Can Uganda’s Competition Act 2023 propel fairness, innovation, and consumer protection?

by Mmeeme Leticia Luweze
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Uganda has been engaged in discussions about a law addressing competition since 2004. However, this process underwent continuous revision. On May 25, 2023, Uganda passed the Competition and Consumer Protection Act. It awaited Presidential assent and came into force on February 2, 2024, 20 years after initial discussions, when H.E. Yoweri Kaguta Museveni signed it into law.

The Competition Act, which shall be administered by the Ministry of Trade, Industry, and Cooperatives aims to boost Uganda’s economy by fostering efficiency, adaptability and development while ensuring competitive prices and choices for consumers and producers. It also seeks to enhance employment opportunities, promote socio-economic welfare and enable Ugandan participation in the global market, acknowledge the role of foreign competition and ensure fair economic participation for all individuals. 

This act will address practices that can harm competition in Uganda’s market, including anti-competitive behaviour, agreements, abuse of dominant market positions, and the impacts of mergers, acquisitions and joint ventures on competition

The study titled “The State of Competition in Uganda” suggests that Uganda would greatly benefit from expediting its competition law implementation and establishing a competition regime. This move is crucial to curb market monopolisation by a few companies, which reportedly leads to anti-competitive practices like price-fixing, market sharing and predatory pricing. By enacting appropriate legislation, such harmful practices can be effectively addressed, potentially reducing or eliminating their occurrence and ensuring accountability through legal measures.

According to the Competition Act 2023, it is prohibited for a dominant person in the market to engage in various practices that exploit consumers or exclude competitors. 

Firstly, a dominant entity cannot impose unfairly high or low purchasing prices or other unfair trading conditions, directly or indirectly. Additionally, they are not allowed to limit production or hinder technical development and innovation to the detriment of consumers.

Furthermore, dominant players are barred from engaging in practices intended to exclude competitors from the market. These practices include predatory pricing, price squeezing, cross-subsidization, refusal to deal, denial of access to essential facilities, tying arrangements and unjustifiable discrimination among customers or suppliers. Sellers must adhere to these regulations to ensure fair competition and protect consumer interests, while consumers can expect fair pricing, innovation and non-discriminatory treatment in the marketplace.

In a media interview, Corti Paul Lakuma, who is a senior research fellow and the head of the Macroeconomics Department at the Economic Policy Research Centre, stated that he believes the Competition Act will address several issues, particularly regarding the unfair participation of some firms. He emphasized that certain sectors are highly concentrated and advocated for breaking up those sectors to attract new players. This, he argued, would enable consumers to benefit from a greater supply of goods at competitive prices.

Lakuma also highlighted the complexities associated with regulating competition, stating, “Competition, if you look at even developed countries, regulating competition is not an easy thing.” He emphasized the necessity of establishing a dedicated regulatory agency for this purpose, citing successful models from other nations such as the office of the Administrator General of Government in America. This, he argued, would facilitate effective oversight of antitrust issues, particularly in the context of mergers and acquisitions.

The Act prohibits individuals or entities from engaging in anti-competitive practices or entering into anti-competitive agreements. Such agreements or actions are void. Horizontal agreements, which involve competitors at the same level of the supply chain, are deemed anti-competitive, if they fix prices, restrict production or markets, share markets or sources of supply, or engage in bid-rigging. Vertical agreements, which involve parties at different levels of the supply chain, are anti-competitive, if they include tying arrangements, and exclusive supply or distribution agreements, refusals to deal, or resale price maintenance.

When asked about how the Competition Act can promote innovation in various fields, Lakuma, highlighted the benefits of competition for consumers, such as lower prices and innovation potential. However, he also cautioned that competition may not always lead to innovation, particularly in capital-intensive sectors. 

He emphasized the importance of considering political dynamics and regulatory frameworks, suggesting that concentrated industries, especially in sectors like finance, could better adopt emerging technologies to benefit consumers. Lakuma noted that while concentration may benefit consumers in certain sectors, such as retail, increased competition is preferable in others. Lakuma further explained that in certain industries, such as telecommunications, despite liberalizing the market, monopolistic tendencies persist.

“In Uganda, the economy is primarily driven by the private sector. Within this sector, a large percentage, comprising over 80%, consists of micro, small, and medium enterprises (MSMEs). These smaller businesses would face adverse consequences from unfair competition, if proper measures are not taken to address it.” said Koti Paul Lakuma 

Despite occasional occurrences of mergers and monopolies in the past, they were not considered significant by authorities. However, under the Competition Act 2023, individuals or entities intending to engage in mergers, acquisitions, or joint ventures are required to notify the Ministry according to prescribed regulations. The Minister is tasked with establishing thresholds for such notifications through statutory instruments. Failure to give notice as required renders the merger, acquisition or joint venture void.

The Ministry responsible for trade is tasked with administering the Act. Its functions include promoting fair competition, safeguarding consumer interests, monitoring markets for anti-competitive practices, investigating such practices, approving mergers and acquisitions that don’t harm competition, resolving complaints related to competition and consumer protection, enforcing consumer protection laws, conducting public awareness activities, collecting data, and collaborating with regional and international bodies on competition and consumer protection matters.

The Ministry, in performing its functions, can direct enterprises to cease anti-competitive practices, nullify agreements violating the Act, take reasonable actions to enforce the Act and cooperate with regional bodies and other laws promoting competition.

The competition bill was developed in 2004 and revised in 2007, but it was returned to the Ministry for further refinement, including policy establishment and cost estimation. Subsequently, a team developed a draft Competition Policy and Law in 2009, drawing insights from various sources and undergoing stakeholder consultations. Financial implications were assessed in 2014.

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