Economy
Competition watchdog left out of dominance decisions
Wednesday April 3, 2024
The Competition Authority of Kenya (CAK) and the Communications Authority of Kenya (CA) have resumed their internecine wars over their respective roles in enforcing market dominance rules in a conflict that risks harming the sector telecommunications.
In its annual report, CAK notes that proposed regulations for the telecommunications industry fail to recognize its role in determining market dominance.
This is despite the ICT Ministry’s amendments to the Kenya Information and Communications Regulations (KICA) 2023, which raised the threshold for abuse of dominance from 25 percent to 50 percent, as in the law on competition.
In addition to regulating tariffs, consumer protection, licensing and radio communications regulations, KICA also addresses the issue of competition.
However, CAK questioned why its role in the issue of competition and dominance had been removed from the proposed regulations.
In an advisory opinion, the CAK wants the regulations to clarify the definition of a dominant service provider.
“Regulation should recognize the role of the Authority (CAK) in regulating competition and determining dominant position and significant market power,” CAK said in its annual report for the 2022/23 financial year .
This turf war reflects the disagreement the two regulators had in 2013 over pressure from rival telecoms operators to declare Safaricom dominant.
Read: State Eyes Telecommunications Profits Through Tighter Dominance Rules
Airtel Kenya, Kenya’s second largest telecommunications company by market share, has denounced Safaricom’s stranglehold on 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, to be separated from other services such as calls, SMS and internet. Safaricom’s argument was that declaring itself dominant would amount to punishing success.
CAK objected to Safaricom’s declaration of dominance, stressing that it was not enough to have a larger market share, a company had to abuse it.
Examples of abuse of a dominant position include imposing unfair selling prices, limiting market access or outlets, or applying different terms to equivalent transactions with other parties.
In the latest case, the CAK is offended by the changes made, emphasizing that the new version of the regulation deliberately left aside the obligation to consult it on questions of competition and dominant position.
In most countries, it is the competition regulator that determines questions of dominance. But where there are other regulators, as in the case of listed companies, banks and telecommunications operators, it is normal to consult or align with the competition watchdog.
Safaricom’s competitors have been pushing for the company to be declared a dominant operator to ensure that its competitors are not pushed into bankruptcy. At the end of December, the company controlled 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.
According to the new regulations, the State will raise the threshold from which telecommunications companies can be declared dominant to more than half of the gross turnover of the entire market. The KICA bill pushed back the domination limit of 25 percent of the relevant gross market, setting it at the same level as that set by the CAK.
Due to these contradictory provisions, it was difficult for the CA to declare a dominant operator or to sanction an abuse of a dominant position. The bill imposes onerous operational obligations on an operator declared dominant and imposes punitive sanctions in the event of abuse of a dominant position.
Read: E-commerce traders on DCI and CAK radar amid growing scams
Analysts say the 25 percent threshold has attracted many operators, defeating the aim 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 that we would have lost focus on the dominant players that the law intended to regulate,” said a CA source.