied or distributed in Kenya. Alternatively, a firm is dominant if it provides or controls at least 50% which are rendered in Kenya.

An undertaking is also deemed dominant where it:

• controls at least 40% but not more than 50% of the market, unless it can show that it does not have market power; or
• possesses less than 40% market share but has market power.

Incidental to the determination of dominance, 'market power' is defined in the Competition Act 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" (Definitional Section at 8).

2.3 How important is market share in assessing dominance in your jurisdiction? Do specific thresholds apply in this regard?

Yes, as outlined in question 2.2, and also according to the Consolidated Guidelines on Restrictive Trade Practices, specific share thresholds apply. In this regard, the CAK sees a firm with a market share of more than 50% as dominant. Further, dominance can be established below the 50% threshold where the undertaking:

• controls at least 40% (but less than 50%) of the market, unless it shows that it does not have market power; or
• controls less than 40% and has affirmative market power.

2.4 What other factors are considered when assessing dominance?

According to Paragraph 66 of the Consolidated Guidelines on Restrictive Trade Practices, the CAK can also consider the ability to "set prices, outputs or trading terms without being effectively constrained by its customers, competitors or suppliers in the relevant market", with the ability to act unconstrained thereof being indicative of dominance and having market power.

2.5 How are the product and geographic markets defined in your jurisdiction?

The CAK's Revised Guidelines on Relevant Market Definition provide the necessary guidance in determining product and geographic markets. In this regard, Paragraph 11 of the Market Definition Guidelines provide that a relevant product market "comprises all those products which are regarded as reasonably interchangeable or substitutable by the consumers, by reason of the products' characteristics, their intended use, production methodologies involved, raw materials used, and route to market among others".

After defining the product market, the geographic market is then defined to possibly extend the area under investigation. In this regard, Paragraph 12 of the Market Definition Guidelines provides that the geographic market "comprises the area in which the undertakings concerned are involved in the supply and demand of products or services ('Focal area'), in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas".

2.6 Does the dominance legislation make any distinction between dominant purchasers and suppliers?

Section 24A(5) of the Amendment Act specifically prohibits the abuse of buyer power and provides that conduct amounting to an abuse of buyer power includes:

1. delays in payment of suppliers without justifiable reason in breach of agreed terms of payment;
2. unilateral termination or threats of termination of a commercial relationship without notice or on an unreasonably short notice period, and without an objectively justifiable reason;
3. refusal to receive or return any goods or part thereof without justifiable reason in breach of the agreed contractual terms;
4. transfer of costs or risks to suppliers of goods or services by imposing a requirement for the suppliers to fund the cost of a promotion of the goods or services;
5. transfer of commercial risks meant to be borne by the buyer to the suppliers;
6. demands for preferential terms unfavourable to the suppliers or demanding limitations on supplies to other buyers;
7. reducing prices by a small but significant amount where there is difficulty in substitutability of alternative buyers or reducing prices below competitive levels; or
8. bidding up prices of inputs by a buyer undertaking with the aim of excluding competitors from the market

However, no reference is made to dominant suppliers.

2.7 Is collective dominance recognised in your jurisdiction? If so, how is it defined?

No, the Competition Act takes an individualistic approach when it comes to ascertaining dominance.

2.8 What is the statute of limitations to prosecute abuse of dominance cases in your jurisdiction?

Section 86 of the Competition Act provides that an investigation may not be initiated after three years from the date on which the infringement ceased. The act does not contain an express tolling provision.

3 Abuse of dominance

3.1 How is 'abuse of dominance' defined in your jurisdiction?

To constitute abuse of dominance, Paragraph 57 of the Consolidated Guidelines on Restrictive Trade Practices provides the following four conditions:

• The entity at issue must qualify as an 'undertaking';
• The undertaking must hold a dominant position on a relevant market;
• The undertaking's conduct must qualify as an abuse; and
• The abusive conduct must be within a market in Kenya or substantial part of Kenya.

3.2 What specific types of conduct constitute an abuse of dominance in your jurisdiction?

Section 24(2) of the Competition Act provides the following specific examples of acts constituting abuse of dominance:

1. directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
2. limiting or restricting production, market outlets or market access, investment, distribution, technical development or technological progress through predatory or other practices;
3. applying dissimilar conditions to equivalent transactions with other trading parties;
4. making the conclusion of contracts subject to acceptance by other parties of supplementary conditions which by their nature or according to commercial usage have no connection with the subject-matter of the contracts; and
5. abuse of intellectual property rights.

The above, however, is not an exhaustive list of possible conduct qualifying as abuse of dominance. Section 24(1) of the act expressly provides that "any conduct" which amounts to an abuse of a dominant position is prohibited.

3.3 On what grounds may the enforcement authorities commence an abuse of dominance investigation?

Section 31 of the Competition Act provides that the Competition Authority of Kenya (CAK) can initiate an investigation relating to abuse of dominance on its own initiative or after receiving a complaint from any person, government agency or ministry.

If the CAK decides not to conduct an investigation, it will inform the complainant in writing of its decision. If the CAK does decide to commence an investigation, it may serve a notice in writing requiring that person to:

• provide it in writing with any information relevant to the investigation;
• produce documents specified in the notice that are relevant to the investigation;
• appear at a specified time and place before it to give evidence/produce documents required by the notice; and
• give copies of any records of relevance to the investigation.

3.4 What powers do the enforcement authorities have in conducting their investigation?

Section 32 of the Competition Act gives the CAK the powers of entry and search; and Section 33 of the act gives it the power to take evidence.

In this regard, Section 32 of the act provides that the CAK may authorise persons in writing where it deems it necessary to its investigation to enter any premises where the person is believed to be in possession of information, documents and records that are relevant to the investigation. The persons authorised by the CAK to enter the premises may use the computer system on the premises that are being searched to search the data on the computer system, among other things.

Police officers may assist the CAK in the execution of entry and search.

Further, Section 33 empowers the CAK to receive statements, documents, information or anything else that may assist the CAK, in its opinion, with the investigation. The statements, documents and information received must, however, be admissible in court to be received into evidence. The CAK may also:

• administer an oath or affirmation for the purposes of taking evidence from a person before it; and
• verify by oath or affirmation a written statement for a person appearing as a witness as his or her written statement.

3.5 Is there an opportunity for third parties to participate in the investigation?

In accordance with Section 36(1) of the Competition General Rules, the CAK may issue a notice to any person to supply information, documents or evidence or to appear before it during the course of its investigation.

Further, Section 38 of the Competition General Rules provides that the CAK shall, upon completion of its investigation but before a final decision has been made:

1. serve a notice to each party which may be affected by the decision, as provided for in the Act;
2. afford due process to undertakings that are likely to be affected by the decision including the right to access evidence relied on by the Authority.

3.6 What are the general rights and obligations of the enforcement authorities during the investigation?

Section 34(4) of the Competition General Rules provides:

Further, Section 36(1) of the Competition General Rules provides that the CAK may issue a notice to any person to supply information, documents or evidence or to appear before it during its investigations.

Lastly, Section 37 of the Competition Act provides that the CAK may impose interim relief during an ongoing investigation if it is of the opinion that it must act as a matter of urgency for the purpose of preventing serious, irreparable harm to any person or protecting the public interest.

3.7 What are the general rights and obligations of the target company during the investigation? What are the general rights and obligations of individuals targeted during the investigation?

The target company may be obliged to provide certain information or documents to the CAK in terms of Rule 36 of the Competition General Rules.

3.8 What factors will the enforcement authorities consider in assessing whether an abuse of dominance has taken place?

The Consolidated Guidelines on Restrictive Trade Practices provide some information on this topic. The abuse is assessed by first establishing whether it is exploitative or exclusionary. The authority will also consider the specific practice in question and the state of competition in the market with and without the presence of the alleged abuse.

As discussed in question 3.2, Section 24(2) of the Competition Act provides examples of conduct the CAK deems abusive.

3.9 In case of a finding of abuse of dominance, can the company seek to negotiate a settlement or similar resolution? If so, what is the process for doing so?

Yes, Section 38 of the Competition Act provides that during and after an investigation, a settlement agreement can be entered into which may include damages to the complainant or a proposal on an amount to be imposed as a pecuniary penalty.

The CAK also sets out further details in the Fining and Settlement Guidelines. The settlement procures are conducted in accordance with Section 4 of the Fair Administrative Action Act and Part IX of the Competition General Rules (63/2019).

In this regard, the parties will notify the CAK in writing of their intention to settle and the CAK will inform the parties in writing within seven days as to whether it is amenable to settlement. Should the CAK consent to the request for settlement, negotiations will begin and a settlement agreement will be executed within 90 days, which may be extended for another 30 days.

4 Defences

4.1 What defences are available to companies in response to enforcement?

Apart from the typical antitrust defences available to companies, such as disputing the relevant product or geographic market definitions, a possible defence is that the practice is justifiable in substance.

4.2 Can companies avail of leniency in abuse of dominance cases?

Yes, Section 89A of the Competition Act provides that the Competition Authority of Kenya (CAK) may operate a leniency programme where a firm voluntary discloses the existence of a prohibited agreement or practice and cooperates with the CAK during its investigation of the agreement or practice. The CAK has issued specific Leniency Guidelines to aid potential applicants in the process of seeking leniency. Successful leniency applicants "may not be subject to all or part of a fine that could otherwise be imposed under" the act (Section 89A).

5 Remedies and sanctions

5.1 What remedies and sanctions may be imposed for abuse of dominance? Can sanctions be imposed on individuals?

In terms of Section 36 of the Competition Act, the Competition Authority of Kenya (CAK) may issue the following after consideration of any written representations and of any matters raised at a conference:

• a declaration that the conduct under investigation is an infringement of the prohibited conduct in terms of the Competition Act;
• a restraint on the undertakings from engaging in that conduct;
• a direction that any action be taken by the undertakings involved to remedy or reverse the infringement or its effects;
• the imposition of a financial penalty of up to 10% of the immediately preceding year's gross annual turnover in Kenya of the undertakings in question; and
• any other appropriate relief.

Sanctions can be imposed on individuals, as per Section 24(3) of the Competition Act, which provides that persons abusing a dominant person will be liable "on conviction to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings or to both".

5.2 How are the remedies and sanctions in abuse of dominance cases determined?

Section 24(3) of the Competition Act provides that abuse of dominance is an offence and that persons that abuse a dominant position will be liable "on conviction to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings or to both".

5.3 Can the enforcement authorities impose remedies and sanctions directly or is court action required?

As provided by Section 36 of the Competition Act, the Competition Authority of Kenya has the legal authority to impose remedies or sanctions directly on its own, which can then be taken on appeal by the target undertaking to the Competition Tribunal.

6 Appeal

6.1 Can the defendant company appeal the enforcement authorities' decision? If so, in what forum and what is the process for appeal?

Section 40 of the Competition Act provides that an appeal must be made to the Competition Tribunal within 30 days of receiving the Competition Authority of Kenya's (CAK) decision. If the appellant is further dissatisfied with the decision of the Competition Tribunal, it may appeal to the High Court within 30 days. Thereafter, the decision of the High Court is final.

6.2 Can third parties appeal the enforcement authorities' decision, and if so, in what circumstances?

Section 40(1) of the Competition Act provides that "a person aggrieved by a determination of the Authority made under this Part shall appeal in writing to the Tribunal within thirty days of receiving the Authority's decision". Hence, third parties may appeal the CAK's decision as long as they are aggrieved by this decision.

7 Private enforcement

7.1 Are private enforcement actions against abuse of dominance available in your jurisdiction? If so, where can they be brought?

Private prosecutions against abuse of dominance are not available in Kenya. An aggrieved party must submit a complaint to the Competition Authority of Kenya (CAK).

However, any person may take a decision made by the CAK on appeal to the Competition Tribunal.

7.2 Are class actions or other forms of collective action available in your jurisdiction?

Yes.

7.3 What process do private enforcement actions follow?

Not applicable.

7.4 What types of relief may be sought and what types of relief are most commonly awarded? How is the relief awarded determined?

Not applicable.

7.5 Can the decision in a private enforcement action be appealed? If so, to which reviewing authority?

The decision of the Competition Tribunal may be appealed in the High Court within 30 days of the tribunal's order.

8 Trends and predictions

8.1 How would you describe the current dominance enforcement landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Although the Competition Authority of Kenya (CAK) has had no recent cases relating to the enforcement of the abuse of dominance provisions, previous experience confirms that the CAK is active in conducting investigations into particular sectors – such as the advertising and manufacturing industries, in which the CAK sought to investigate abuse of dominance, among other things. Thus, the CAK is alive to conducting investigations into possible abuse of dominance and is likely to commence similar investigations in keeping with its trend of increased enforcement.

9 Tips and traps

9.1 What would be your recommendations to companies to avoid an abuse of dominance charge and what potential pitfalls would you highlight?

It is pivotal for companies to implement effective internal antitrust/competition training for key employees. This not only will reduce the risk of anti-competitive behaviour occurring, but may also be used as a possible mitigating factor if a fine is ever imposed against the company for abuse of dominance.

In addition to internal compliance training, it is essential for companies to gather legal opinions from external counsel to identify whether certain conduct may constitute an infringement of the Competition Act.

The pitfalls of an abuse of dominance charge is that it necessitates a drawn-out and complex period of litigation, accompanied by significant legal costs and potential penalties. In addition, companies stand to suffer substantial reputational damage as a result of any adverse findings. In general, competition law may be particularly hard to navigate while also having onerous ramifications on infringing companies – which is why it is essential to have effective compliance training and advice from external legal counsel.

Co-Authored by Gina Lodolo, Joshua Eveleigh and Andreas Stargard

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.