June 02, 2014
According to the Constitution of 2008, the Union must “prevent acts that injure public interest through monopolization or manipulation of prices by an individual or group with intent to endanger fair competition in economic activities”.
The 2013 Telecommunications Law contains a chapter on anti-competitive practices in the telecom sector. However, there is no general law prohibiting unfair competition and the abuse of monopolies as of today.
The draft of a competition law (“Competition Bill”), published on May 11, 2014, will, if enacted, change this. In line with similar legislation in other jurisdictions, it prohibits acts of unfair competition and the creation of monopolies through abusive means. It introduces a control mechanism whereby mergers and acquisitions require the approval of a newly formed competition commission.
If the bill is enacted as drafted, the government must form a competition commission charged with, amongst others, investigating suspected acts of unfair competition, specifying thresholds considered to indicate a monopoly, and ordering enterprises monopolising the market to reduce their market share.
The commission must, in turn, form an enquiry committee with the power to subpoena witnesses and experts, search buildings and premises and confiscate evidence according to the directions of the commission.
The bill, if enacted, will prohibit entrepreneurs from creating monopolies by controlling prices, inducing a scarcity of supply, or restricting opportunities to buy and sell. A merger control clause will prohibit mergers and acquisitions, joint ventures and other forms of collaboration if these acts would lead to one company controlling more than 30pc of the market or a group of companies controlling more than 50-75pc.
The bill lists specific acts of unfair competition. Amongst others, entrepreneurs are prohibited from deceiving consumers by using names, logos or other identifying characteristics of competitors.
The bill furthermore prohibits the unauthorized use or revelation of business secrets of competitors as well as the breach of security measures and the persuasion of employees of a competitor in order to obtain a business secret. Special protection is accorded to business secrets of state-owned organisations.
The bill prohibits the “bullying and threatening” of consumers and competitors. Furthermore, entrepreneurs must not use false information in order to defame competitors, or interfere with other businesses which are carried out in accordance with the law.
The bill also prohibits unfair and deceptive advertising measures and sales promotions. In particular, entrepreneurs must not compare their goods or services with similar goods or services of fered by competitors, imitate other advertisements, or give misleading information regarding the price, amount, quality or other characteristics of the goods.
“Discriminatory practices” – an example would be a boycott – are likewise prohibited under the bill. Furthermore, entrepreneurs must not sell products at a price below production costs if their intent is to reduce the competitiveness of other businesses.
Entrepreneurs with a dominant position in the market are prohibited from abusing it: In particular, they must not impose unfair terms and conditions on their business partners, offer different terms and conditions in similar circumstances, or cause harm to consumers by demanding unreasonable prices or restricting production or distribution levels.
The commission may also define other practices considered unfair competition.
The commission has the power to impose administrative sanctions (warning, administrative fine, suspension of the business for a limited period of time, blacklisting) on non-compliant entrepreneurs.
Furthermore, non-compliance may, according to the bill, lead to imprisonment of up to 5 years and a fine of up to K7 million. The bill does not deal with civil suits by competitors or consumers.
(By Sebastian Pawlita and Thitsar Khine)