SALIENT POINTS OF THE DRAFT KENYA COMPETITION RULES AND GUIDELINES

By Tamara Dini Thursday, April 19, 2018
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On 26 February 2018, the Competition Authority of Kenya (Authority) published the following draft rules and guidelines pursuant to the Competition Act, No 12 of 2010 (Act):

  • Competition (General) Rules, 2018 (General Rules);
  •  Merger Threshold Rules, 2018 (Merger Threshold Rules);
  •  Competition (Abuse of Buyer Power) Rules, 2018 (Buyer Power Rules);
  •  Block Exemption Guidelines;
  •  Search and Seizure Guidelines (Search Guidelines); and
  • Consolidated Guidelines on the Substantive Assessment of Mergers under the Competition Act (Merger Guidelines).

A summary of the salient points contained in these draft rules and guidelines follows.

The General Rules

The General Rules provide for the filing of a merger only with the COMESA Competition Commission when it meets both the COMESA and Kenyan merger notification thresholds. This presents a significant and welcome change as currently mergers notified to the COMESA Competition Commission may also trigger notification obligations in Kenya even though Kenya is a COMESA Member State.  The General Rules also give the Authority the mandate to investigate a merger falling below the threshold for exclusion if it is likely that the merger will substantially prevent or lessen competition, or restrict trade, or raise public interest concerns. 

The Merger Threshold Rules

These rules propose to increase the merger notification thresholds by providing that a merger is notifiable where the combined turnover or combined assets (whichever is higher) of the merging parties equals or exceeds one billion shillings and the turnover or the assets (whichever is higher) of the target is above 500 million shillings (up from the current 100 million shillings). Additionally, the Merger Threshold Rules provide for the following types of mergers to be exempt from the obligation to notify the Authority in Kenya (both of which are very welcome and positive proposals):

  •  mergers which meet the COMESA notification thresholds; and 
  • mergers where the combined turnover or combined assets (whichever is higher) of the merging parties are between zero and 500 million shillings.

The Buyer Power Rules

The Buyer Power Rules provide for factors to be considered when assessing buyer power and the acts constituting an abuse of buyer power. Acts constituting abuse of buyer power include delayed payment in breach of agreed terms; unilateral termination or threat of termination of a commercial relationship without notice or on short notice; and refusal to receive or return products without good justification.

The Block Exemption Guidelines

The Block Exemption Guidelines provide for the following vertical agreements to be exempted in terms of section 30(2) of the Act: (i) franchise agreements, (ii) stadia branding rights, (iii) media content development and broadcasting agreements, and (iv) one-off sporting and promotional events.

The Search Guidelines

Among others, the Search Guidelines provide for:

  • the rules pursuant to the Criminal Procedure Code in terms of which a search is to be conducted by the Authority;
  • the rules in relation to the issuance of a valid search warrant (e.g. its form, when it must be issued and what it should state); and
  • guidelines regarding a search to be conducted without a search warrant (e.g. where there is reasonable cause to believe that a delay in obtaining a search warrant may lead to adverse tampering, removal or destruction of evidence).  

The Merger Guidelines

The Merger Guidelines, which expound on the Authority’s existing merger guidelines, provide a more detailed approach of the Authority’s assessment of different types of mergers (e.g. asset mergers, private equity mergers, joint ventures and restructuring). They also provide for the assessment of public interest factors.

The rules and guidelines published by the Authority are still in draft form. It is expected that they will be subject to further stakeholder review before final publication by the Authority.

For further information please contact the Bowmans Competition Practice.