Transcript talking notes on uganda tool kit for competition bill 2004

DRAFT TALKING NOTES FOR
TOOL KIT ON DRAFT UGANDA
COMPETITION BILL
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Introduction: Governance
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1962 is Uganda’s Independence day
1995 Constitution makes it a Republic
Republic with three separate arms
The Executive President, Judiciary, Parliament
The Current President is Yoweri Museveni
He has been so since 1987
This is the 7th Parliament
There are over 135 Legislators
From 50 Districts, Town Councils and nominees
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Introduction: Economic Foundation
• Uganda’s population is 27 million
• The birth rate is 3% The life expectance is
50 years
• Infant mortality rate significantly reduced
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Introduction: Baseline Resources
• Uganda is bordered by Congo DR for 765
km, Kenya 933 km, Rwanda 169 km,
Sudan 435 and Tanzania 396 km
• These have important – implication on
Uganda’s competitiveness and,
• The management of competitiveness
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Introduction: Baseline Resource
• Agriculture is its foundation for
development
• 80% of its peasant population live on it
• 20% on services and industry
• Total surface area is 236,000 km sq.
• 36,330 km sq of it is fresh water
• 200,000 km sq is arable land
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Introduction: Baseline Resources
• Agricultural sector is rain-feed
• It has only two dry seasons (Dec-Feb),
and June to August)
• Arable land 25.34%
• Permanent crop 8.77%
• Others 66% (1998) Est.
• Irrigated land is about 90 sq km
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Introduction: Baseline Resources
• Originally coffee, cotton, tea, tobacco were
the dominant crops
• Now none -traditional crops, fish,
horticulture are coming up
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Introduction: Indicators
• Agriculture and Fisheries (2002) 29.5 GDP
to 35.8% to GDP 2002
• Quarrying 1% to GDP 2006
• Manufacturing 6.1% to GDP 2006
• Construction 9.1% to GDP 2006
• Utilities 1% to DGP 2006
• Trade 10.6% to GDP 2006
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Introduction: Indicators
• Hotels and restaurants expanded 1971
(2001) – 3,231(2006)
• Transport – 8.7% to GDP 2006
• Telecom 4.5% to GDP 2006
• Education 4.9% to GDP 2006
• Health 2.9% to GDP 2006
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Introduction: Indicators
• Total business (2002) 10,569 – (2007)
17,000
• Business employing more than 5 persons:
• 50% sole proprietors
• 24% private limited companies
• 11% partnership
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SOLE PROPRIETORSHIP
• 29% Hotels and Restaurants
• 29% Trade
• 20% Manufacturing
• 22% others
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Introduction: Indicators
NATIONALITIES OF BUSINESSES
• Ugandans 27%
• Indians 1.12%
• British 0.29%
• Kenyans 0.24%
• Those in associations 10%
• Those in MF, ULS, UM, DPA, UPSA were
32%
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Development of Competitiveness
• 1962 -1970 State enterprises were state
controlled
• 1972 Nationalization of private firms
• 1972 Allocation of firms to indigenous
people
• 1972-1987 – Price fixing, commodity
allocation , etc
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Development of competitiveness
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1987 Down of new governance
1987 Liberalization of the economy
1987 Liberalization of imports
1987 Demonetization
1987 Privatization of state firms and reduced
protection of state firms
• Firms were exposed to anti-competitiveness
• Consumers continued on restrictive commercial
practices using letters
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Development of competitiveness
• Lack of sequences of reforms
• Scattered laws and regulations
• Lack of knowledge on competition
management
• Use of bilateral, regional and others
agreements
• Namely: PTA, EAC, WTO etc.
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Development: Objectives of the bill
2004
• Tool for efficient operations of all
• markets and consumers’ rights
• Tool for accountability, investigation &
cooperation among states
• Tool for resource allocation and restoration
of governance
• Tool to reduce conflict among laws and
policy
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Development: Objective &
Principals
• Abuse of dominant positions (e.g. beer
firms, tobacco)
• Mergers & acquisitions (e.g. oil &
beverage companies)
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Development: Regional dimension
• Promote trade, investment, liberalization &
competitiveness
• Monitor firm behaviour at home and
outside
• Balance national and regional business
interest
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Development: Structure of the Bill
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Based on 10 parts and 56 sections
Interpretation
Establishment of the commission
Formation
Functions
Procedures and jurisdiction of the commission
Anticompetitive practices
Offences
Obligations
Advocacy
resources
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Establishment
• Part II establishes the institution and the
qualification and appointment of the officials
• It gives powers for investigations, appeals on
agreements
• Part – VII prohibits abuse of dominant positions
• It provides 33% marked share as a criterion
among others
• part VIII provides for merges and 35% as criteria
notification
• Part XI gives the Minister power to seek
Commissions views on policy & to respond
within 36 days and sources of funding
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Relevant market, geographical
market – product and time
• These definitions are not restrictive in
scope
• They take into account product range and
legal aspects needs when it arises
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Monopoly, perfect and normal
competition
• Monopoly existence in terms of utilities
and natural monopolies & for traditional
crops
• Perfect – competition exists in terms of
small holder agricultural firms
• Normal competition existence in terms of
services enterprises
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Objectives of draft bill
• The objectives is to promote and sustain competition so
as to –
• Enhance the efficiency, stability and development of
Uganda
• Give consumers competitive prices and variety of
commodities
• Enhance job creation and foster social and economic
livelihood of Ugandans
• Widen opportunities for Ugandas involvement in foreign
markets
• Appreciate the participation of foreign competitors in
Uganda
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Competition policy and law
• Focuses on economic agents and scares
resources
• The policy gives direction framework
• The law is expected to ensure enforcement
• The policy is expected to provide the threshold
based on background data
• The law development is suspended for now
• The policy is to be developed first
• Thus a comprehensive competition policy can
give effect to the Bill
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Restricted T - practices and anticompetitive Agreements
• These are designed to reduce access or
reduce competition
• The Draft Bill considers as anti-competitive
such practices or Agreements
• E.g. importation of dry sells in
collaboration with supplies
• Anti-competitiveness and restricted trade
practices both horizontal, vertical have
same infect of market distortion
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Price fixing & market allocation
• Price fixing or tariffs is common among oil
firms, telecoms
• Among oil firms is tolerate for stability
purposes
• Among forex bureau it is supervised by
Bank of Uganda
• Among Taxi Associations, UTODA it is
tolerated
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Market allocation & output
• Market allocation is at regional levels
• Allocation in the area of beverage brands
among breweries in Uganda, Kenya and
Tanzania
• Allocation among cement producers in
Uganda, Kenya and Tanzania
• The highland mineral water and cocacola
sale of beverages may not be referred to
as market allocation
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Bid rigging
• Bid rigging is under Public Procurement
and Disposal of Public Assets Authority
• Complicated by clauses that the seller
reserves the right of price and to whom to
sale
• Note the case of UCB and Diary
Corporation of Uganda
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Resale price maintenance and
exclusive dealings
• Promotes development in a large scale
farms
• Common in soft drink firms where local
franchise can limit retail price
• Exclusive dealing exist between power
producers, generators and distributors
• It is illegal if it has negative effects
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Tied selling
• Tied selling is prohibited if it has negative effect
• The investment code 1991 has relaxed this
provision
• Tied selling is common among South Africa
Swissgorde products and
• Consumers pay for volumes and values against
their wishes and knowledge
• Tied selling example of using fridges for
cocacola only
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Abuse of dominant position
criterion
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Market share of 33%
Size ad resources of firms
Size and importance of competitors
Economic power of enterprise
Entry and exit barriers
How to determine (2 - 4 above)
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Price discrimination and refusal to
supply
• Not –clearly defined but not allowed
• Takes place among African and Indians
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Enforcement Part
• Part III provides jurisdiction, power and
authority
• Initial inquiry on receipt of Ministers
directives, complaints, information
inquiries
• Based on a prima facie case to justify the
need for initiating inquiry
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Enforcement Part
SECTION 31 PROVIDES TO USE
• civil procedure rules
• Principles of natural justice
• Rules by the Minister
• These include summoning, evidence
examinations of records or dismissing
application in default
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Mergers
• Mergers be horizontal, vertical or
conglomerate is tolerated
• Considered as joint ventures
• Important for notifications to be effected
for time for approval
• Inquiry if share exceeds the currency
threshold or 35% share on relevant market
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Unfair trade practices: competition
and consumer protection
• Yes, the Bill does not address the
consumer interest
• The draft consumer Bill, in the making
addresses these challenges
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Trade related aspects of IPR
parallel imports
• Addressed under copy right, trade markets
etc.
• In the 1970’s only Civil action was used
• Yes, the Draft Bill Competition does not
address IPR
• Needs assessment of IPR has been
affected
• IPR Bill is in the making
• The IPR should address parallel imports
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Draft Bill and EAC and COMESA
• External and competitive practices will be
addressed by EAC competition Bill in the making
• Beyond EAC, COMESA competition Rules and
Regulations will address and competitive
practices among COMESA member States
• Beyond COMESA there is need to examine the
answer through Singapore issues
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Competition Policy
• Competition law alone does not guarantee
market perfection
• Need for other key policies to confirm to key
market principles
• These should adhere to equilibrium in the four
markets
• Public policies are used to regulate markets
• Most successful were for health, law, finance
and international and regional agreements.
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