DRAFT TALKING NOTES FOR TOOL KIT ON DRAFT UGANDA COMPETITION BILL

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.