Competition watchdog edged out of dominance decisions

Competition watchdog edged out of dominance decisions
Economy

Competition watchdog edged out of dominance decisions

Wednesday April 03 2024

CAK and the CA have renewed their turf wars over their respective roles in enforcing market dominance rules. PHOTO | SHUTTERSTOCK

The Competition Authority of Kenya (CAK) and the Communications Authority of Kenya (CA) have renewed their turf wars over their respective roles in enforcing market dominance rules in a dispute that is likely to hurt the telecommunications industry.

In its annual report, the CAK notes that proposed telecommunications industry regulations do not acknowledge its role in the determination of market dominance.

This is despite changes by the ICT ministry to the Kenya Information and Communication (KICA) Regulations, 2023 which pushed up the threshold for abuse of dominance from 25 percent to 50 percent as in the Competition Act.

Besides regulations of tariffs, consumer protection, licensing regulations, and radio communications, KICA also addresses the issue of competition.

However, the CAK has questioned why its role in the issue of competition and dominance had been expunged from the proposed regulations.

In an advisory opinion, the CAK wants the regulations to clarify the definition of a dominant service provider.

“The regulations should acknowledge the role of the Authority (CAK) in the regulation of competition and determination of dominance and significant market power,” said the CAK in its annual report for the Financial Year 2022/23.

The turf war mirrors the disagreement that the two regulators had in 2013 over the push by rival telcos to have Safaricom declared dominant.

Read: State eyes telco profits in tighter dominance rules

Airtel Kenya, the second biggest telco in Kenya by market share, decried Safaricom’s stranglehold in the market which it said made it difficult for other players to compete.

Airtel also wanted M-Pesa, a mobile money service provider owned by Safaricom, separated from the other services such as calling, texting and Internet. Safaricom’s argument was that declaring it dominant would be akin to punishing success.

The CAK was against declaring Safaricom dominant, noting that just having a bigger market share was not enough, a company had to abuse it.

Examples of abuse of dominance include imposing unfair selling prices, limiting market access or outlets, or applying different conditions to equivalent transactions with other parties.

In the latest case, the CAK is offended by the changes made, noting that the new version of regulations has deliberately left out the requirement to consult it on competition and dominance matters.

In most jurisdictions, the competition regulator is the one that determines dominance issues. But where other regulators are there, like in the case of listed firms, banks and telcos, it is normal practice to consult or align with the competition watchdog.

Safaricom’s rivals have pushed for the firm to be declared a dominant operator to ensure the competitors are not pushed out of business. The firm was at the end of December commanding 66 percent of SIM card subscriptions and 96.8 percent of mobile money while Airtel followed with 26.3 percent and 3.1 percent respectively.

Under the new regulations, the State will raise the threshold for telecoms firms to be declared dominant to more than half of the gross turnover of the entire market. The KICA Bill has pushed the limit for dominance from 25 percent of the relevant gross market, fixing it at par with that set by the CAK.

The conflicting provisions made it difficult for the CA to declare any operator dominant or punish abuse of dominance. The Bill puts heavy operational obligations on an operator declared dominant and imposes punitive penalties for abuse of dominance.

Read: E-commerce traders on DCI, CAK radar over growing scams

Analysts reckon that the 25 percent threshold had captured many operators, defeating the purpose of the law, which is to focus on dominant players.

“At 25 percent we would have captured a number of operators and the net effect is we would have lost focus on the dominant players that the law intended to regulate,” said a source at the CA.

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