1

DRAFT TALKING NOTES FOR TOOL KIT ON DRAFT UGANDA

COMPETITION BILL

2

Introduction: Governance

• 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

3

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

4

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

5

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

6

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

7

Introduction: Baseline Resources

• Originally coffee, cotton, tea, tobacco were the dominant crops

• Now none -traditional crops, fish, horticulture are coming up

8

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

9

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

10

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

11

SOLE PROPRIETORSHIP

• 29% Hotels and Restaurants

• 29% Trade

• 20% Manufacturing

• 22% others

12

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%

13

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

14

Development of competitiveness

• 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

15

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.

16

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

17

Development: Objective & Principals

• Abuse of dominant positions (e.g. beer firms, tobacco)

• Mergers & acquisitions (e.g. oil & beverage companies)

18

Development: Regional dimension

• Promote trade, investment, liberalization & competitiveness

• Monitor firm behaviour at home and outside

• Balance national and regional business interest

19

Development: Structure of the Bill

• 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

20

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

21

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

22

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

23

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

24

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

25

Restricted T - practices and anti-competitive 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

26

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

27

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

28

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

29

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

30

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

31

Abuse of dominant position criterion

• 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)

32

Price discrimination and refusal to supply

• Not –clearly defined but not allowed

• Takes place among African and Indians

33

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

34

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

35

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

36

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

37

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

38

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

39

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.