Authority criticises Comesa arm over rollout of competition rules

Kenya’s competition watchdog has asserted its authority over mergers and acquisitions carried out by local firms. The confirmation comes in the wake of a perceived encroachment on its turf by a regional regulator.

The Competition Authority of Kenya (CAK) said that it still has primary control in enforcing competition rules in the country despite the coming into force of an over-arching Common Market for East and South Africa (Comesa) body to oversee the same.

In January, the Comesa Competition Commission (CCC) became operational obliging companies in the 19-member bloc to seek its approval before carrying out mergers and acquisitions which have cross-border impact. Analysis of such applications by the Comesa body would attract a fee of $500,000 (about Sh42.8 million).

This development sent jitters through the local corporate scene with fears that the new regulation could stall the expansion drive of Kenyan firms.

After consultation with the Attorney-General, the CAK last month warned Comesa that the new rules will not take precedent over Kenya’s national law.

“We are justifiably inclined to advise that the competition regulation regime [in Kenya] has not changed,” said the CAK in a letter to the Comesa Competition Commission.

In its letter, CAK admonished CCC for failing to follow appropriate procedure in declaring the Comesa-sanctioned competition regulations operational. 

The authority noted that the Comesa competition body had failed to gazette the regulations or to carry out appropriate consultation with respective national bodies.

Although the CAK did not completely dismiss the implementation of Comesa competition regulations in Kenya, the body said that this would only be carried out within a “cooperation framework” with local authorities.

The coming into force of the CCC in January raised concerns over duplication of regulatory roles at three different levels. While Kenya’s antitrust laws are implemented by the CAK, the East African Community (EAC) also has a similar authority.

Had the Comesa regulations been implemented in their current form, experts warn, it would have led to ambiguity and confusion in cases where all three regulatory regimes apply.

“An absurd situation may arise that a merger cannot be implemented if the commission approves it but the [Competition Authority] refuses to approve it, or vice versa,” said Daly & Figgis advocates in an article on their website.

Further, some commentators have questioned the logic of creating bodies such as the CCC within economic blocs that are ideally founded on free market principles.

“We need to make the environment as free as possible while letting market forces to control the behaviour of the firms. Competitive companies will survive. Those that are weak and do not adapt, will not do as well,” said University of Nairobi lecturer, Dr Samuel Nyandemo.

Kenyan firms have been expanding into the East African region over the past decade. Last year, the World Bank noted that 56 per cent of the banks operating in the East African region have hubs in Kenya.