ARTICLE
27 February 2024

Ugandan President Assents To The Long-awaited Competition Act

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It may have been 20 years in the making but it is finally here! The President assented to the long-awaited Competition Act, 2023 ("the Act") on 2 February 2024.
South Africa Antitrust/Competition Law

It may have been 20 years in the making but it is finally here! The President assented to the long-awaited Competition Act, 2023 (“the Act”) on 2 February 2024. The assent to the Act is timely as it comes in the wake of HEAPI v Hon. Dr. Jane Ruth Acheng, Minister of Health and Attorney General where the court ordered the respondents to regulate and standardise the pricing of medical services provided by private health facilities. The back-to-school season also caused an outcry in the country for the regulation of school fees. Consumer protection and providing consumers with competitive prices and product choices are some of the key objectives of the Act. Implementation of decisions such as that in HEAPI may therefore fall within the mandate of the Ministry of Trade, Industry and Cooperatives (“the Ministry”), the administrative mechanism of the Act.

Administrative mechanism

While the region has opted for independent authorities to regulate competition within the respective countries, Uganda has not. The Act shall be administered by the Ministry, particularly a technical committee on competition and consumer protection established within the Ministry. With the government looking to increase its role within the economy, this immediately sets up a challenge for the independence of the Ministry and the potential conflicts that may arise.

The functions of the Ministry in administering the Act include:

  • Promoting and sustaining fair competition in the market;
  • Protecting the interests of consumers;
  • Monitoring and investigating anti-competitive practices;
  • Approving merger transactions and hearing and determining complaints in respect of competition; and
  • Consumer protection matters.

The Act also gives the Ministry the power to inquire into any action which is alleged to be in contravention of the Act and make a wide array of orders including, ordering for the payment of fines and directing parties to discontinue anti-competitive actions.

Relationship with sector-specific regulation

Competition has previously been regulated in certain sectors such as telecommunications and energy, among others. The fragmentation of the laws regulating competition in the Ugandan economy was one of the drivers of the Act. The Act allows sector-specific proceedings to be referred to the Ministry for its opinion where a party alleges that a decision or proposed decision is likely to affect competition in the market. It's worth considering the Ministry's capacity to sit and hear competition-related matters from different sectors in the market and render timely opinions, in addition to its wider mandate.

Relationship between the Act and COMESA, EAC regimes

The Act empowers the Ministry to so far as practicable to cooperate with competition authorities in the Common Market for Eastern and Southern Africa ("COMESA") and East African Community ("EAC"). However, the Act does not provide details on the interplay between the national and regional competition regimes, particularly as it does not exclude mergers or acquisitions with a cross-border effect from its approval process. This implies that mergers or acquisitions with a cross-border effect will have to meet the notification requirements on both a regional and a national level leading to a duplicity of filings.

In Kenya, mergers that meet the COMESA merger notification thresholds are exempt from notification to the Competition Authority of Kenya (“CAK”). Parties are only required to inform the CAK of the COMESA notification within 14 days of filing the notification. A similar arrangement would need to be considered in Uganda to avoid potential duplicity of filings.

Merger control

The Act introduces the requirement to notify the Ministry of any mergers, acquisitions or joint ventures. The entity acquiring control through a merger, acquisition or joint venture must give notice to the Ministry.

The Act defines control as:

  • The ability to exercise 49% or more of the voting rights in the entity;
  • The ability to appoint more than half of the members of the board of directors; or
  • The ability to control the affairs of an entity.

The threshold to be applied for the notification, the form that the notification shall take and the fees to be paid shall be prescribed by regulations of the Act. The timely publication of the merger threshold is crucial to the exercise of this requirement. A delay is bound to create unnecessary administrative hiccups.

Prohibition of anti-competitive practices and anti-competitive agreements

The Act prohibits any agreements, decisions or practices that have an adverse effect on competition. Particularly, horizontal co-operation agreements i.e. agreements between actual or potential competitors to fix prices, limit or control production, supply or investment and rig bids or undertake collusive tendering. The Act also prohibits vertical restraints i.e. agreements between entities at different levels of the supply chain to enter into an exclusive supply or distribution arrangement, a tying arrangement or a refusal to deal.

In its determination of an adverse effect on competition, the Ministry shall look at whether the agreements or practices result in the creation of barriers to new entry into the market or force out existing competitors. Alternatively, the Ministry shall consider whether the agreements result in any consumer benefit, pro-competitive impact or contribute to the economic progress of the market.

Abuse of dominant position

The Act also prohibits the abuse of a dominant position in the market. In determining whether an entity enjoys a dominant position, the Ministry shall take into account the economic power of the entity, whether the entity supplies or acquires 30% or more of particular goods or services and the market structure and size of the market in which the entity operates.

An entity would be found to have abused its dominant position where it imposes unfair or discriminatory purchase or selling prices, limits products to the prejudice of consumers, indulges in actions resulting in a denial of market access and uses its dominance in one market to move into or protect another market.

Conclusion

Uganda welcomes the Competition Act with open arms. A law governing competition is vitally important for the creation of a successful economy and it gives Uganda the opportunity to catch up with its EAC neighbours. The technical committee in the Ministry has its work cut out for it as the success of the law is hinged on the technical expertise and institutional strength of the administrative mechanism. To effectively exercise its wide mandate, the Ministry will require staff with adequate technical expertise and financial resources to establish an appropriate framework to implement the Act. The government's unfettered support towards the implementation of the Act is also crucial.

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.

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