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What you need to know:
- Competition and consumer protection laws ensure the healthy and orderly functioning of markets.
One of the key functions of a government is to create an enabling business environment that fosters enterprises and individuals to thrive. Such an enabling market environment can not exist in a vacuum.
Markets must be organised, regulated, maintained, and or enforced. A vibrant marketplace requires an enabling legal and regulatory framework that protects market participants from the harmful competition and unfair business practices.
These legal and regulatory institutions are vital in facilitating market exchange, competition, efficiency, and growth. However, unlike in other East African member states like Kenya, Tanzania, and Rwanda, Uganda does not have an established regulatory and legal framework that provides for fair market competition, consumer protection and orderly functioning of the goods and services markets or “prevent the formation of monopolies and cartels in the markets”.
Globally, markets are undergoing rapid changes which present new challenges and opportunities. The absence of competition and consumer protection policy in Uganda has created opportunities for some actors in the business community to engage in unfair business practices such as price-fixing.
Competition and consumer protection laws ensure the healthy and orderly functioning of markets, increase market competition and dynamism, improve consumer welfare, ensure efficient functioning of markets and elimination of market failures.
As economies grow and increasingly become more open or move towards increased liberalisation, certain undesirable business practices can emerge which act as a hindrance to economic growth and development.
The regulatory framework can protect consumers by stopping unfair, deceptive, or fraudulent practices such as misleading adverts, consumption of harmful products, or counterfeit goods in the marketplace, and educate consumers and businesses about their rights and responsibilities. Likewise, while some large firms can accrue economies of scale that permit them to reduce costs or to withstand both domestic and foreign competition; however, such firms can occasionally misuse their market power by engaging in anti-competitive behaviour cascading towards monopoly amplified by their giant size, through killer acquisitions or extravagant profitability and phenomenal market capitalisations.
It is important to ensure that consumers are adequately protected from such firms, which abuse their market power to engage in collusion that is designed to prevent competition.
Thus, there is a need for clear policies to ensure that consumers and producers are adequately protected against unfair competition and harmful business practices.
Competition policy is complementary to other economic policy reforms like trade and investment liberalisation. The consumer welfare and developmental benefits resulting from trade and investment liberalisation, in the absence of the appropriate competition rules and supporting institutional infrastructure, have been questioned in the light of the experiences of many countries.
Unless business firms and consumers are protected from harmful and anti-competitive practice the likely benefits of a movement towards a more liberal economy will not be realised. To ensure that such market rules are enforced, there is need for establishment of a market regulation and competition authority, whose mandate is to protect consumers against fraudulent and deceptive practices by sellers and suppliers of goods and services, and to redress disputes and ensure fair competition in the marketplace.
The East African Community Competitions Act, 2006 provides for the establishment of EAC competition authority whose mandate is to protect partner states’ markets against the creation of barriers to interstate trade and market participants against anti-competitive practices. Unlike other community member states, Uganda doesn’t have a legal and institutional framework in place.
Amos Sanday is a co-founder at Centre for Empirical Research in Development and Public Policy Evaluation.