The failure of implementation of competition rules in EAC: a hidden hand of political disagreements between members

By The Rwandan Analyst

Introduction

Asunderlined by Paul Collier, East African Community (EAC) is an unfinished project in restoring the regional integration that East Africa once enjoyed almost half a century ago. Potentially it is a vehicle for economic and political cooperation in a number of spheres. I would like to focus on three aspects of regional integration: market integration, a shared infrastructure, and macro-monetary integration.

Competition and protection of consumers is the core pillars in transnational business on which is intending to focus among areas this sub-regional institution. In fact, anti-competitive practices  which are business, government or religious practices that prevent or reduce competition in a market if not prevented can harm or uproot all efforts provided till now to ensure a competitive commercial framework. Theoretically speaking, these can include: dumping; exclusive dealing; price fixing, refusal to deal; dividing territories; limit pricing, tying; resale price maintenance. also criticized are involved absorption of a competitor or competing technology; subsidies; regulations; protectionism, tariffs and quotas patent misuse and copyright misuse .

Created in order to promote sub-regional cooperation towards a future unique state, the EAC put in place various institutions and regulations among which the act governing trade competition between members. Is it strictly respected by all parties who were committed? The following detailed analysis will surely respond to this open question.

As issues that motivated the research,in legal systems where the field of competition has been the subject of regulation since a certain time, such as the United States or the European Union, the establishment of rules and institutions regulating competition has not solved all problems of competition. In fact, other factors like those related to the development of particular country’s economy, the culture of competition, and relationships between the Community and Member States, were considered for the effective functioning of institutions responsible for enforcing the rules of competition within the Community.In this context, the countries members of EAC enacted a protocol which regulates fair competition trade in 2006. The concerning legal issues which hinder its effective and collective implementation should be sorted out as follows:

Primo, even under sub-regional commitment some states didn’t put in place rules implementing that act. Secundo, on internal level competent authorities are not yet empowered to execute this act provisions. Tertio, some states seem not understanding or not agreeing with the objectives of EAC which involves among areas open market and consequently open barriers. Given the above considerations, this study will therefore manage to respond to the following questions: How far is implemented the EAC competition act in its members? What is the role of diplomatic disputes between members? what strategies should be forecasted in order to make it more effective?

This study is constituted by two parts. The first one deals with the assessment of the state of competition rules implementation in EAC; while the second one suggests a series of strategies for effective implementation of the said rules. 

I. The state of implementation of competition act: achievements, risks and opportunities

Since it was adopted in 2006, the EAC competition act was more or less implemented. Throughout the following considerations, we intend to set out various indicators of progressive implementation of legal requirements, challenges encountered and opportunities which should rather be taken into account to effective respect of this sub-regional instrument.

1.1. Implementation of the instrument on regional and national levels 

The issue of cooperation between competition authorities is not much provided for under the EAC Competition Act. The Act only stipulates that the EAC Authority and the Partner States shall mutually co-operate in the implementation of the East African Community Competition Law. Since the EAC Competition Authority is not established or any other regulation relating to its functioning set up, we can only refer to other competition system in order to see how cooperation between community competition authority and national competition authorities is organized. 

2.1.1.Sub-regional cooperation between Competition authorities 

In general, regulating cooperation and collaboration between the Community and National competition Authorities implies the regulation of how the two institutions should handle the most important competition issues provided for under the Community competition law, which are within the jurisdiction of both Competition Authorities, in the sense of the efficient implementation of the Community Competition law. 

The above competition issues are those provided for such as anti competitive practices qualified as such because they adversely affect free trade and include any agreement, undertaking or concerted practice which has as its objective or effect the prevention, restriction or distortion of competition within the Community. According to the competition laws and other related regulations, some of those practices are simply prohibited, while others have to be authorized by the Competition Authorities. The role of the Competition Authorities is therefore to punish firms which are responsible for the crimes related to those prohibited practices, controlling market dominance by some firms and authorize those which intend to make associations notably by mergers and acquisitions. 

 In that perspective, the competition authorities will cooperate in the following ways: 

– The regional competition authority shall transmit to the national competition authorities the copies of the most important documents it has collected with a view to handle issues related to the concerted practices, associations of undertakings and abuse of dominant position.

– The national competition authority (NCA) shall inform the Community competition authority when commencing the investigative measure related to the above mentioned anti competitive practices prior to taking any formal decision.

– The national competition authorities shall consult the regional competition authority on any case involving the application of Community Law. 

– Exchange of information between the Community Competition Authority and NCAs which information may be used in evidencing any matter of fact or of law, including confidential information.

More specifically, within the EU competition law, national competition authorities , when applying domestic provisions related agreements between undertakings, decisions by associations of undertakings and concerted practices , abuse of dominant position in the sense of articles 81 and 82 of the European Community treaty, which may affect trade between Member states , they have also apply these articles. 

In addition, the national competition authorities have the power to apply articles 81 and 82 of the treaty in individual cases; for that purpose, acting on their own initiative or on a complaint, they may take decisions such as requiring that an infringement be brought to an end or imposing fines, periodic penalty payments or any other penalty provided for in their national law. 

1.1.2. Advantages of cooperation between competition authorities 

The cooperation between competition authorities has been justified in a context of regional integration where the same competition rules must be consistently applied throughout the Member States. A further step has been taken by the Commission when it adopted a notice on the manner with which it cooperates with NCAs addressing allocation of work and the provision of assistance to and from the Commission and amongst the NCAs themselves and by establishing a ‘network of competition authorities’ (European Competition Network, or ECN) by a joint statement of the Council and National Commissions. 

In the context of EAC, the cooperation between EAC Competition Authority and NCAs have to be more defined by setting up clear regulations or directives on how this cooperation must be organized, indicating for instance national competition authorities’ s responsibilities vis-a-avis the EAC Competition Authority and modalities of fulfilling them. Those regulations should also specify the relations between individuals, competitors and consumers with the EAC Competition Authority. 

For the best interest of those categories of people, we suggest that any one should have the right to interact with the EAC Competition Authority, as it is in the European Union. The following statement by P. LOWE is an indication of what we are suggesting: “In your daily life, you may come across situations in which there are signs of business practices which may restrict competition. For instance, companies have sometimes refused to accept orders from consumers from other Member States. Such a refusal may be a sign of illegal, restrictive practices and you may want to inform a competition authority about them, step one is to decide which competition Authority to inform. If the situation you have encountered is specific and limited to the country or the area in which you live, or involves no more than three Member States you may in the first place want to contact a national competition authority. The competition authorities of all EU Member States now apply the same competition rules as the European Commission and very often they are well placed to deal with your problem. If you think that a larger number of Member States are concerned, you may primarily choose to contact the European Commission. Even if you are unsure about the scope of the problem, do not hesitate to contact either the European Commission. 

The above-mentioned analysis made by an EU competition expert is relevant in that the experience of the European Commission may inspire the regulation of interactions between Consumers and / or competitors and EAC Competition Authority and National Competition Institutions in that way.

1.2. Challenges and risks 

In the implementation process of the EAC competition act, two main challenges among areas can be identified as reasons paralyzing effectiveness and efficiency of the competition authorities i.e independence and capacity. 

1.2.1. The problem of independence of the competition authorities 

Authors who have made an assessment on competition policy implementation in transitional economies have found that Competition Authorities in those countries have encountered difficulties which have affected their effective functioning. In assessing the institutional effectiveness, they based their evaluation of the degree of political independence of the Competition Authorities, their transparency, and the effectiveness of the appeals process based on relevance of adjudication. The same authors declare that their assessment of the independence of Competition Authorities is based on the frequency of decisions that the authorities have failed to take or decisions taken that have been overturned for political reasons. While transparency is based on the extent to which decisions and annual reports are publicly available as reflected in the awareness by the general public of competition law provisions, appeals are evaluated on the extent to which they are judged based on economic content rather than exclusively on due process. 

The independence of the competition authorities may not be only a domestic issue for internal competition; the same concern may apply on regional competition authority. However, this may be less acute as it is an international institution composed with heterogeneous members coming from different Partner States, and taking decisions collegially as it will be for the EAC Competition Authority. However, the challenge is not negligible taking into account that this regional authority will need to cooperate with national competition authorities which may be influenced by Governments or other forces. 

Although the independence of the Competition Authorities is guaranteed by laws, the latter should build additional safeguards to protect against undue influence from pressure groups in government and elsewhere.

1.2.2. Lack of the capacity of competition authorities 

Among the challenges affecting Competition Authorities, the issue of their capacity is a paramount one. 

Even in well advanced competition systems, the capacity for the Competition Authorities has been always raised. Indeed, it is not a simply theory, it is rather a really phenomenon that has been attested by Competition Authorities themselves. All of them are unanimous in affirming that the capacity of the Competition Authorities implies that they are adequately equipped for their task, whether in terms of effective enforcement mechanisms, efficient structures or adequate resources. Such means for effective and sustained operation must be guaranteed, especially in terms of budgetary constraints. As Italianer, EU Director General for Competition points out, competition enforcement is always a sound investment and it outweighs its costs.

The issue seems to be acute in such a way that in the European Union for instance, Heads of the European Competition Authorities have been obliged to take a resolution appealing for a continued need for effective competition institutions. They have taken this resolution basing on the fact they have to play a crucial role not only in implementing competition law especially in the very sensitive case of anticompetitive agreements and abuse of dominant positions, but also considering that at the national level, they have a vital role as trusted advisors to governments and legislators, advocating pro-competitive approaches and promoting a culture of competition in their jurisdictions.

In developing countries, the issue of the capacity of Competition Authorities has been considered as a global challenge that needs international assistance. In this perspective, the United Nations has provided to those countries, assistance in capacity building through UNCTAD. 

The Competition Authorities have been beneficiaries of that assistance in the training of officials responsible for implementing national competition policy, increase the ability of case handlers to carry out successful antitrust policy, investigate cases and carry out economic analysis necessary for effective enforcement.The issue of capacity of Competition Authority has an impact on its effectiveness and efficiency and resolving it can be a long process. In the European Union for instance, it is only within a half-century that competition policy has developed into a powerful instrument for enforcing a set of fundamental rules across Europe. Although Europe has been at the forefront of competition policy and has been referred to as the world’s leading jurisdiction in antitrust matters, it is still facing some major policy challenges ahead that need to be addressed. 

With regards to the above challenges which have been an obstacle to the functioning of Competition Authorities in different competition systems, it goes without saying that the same challenges may affect the effectiveness of the EAC Competition Authority and the NCAs, and this will have impact on the implementation of the EAC Competition Act, accentuating the delay in its enforcement which is actually considerable currently. 

Therefore, relevant authorities have to know that they must empower the Competition Authorities when established, the latter should know that to be effective, they will not only apply existing laws, but also other regulations and rules will be issued regularly so as to enable them to be up to date with the new dynamics of the competition.

1.2.3. Diplomatic conflicts between members

Even if they theoretically agreed to cooperate on various levels economic, political, judicial; the East African Countries did not end their bilateral disputes. On one side, a given state plots a putsch with some nationals against the governing regime; on another side, states mutually to organize espionage on its territory in a bit to destabilize it and overthrow the power in place, being a military rear base for rebellions to disturb the neighboring country, all but a few. This situation is still prevailing between Rwanda and Burundi; Rwanda and Uganda, Rwanda and DRC the latter being now full member of the community. Such a conflictual climate cannot facilitate harmony as long as people are working with distrust.

II. Opportunities

Hereby, we esteem suitable to suggest some strategies which should eventually be respected to insure the effective implementation of the competition act.

2.1. Capacity building of Competition Authorities 

As mentioned above, Competition Authorities need capacity to be effective. The capacity that is required for Competition Authorities is not only expressed in terms of financial means; it is also about skills that Competition Members must possess. In fact, in order to fully play their role in assessing adequately all competition matters and applying correctly the competition law, there are key conditions to ensuring that competition authorities will be able to provide beneficial results for the economy and for consumers whilst actively pursuing efforts to enhance the effectiveness of their action and applying the high professional standards that are required. 

Besides operating under an appropriate legal framework, competition authorities must be endowed with the appropriate infrastructure and expert resources to be able to investigate and take action against infringements, including violations such as bid-rigging, market sharing and price-fixing agreements, or abuse of market power. The authorities should be put in a position to take action in a relevant timeframe, intervening swiftly on urgent cases. They must be able to handle complex matters of law and economics and, to this end, to attract talent and retain qualified staff. National competition authorities must also be in a position to fully cooperate between them and with the EAC Competition authorities in order to enhance their ability to jointly address competition problems and ensure convergence. 

2.2. Internal enactment and implementation of regulations and other rules 

Competition in the regional context is not only governed by the laws as enacted by the legislative organs. Other regulations and rules implementing those laws are necessary in order to operationalize the Competition Authorities’ activities with clear orientations and guidance, not only for themselves, but also for the undertakings in competition, consumers and generally the public, which is a condition for them to be more effective and efficient in their duties. 

In this paragraph, we want to show that once the East African Competition Authority is established, its work may be challenged by a number of regulations and rules necessary for the fulfillment of its duties, taking into account that prescribing all those regulations is not only in its powers. In fact regulations have to be prescribed by the Council of Ministers whose decisions are politically motivated and are binding in its entirety and directly applicable in all Member States, therefore they may take a certain process which may affect the functioning of the Authority. 

In the other hand, the level of the capacity of the Authority, human and material, as well as its level of autonomy will affect its ability to adopt regularly the needed rules. 

With regard to these considerations, the Competition Authority, once established should be aware that it has to be prepared from the beginning, especially taking into account the delay in implementing the Competition laws. 

The legal basis of prescribing implementing regulations and rules is the EAC Competition Act itself. It stipulates that ‘’the Council may make regulations generally for the better and carrying into effect of the provisions of this Act’’, on the one hand and on the other hand that’’ the Authority shall prescribe rules for the conduct of its affairs. The examples of regional integration systems which are advanced in competition matters should inspire it. 

Other regional integration systems have a good experience, but according to the length of its experience compared with a number of regulations taken, one may conclude that the work may be hard for the EAC Competition Act.  We are of the view that some most important regulations which may be taken are the following:  rules applied to mergers and acquisitions; rules applicable to abuse of market power and rules applicable to anti –competitive concerted practices between undertakings. 

Such regulations are important in the sense that they give guidelines to the implementation of EAC Competition Act with regard to these anti competitive practices regulated in the context of competition with cross-border effect, and how cooperation between EAC Competition Authority and national competition authorities has to be organized with regard to the application of EAC Act provisions relating the aforementioned practices. 

Moreover, such regulations may be many and diversified depending on the nature and categories of the firms intending to engage in concerted practices. 

The case of EU is a good illustration of this. In application of articles 81 and 82 of the Treaty establishing the European Community, several regulations have been prescribed among them Council regulation no 17 of 6 February 1962 which was the first regulation on the implementation of the rules on competition laid down in provisions related to the trade concerted practices between undertakings and abuse of dominance and the Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty. 

It is important to notice on the one hand that between the two Council Regulations, many other regulations have been adopted in order to update rules implementing the above provisions on concerted practices and abuse of dominance. On the other hand, many other regulations have been adopted in order to implement the above mentioned provisions to different categories of undertakings. 

The EAC Competition Authority in not established formally five years after the Act establishing it legally, and it is a challenge to the implementation of the Act in itself. The example of the European Union in the implementation of the competition rules within the Community illustrates that, when the Authority is established, it should be well equipped in order to allow it to be fast in addressing all competition issues under its competence. EAC and relevant national authorities should also be aware of this situation in order to be ready to take necessary actions in the fulfillment of their obligations relating to competition implementing measures. As their activities may increase all the time and are to be always adapted to the situation and the evolution of trade, competition authorities constantly have to update the rules and regulations governing all competition matters, and their internal modus operandi as well. 

In a nutshell, we should conclude with this interesting statement:’in evaluating the effectiveness of Competition Authorities, we should not deem the number of cases handled by a Competition Authority as the key determinant of effectiveness, especially in the restrictive business practice area. This is because we deem the surveillance role of a competition authority to be more important. A comparison can be made with the effectiveness of a police force. In our view, a police force is more effective when its surveillance and preventive role is more successful. Otherwise, we cannot say that a police force is whose area more crimes have been committed, even though it has been very effective in arresting and convicting all the criminals, is more effective than the police force in whose area there have been very few cases of crime due to its superb surveillance and preventive methods.

2.3. A strong diplomacy

A conflict in any one of the EAC countries has far reaching effects as it inevitably affects the whole region in one way or another. Conflicts everywhere in Africa transcend ethnicity and physical borders and this always complicates the magnitude of the conflicts. The regional dynamics of conflicts and the cross-border nature of security threats such as arms and human trafficking require the collaborative role of regional and sub regional actors who have intimate understanding of the local contexts. It is therefore important for the EAC as a sub-regional regime, to embark on a diplomatic campaign that uses human rights and respect thereof as a diplomatic kite in all of its activities. It should be expected that human rights and democratization records ought to be used as a yard stick for ‘eligibility’ to membership and continued membership in the organization. Beyond the subregional efforts some large organizations like ICGLR; African Union and other African regional communities can help in terms of mediation mechanisms.

CONCLUSION

Through the research conducted above, there noticed finally that the implementation of the EAC competition act stays in a process but in a progressive one despite diplomatic impediments underlied by internal disputes in which neighboring states are often involved. The first challenge of this situation is that the state of the implementation of the Competition Act doesn’t follow the state of implementing the Customs Union, then the competition issues in EAC region are not handled since the entitled Authorities are not established yet. The EAC Secretariat is aware of that challenge that is why it has organized a sensitization campaign in the Partner States urging them to implement the EAC Competition Act, by especially establishing the Competition Authorities. Last but not least, a political hand remains behind the dysfunctions of all laudable initiatives and restoration of confidence between states is a crucial priority.

REFERENCES

-Treaty for establishment of the East Africa Community signed on November 1999 in Arusha, Tanzania(as amended on 14th December, 2006 and 20th August, 2007). 

– Protocol on the establishment of the Common Market signed at Arusha on the 20th November 2009. 

-Protocol on the Establishment of the East African Community Customs Union, signed at Arusha, TANZANIA, on the 2nd March 2004. 

-Law nº36/2012 of 21/09/2012 relating to competition and consumer protection, Official Gazette nº 46 of 12/11/2012. 

-Loi N° 1/06 du 25 mars 2010 portant Régime Juridique de la concurrence, Bulletin officiel du Burundi, No. 3 bis/2010. 

-East African Community competition Act, 2006 

– Kenya competition act, 2010. 

-The Fair Trade practice Act, 2003(Tanzania). 

-COMESA Competition Regulations, December 2004. 

 -EEC Council Regulation No 17: First Regulation implementing Articles 85 and 86 of the Treaty. 

-Regulation (EEC) No 479/92 of 25 February 1992 on the application of Article 85 (3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia). 

II. TEXT BOOKS 

-LINDERBERG, N., &SCHEINGOLD, A.S., Regional Integration: Theory and Research, Harvard, Cambridge: Harvard University Press, 1971. 

EUROPEAN UNION, Competition authorities in the European Union – the continued need for effective institutions, Resolution of the Meeting of Heads of the European competition authorities of 16 November 2010. 

III. ELECTRONIC SOURCES 

1. DIMGBA, N., Introduction to competition law : a sine qua non to a Liberalised Economy, in Rules Watch: competition Legislation &the New World Order ,24-26 May 2006, Lagos Nigeria, available at http://www.globalcompetitionforum.org/regions/africa/Nigeria/INTRODUCTION%20TO%20COMPETITION%20LAW.pdf. 

2. DUTZ, M.A., & AGLIASINDI, M., Competition policy implementation in transition economies: An empirical assessment, in European Economic Review 44(2000). Available onhttp://www.oecd.org/dataoecd/38/34/39990968.pdf. 

3. NJOROGE, P.M., ‘’Regional cooperation on competition policy and law-the East African Community experience’’ ,available at http://www.unctad.org/sections/wcmu/docs/c2clp_ige7p25_en.pdf. 

4.ITALIANER, EU priorities and competition enforcement, Institute for European and International Affairs, Dublin, 25 March 2011. p.5. available on http://ec.europa.eu/competition/speeches/text/sp2011_03_en.pdf, 

5.UNCTAD, Capacity-building on competition law and policy for development, report UNCTAD, New York and Geneva, 2008. p.17 , available at http://www.unctad.org/en/docs/ditcclp20077_.pdf.  

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