Competition law in Uganda: What you should know

Competition law, as the name suggests, exists to safeguard competition. Uganda’s Competition Bill, 2022, was first read in Parliament on 30 November, 2022.

The proposed law seeks to promote fair competition and safeguard consumers’ interests. It was passed by Parliament in May 2022, but the President of Uganda has not yet signed this proposed law.

First, it is essential for any legitimate government to protect and facilitate competition. “Competition” is defined by the Black’s Law Dictionary as, “the effort or action of two or more commercial interests to obtain the same business from third parties”. What’s so bad about a business or several businesses acting like monopolists – that is, raising prices and decreasing output without regard to a competitive response?

Market competition is good for society. When there are two businesses supplying the same product/service. Usually, they will make an effort to win over the market by designing better products with the best price, which sometimes is the cheaper price. However, if there is only one player, the incentive to innovate is lower and their price point is often unreasonable because there are no alternatives. That’s why competition laws are important, they seek to protect market efficiency, and regulate unfair practices. 

Second, the emergency of the digital economy creates a greater necessity for competition law.   Technology and digital environments present even more complex challenges. Algorithms, artificial intelligence and dark patterns may be used to manipulate consumer behavior.

Businesses with exclusive access to certain technologies may, by virtue of their privileged positions, restrict others from using such technologies, thus rendering them unable to compete.  Most of the leading competition cases in Europe, South Africa and the United States concern technology disputes. 

Third, competition laws typically seek to prevent businesses from abusing their dominant positions. They prohibit businesses with large market shares from entering into price fixing agreements and other restrictive agreements allocating certain markets to themselves.

In Uganda, there are a lot of dominant businesses with a dominant market share in different sectors.   Having a huge dominant position although not illegal, often usually leads to practices that are anti-competitive which can squeeze out small businesses.

Yet, small and medium enterprises (SMEs) are the heartbeat of Uganda’s economy. Historically, competition law has prevented dominant players in markets from colluding to set high prices, and Uganda’s Competition Bill could achieve a similar feat. While this is obviously an oversimplification of one of the most technical areas of law and economics, it serves to show the immense risk presented by the lack of a comprehensive competition law.

Relatedly, the enactment of the Petroleum Supply Amendment Act, 2023 has raised serious concerns. This law designates the Uganda National Oil Company Limited as the sole importer and supplier of petroleum products destined for the Ugandan market. The new law requires all licensed oil marketing companies to purchase their petroleum products from Uganda National Oil Company or any other person nominated by the Minister.

Although this may be justified on grounds of supporting homegrown initiatives, one must ask; is it in the interest of consumers that their suppliers are restricted in their choices of where to acquire petroleum products? Won’t this restriction inevitably raise the prices of petroleum products? Won’t Ugandans benefit from a more open market than a restricted and foreclosed one? Such questions must be determined through interpretation of competition law.

Even though Uganda has sector-based competition regulations within banking and telecommunications, there is a need for a comprehensive law to protect competition, market efficiency and consumers.

Mr Joel Basoga is a Tech, Competition and Data Privacy Lawyer.