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Can competition policy treat unhealthy market dominance?

  Jun 2, 2017

The big challenge in treating unhealthy market dominance has been; keeping the balance between controlling firms’ aggressiveness, whilst retaining a competitive environment that boosts efficiency. For instance, when are certain competitive tactics “too much” and therefore prohibited? When a price is too low, is that predatory?

The significance of competition policy is to protect firms against abusive and other anti-competitive behavior of other firms. In doing so, businesses must engage with governments to see the development of a competition policy that accomplishes its goals efficiently.

How can competition policy in Kenya manage the balance between healthy and predatory competition? Seasoned professor Thomas Ross expounds on these matters in his keynote address that highlights the challenges facing the implementation of competition policy in Kenya. Prof. Thomas Ross is a senior Associate Dean, Sauder School of Business, University of British Columbia, Canada. He is also the program leader of the Competition Policy Executive Program at Strathmore Business School.

Abuse of dominance has been experienced through the following channels; predatory pricing, price discrimination and tied selling. Although most modern competition laws have sections devoted to agreements on price fixings, abuse of a dominant position, mergers and consumer protection provision, problems with these behaviors; price fixing, cartels and bid-rigging can lead to market power and all kinds of efficiency losses. “While most laws (including Kenya’s) leave definition open to allow for new methods of predation or exclusion, the application of the rule of reason that requires one to show competition harm, remains undefined in Kenya’s competition policy,” explained prof. Ross.

A significant area in the invasion of unhealthy market dominance, has been through mergers and acquisitions. While most mergers are designed to create better, more efficient, productive and innovative firms, some can create market power when the merging partners are competitors. The goal of merger law is to stop the buildup of market power but to also take into account the many legitimate reasons for mergers (efficiency).

Although Kenya has had a solid start in its competition policy, for instance; a solid legislative base by the Competition Authority of Kenya, a well-organized and resourced authority, significant priority given to advocacy that places importance to sector specific cases and markets inquiries, challenges such as finding allies for competition policy in industry groups, consumer groups, media and other branches of government continue to slow down the effective functioning of the regulatory body. He also highlighted challenges such as resisting demand for special treatment while recognizing other legitimate policy interest of the government, the size of the informal sector and building a culture of competition via advocacy as being key influences to the competition landscape in the country.

He recommended adjusting merger review processes, private enforcement of the policies and public benefit tests of mergers, to tame unhealthy competition. 

Strathmore Business School in partnership with Sauder School of Business, Canada, is developing a Resource Centre in Competition Policy, in preparation for the envisaged heightened interest in Mergers and Acquisitions.

The Centre of Excellence will be a working group, led by highly qualified faculty members, whose main objectives are to push forward the boundaries of both the theoretical and practical knowledge in the field of competition policy, especially in Kenya and the rest of East Africa, while sharing its findings widely and publicly.

The activities of the Centre of Excellence will include the following:

  • Development of applied research that influences opinion in the academic and business worlds and society at large
    • Organizing research seminars and conferences
    • Research publishing
    • Organizing debate fora between academics and business executives
    • Running of postgraduate programs
    • Holding Symposia
    • Publishing books and book collections

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