Why Uganda needs a competition law

“Companies that cannot compete at national level cannot compete at regional level,” those were the words of the Director and chief executive officer of the Common Market for Eastern and Southern Africa (COMESA) Competition Commission (CCC) in Livingstone, Zambia.

Mr George K Lipimilie, the chief executive officer of the COMESA Competition Commission (CCC), while addressing reporters recently in Livingstone, Zambia, said there are many benefits for a country with a proper competition law that is harmonised with the regional laws especially those relating to trade and investment.

Competition policy refers to a set of laws, regulations and measures employed by governments aimed at ensuring that markets remain competitive through maintaining a fair degree of competition by eliminating restrictive business practices by private enterprises.

A competition policy seeks to encourage and improve the competitive process and ensure consumers feel the benefits of that process. These aims are achieved in practice through competition law.
Competition encourages enterprise, innovation, efficiency and widening of choice allowing consumers to buy the goods and services they want at the best possible price; and contributing to our national competitiveness.

Mr Lipimilie noted that the competition policy has a key role to play in the development of national and regional economies, particularly in the current economic context characterised by increasing movement of goods and services beyond national borders and emerging middle class.

While trade liberalisation - the removal of barriers on the free exchange of goods between nations - has contributed to spurring economic growth, it has also brought in debate on fair competition in international trade.

It is against this background that the CCC which has a membership of 19 countries started the competition commission in 2013 to create a frame work for a competition law among the member states.
Mr Lipimile explained that competition laws are there to protect the process of competition.

“They are not meant to punish large companies on account of their size and commercial success. The idea behind these laws is that in every market, there should be vigorous competition forcing firms to continually strive to improve their goods and services and to offer them on favourable terms.”

With the increasingly transactional character of competition cases, he says a holistic regional competition regime is essential to overcome the enforcement gap of the traditional territorial scope of national competition laws.

“National authorities are increasingly being called upon to protect consumers from anti-competitive conduct originating outside their jurisdiction,” Lipimile argues. He adds: “Consumers on the market are a largely unorganised group, with little bargaining power, poor knowledge of their rights and the avenues for enforcing these rights are even more challenging in the context of an open market economy.”

In order for the competition law to operate successfully, it requires the participation of all COMESA member countries so as have uniform policies across all the regional markets in order to avoid restraining trade between countries.

In Uganda, the evolution of cartels where prices are determined by connivance contrary to the principle of market forces, has undermined the principles of competition and encouraged uncompetitive practices.

Unlike Kenya, Uganda does not have a competition law and there have been concerns over the growth in prices of specific services and goods, especially for fuel, telecom, banking, sugar and power sectors, which consumers blame on the growing cartel-like tendencies.

Experts, Jane Seruwagi and Martin Kaggwa from SEATINI Uganda, argue that the lack of this law has led to deindustrialisation, increased trade gap, market monopolisation by few companies, and subsequently led to Anticompetitive Practices (ACP) like price-fixing, market sharing, predatory pricing, and resale price maintenance among others. It is partly explained that despite the introduction of Structural Adjustment Programmes in a bid to stabilise her economy, poverty, unemployment, debt, among other indicators of under development, have continued to prevail. It is, therefore, important for Uganda to have a Competition Policy and agency to regulate such ACPs.

Ideally, in a free market economy, prices are determined by forces of demand and supply but instances of uncompetitive tendencies and fixing prices by big markets are still common.

Hadijah Nakakande, the public relations officer at the Ministry of Industry and Trade, says Uganda is in the process of putting in place a National Competition law. The Consumer Protection and Competition Bill was approved by Cabinet in November 2015 and the draft Bill was forwarded to the First Parliamentary Council awaiting for its first reading.

“We are working on the domestication of the COMESA Treaty. The COMESA Treaty Implementation Bill was approved by Cabinet and is to be tabled before Parliament for the first reading. COMESA laws only apply to cross boundary trade and until we domesticate the Treaty, the laws are not applicable to national issues,” she says
Uganda is a member of the COMESA Competition Commission; we automatically became members when the Commission was put in place.

However, she says the National Competition and Consumer Protection Policy in place. The policy was approved by Cabinet in November 2014 and implementation is underway. The Policy promotes fair competition and consumer welfare while giving the force of law in the country to related commitments Uganda has made at the EAC and COMESA.

According to the State of Play of Competition Policy and Law Reforms published by Cuts International, in 2004 a Competition Bill for Uganda was developed and revised in 2007 before presenting the same to the Cabinet and the Parliament. The Bill was sent back to the Ministry mainly for two reasons: the need to first put in place a policy. Secondly, the need to have clear cost estimates relating to the implementation of the law.

Subsequently, in 2009, a team of experts were tasked to develop a draft Competition Policy and Law. The team drew lessons from the 2004 Competition Bill, relevant national laws, the COMESA Competition Regulations, EAC Competition Act and laws of other countries. Also, National stakeholder consultations on the draft policy and law were undertaken in 2012, the cost estimates for implementing the Bill drawn, and a certificate of financial implication given by the Ministry of Finance in March 2014.

However, Uganda has relevant competition clauses entrenched in the various sectoral laws. The provisions cater for fair competition, promoting innovation, removal of 13 concentrated economic power, improving efficiency in trade and accelerating development.
While the competition law is to punish/prevent anti-competitive practices in the market is one way of enforcing competition, the social and economic policies of the national government can also have implications for the extent of competition and on the overall competition policy.

Interest rates

In banking, even with the presence of a regulator, banks set their own rates in consideration of the economic environment of the time.
However, much of this is influenced by the Central Bank, which usually adjusts rates to control growth in inflation as well as stabilising the currency markets.
Often times, commercial bank lending rates rise sharply, but fall rather slowly.

Even this, apparently baffles the Central Bank with Governor Emmanuel Tumusiime Mutebile, saying: “We (Bank of Uganda) do not direct commercial banks on what rate to lend at.”