Category Archives: Legal Advice

Introduction

The Competition Authority of Kenya (CAK) has proposed a series of changes to the Competition Act Cap. 504 Laws of Kenya (the Act) in response to emerging regulatory issues, such as those presented by digital marketplaces. CAK also aims to incorporate lessons learned from its enforcement experience and international best practices.

Some of the areas that the Bill seeks to amend include abuse of buyer power, mergers, criteria for determining dominant position, and financial penalties.

We will provide an overview of some of the key provisions of the Bill below.

Key Provisions

New Definitions

The Bill introduces some new definitions to the Act. The terms “business consumer”, “digital activities”, “product information standards”, “strategic market position” and “superior bargaining position” have all been introduced to the Act.

Superior Bargaining Position

The proposed Bill aims to replace the term “abuse of buyer power” with “superior bargaining position.” According to the Bill, a superior bargaining position refers to the ability of an enterprise to control, direct, define, or determine business operation conditions with counterparties, in a manner that benefits the enterprise, regardless of its dominant market position or power. The Bill prohibits any conduct that amounts to abuse of superior bargaining position in the Kenyan market or a substantial part of it. The Bill also grants the CAK the power to monitor the activities of any sector or enterprise that it believes is experiencing or likely to experience abuse of superior bargaining position. CAK is authorized to impose reporting and prudential requirements to ensure compliance and establish a code of conduct for such sectors.

Some behaviours that constitute abuse of a superior bargaining position include delays in payment without justifiable reasons, unilateral termination or threats of termination of a commercial contract without adequate notice, unilateral variation of contractual terms, transferring costs to the counterparty, and imposing unfair commercial risks meant to be borne by the other party.

Additionally, demanding preferential terms unfavourable to the other party, setting purchase or service prices below competitive levels, unreasonably collecting and/or processing personal data of the counterparty, imposing unduly difficult conditions for the termination of services, and obstructing business activities or interfering in the counterparty’s management of its business also amount to abusing a superior bargaining position.

Those found guilty of abusing their superior bargaining position can face imprisonment for up to five years, a fine not exceeding KES. 10 million, or both.

Mergers

The Bill proposes adding mergers of institutions that have been privatized to section 41 of the Act, which defines a merger. CAK may also request public input on a proposed merger within 14 days of receiving notification of the proposed merger.

Financial Penalty

The Bill introduces a financial penalty of up to 10% of the immediately preceding year’s gross annual turnover in Kenya for an undertaking that contravenes any lawful order given by CAK under the Act.

Consumer Protection

The Bill proposes to strengthen consumer protection measures, including mandatory disclosure of product information and prohibition of withholding material information about product quality and use.

Conclusion

The Competition Authority of Kenya (CAK) states that the proposed amendments are intended to enhance its ability to carry out its mandate and ensure efficient operation of the Kenyan market.

CAK has invited the public to provide comments on the Bill. Feedback can be submitted through the Bill and Stakeholder Feedback Tool, which is accessible at: Stakeholder Views Collection Matrix.xlsx (live.com).

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kabu.karanja@attorneysafrica.com

The Competition Authority of Kenya (CAK) is cracking down on banks that impose charges on customers, charges that had not been previously disclosed to the customer. This is in line with the authority’s prerogative under Section 56(3) of the Competition Act, which states as follows: –

A person shall not, in the provision of banking, micro-finance, insurance and other services, impose unilateral charges and fees, by whatever name called or described, if the charges and the fees in question had not been brought to the attention of the consumer prior to their imposition or prior to the provision of the service.

CAK has accused some tier-one banks of providing misleading information to customers or failing to disclose additional charges to customers during lending, violating agreements with customers, and imposing unfair charges on customers. These practices have led to financial hardships, defaults in loan repayment, and damaged credit scores.

The move by CAK has come amid growing concerns by members of the public of additional and hidden charges imposed by lenders in the conduct of their business.

Previously, the banks handled complaints of this nature, often leading to dead ends. Now, with increased consumer education initiatives, borrowers are more aware of their rights and can escalate issues to the CAK for investigation.

The CAK investigates most of these cases; however, some are forwarded to the Central Bank of Kenya and the Insurance Regulatory Authority for further action.

This move by the CAK, aimed at improving information symmetry between banks and their customers, is a step towards fostering customer trust in banks and ensuring fairness in the banking sector.

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Introduction:

On 21 February 2024, the Energy and Petroleum Regulatory Authority (EPRA) released the Draft Energy (Electricity Market, Bulk Supply, and Open Access) Regulations, 2024 (the Proposed Regulations). The Proposed Regulations are aimed at governing the electric power, coal, renewable energy, and petroleum subsectors. They apply to the generation, importation, exportation, transmission, distribution, and retail supply of electrical energy in Kenya.

Key Objectives:

The objectives of the Proposed Regulations are as follows:

• providing guidance on reviewing the electricity market;
• governing operations and management of the electricity market, open access, and bulk supply;
• promoting competition, efficiency, reliability, and service quality;
• ensuring non-discriminatory open access to enhance competition;
• attracting investment in energy infrastructure; and
• enhancing accountability, transparency, and efficiency in the electricity market.

Key Provisions:

We set out below some of the key provisions in the Proposed Regulations:

• The Electricity Market Structure: The Proposed Regulations provide for the conduct of a market review to be conducted by EPRA in consultation with the Cabinet Secretary responsible for energy (the Cabinet Secretary). EPRA is also required to involve stakeholders in the energy sector while undertaking the market reviews and subsequent guidelines. This review should be done within 3 years. Subsequent reviews should be undertaken at least once every five (5) years. Upon conclusion of the market reviews, EPRA is required to publish a report in the Kenya Gazette within 30 days of concluding the review. The first market review will be essential in informing Kenya’s electricity market structure and design.Once the first report is gazetted, EPRA in consultation with the Cabinet Secretary to issue and gazette guidelines on the structure of the electricity market within 6 months after gazettement of the market report.

• Open access: transmission and distribution licensees will be required to provide ‘non-discriminatory open access” to their transmission or distribution system. This will enable any other licensees or eligible consumers to use the systems, upon payment of wheeling or use of system charges and other prescribe fees. Consumers will also have the liberty of selecting their preferred retail suppliers provided that the consumer has not entered into two supply contracts for the same premises.

• Minimum roles: The Proposed Regulations outline the minimum roles of a generation licensee, transmission licensee, distribution licensee, retail supply licensee, eligible consumers and system operators all in an effort to promote equity and fairness in Kenya’s electricity market.

• Tariffs: The Proposed Regulations require EPRA to prescribe generation and retail tariffs and charges for network service, wheeling, use of system and ancillary services. Licensees will be required to apply to EPRA for approval for approval of tariffs which will take effect on the commercial operation date under the respective commercial agreement. Licensees will be able to recover capital costs, O&M costs, depreciation, return on equity, other finance costs and taxes from the tariffs.

• Bulk Supply: The Proposed Regulations set out a framework for bulk supply. Under the Proposed Regulations bulk supply shall be the supply of electrical energy by a licensee to another licensee and not to a consumer. The format of the bulk supply application and agreement are prescribed by the Regulations.

• Non-compliance sanctions: Offences and penalties under the Proposed Regulations include giving false and misleading information at application stage and failure to comply with the regulations, orders or prohibitions of the Authority. The proposed sanctions where one is found liable are both custodial and non-custodial.

• Dispute resolution: The Proposed Regulations require that where there are disputes and/or complaints that the internal mechanisms provided under the complaints and dispute resolution regulations. Additionally, a person aggrieved or dissatisfied with the decision of the Authority may appeal the same at the tribunal and then the High Court within 30 days of the Tribunal’s decision.

Stakeholder Engagement Workshop:

EPRA has scheduled a stakeholder engagement workshop on 4March, 2024, at the Sarova Stanley Hotel in Nairobi, running from 8:00 a.m. to 3:00 p.m. The workshop aims to provide a platform for stakeholders to gain insights into the Proposed Regulations and to express their views. The proceedings will be accessible remotely through Zoom, YouTube, and Facebook.

Public Participation:

Stakeholders and members of the public are encouraged to actively participate in the regulatory process. The Proposed Regulations can be accessed here. Comments can be submitted through email at info@epra.go.ke or physically delivered to EPRA’s regional and headquarter offices.

Conclusion

The Proposed Regulations signify a significant step towards enhancing the regulatory framework in the energy sector, promoting transparency, competition, and efficiency. Stakeholder input is crucial in shaping the final regulations, and interested parties are encouraged to participate actively in the upcoming workshop and submit their comments for consideration.

Note: This legal alert provides a general overview and is not a substitute for legal advice. Stakeholders are advised to review the full text of the Proposed Regulations for comprehensive understanding and seek professional advice as needed.

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