COMPETITION (AMENDMENT) ACT 2016

Monday, January 16, 2017
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The Competition Amendment Act 2016 (the Amendment Act) was assented to on 23 December 2016 and takes effect today, 13 January 2017. It makes certain changes to the Competition Act, No. 12 of 2010 (the Act). The salient provisions of the Amendment Act are summarised below:

Mergers

Introduction of thresholds

The Amendment Act substitutes the Competition Authority of Kenya’s (CAK’s) power to declare any proposed merger to be excluded from the provisions of Part 4 of the Act (the merger control provisions), with the power (in consultation with the Cabinet Secretary for Finance) to set the threshold for any proposed merger excluded from the provisions of Part 4 of the Act.  It is therefore expected that during the course of this year, the CAK will publish thresholds on excluding certain types of mergers from the provisions of the Act.

Financial penalties for non-notification/giving false information

The Amendment Act gives the CAK the power to impose a financial penalty of up to ten percent (10%) of the preceding year’s annual gross turnover of the relevant party to a merger, where the CAK’s approval of such merger was based on materially incorrect or misleading information from that party or if any condition attached to the merger is not complied with. This is in addition to the existing power of the CAK to revoke a merger approval if it was based on materially incorrect or misleading information from a party to the merger. The Amendment Act also provides for monetary and criminal sanctions for a person, who being party to a merger, provides materially incorrect or misleading information or fails to comply with any condition attached to the merger approval.

Restrictive trade practices and abuse of dominant position — financial penalties

The Act empowers the CAK to impose a financial penalty on an undertaking following the conclusion of an investigation into conduct constituting a prohibited practice (namely, Restrictive Trade Practices and Abuse of Dominant Position). The Amendment Act strengthens the current penalty regime set out in the Act by providing that the financial penalty may be up to ten percent (10%) of the immediately preceding year’s gross annual turnover in Kenya of the undertaking(s) in question.

Abuse of buyer power

The Amendment Act introduces a prohibition for abuse of buyer power in a market in Kenya.  Buyer power is defined to mean “the influence exerted by an undertaking or group of undertakings in the position of a purchaser of a product or service to obtain from a supplier more favourable terms, or impose a long term opportunity cost including harm or withheld benefit which, if carried out, would be significantly disproportionate to any resulting long term cost to the undertaking or group of undertakings.” The Amendment Act gives the CAK the mandate, in consultation with the Cabinet Secretary (for Finance) and other stakeholders, to develop rules relating to the abuse of buyer power in Kenya. We expect that the CAK will publish such rules in due course.

Obligation to provide information

The Amendment Act introduces a general obligation on any person, undertaking, trade association or body to provide information to the CAK during a market inquiry, if so requested. It remains to be seen how the CAK will balance this provision against the fair administrative and constitutional rights of third parties.

For more information please contact Joyce Karanja – Ng’ang’a, Partner Competition.