CAK targets Big Tech with proposed competition law

The Competition Authority of Kenya (CAK) has published new amendments to the Competition Act which sees the watchdog tighten its regulation of 'Big Tech’ players operating in the country.

In the Competition (Amendment) Bill, 2024, CAK seeks more powers from Parliament to expand its oversight in protecting local companies from dominance by technology giants such as Google parent Alphabet, Meta, Amazon and Netflix, which were previously not expressly captured by the market share and market power threshold provided under the existing Competition Act.

The watchdog seeks to clamp down on things like mergers and acquisitions intended to kill the tech companies’ competitors, as well as restriction of third-party services on their platforms.

The draft laws seek to add a new definition of “digital activities” to the Competition Act, to say “the provision of a service by means of the internet, or provision of digital content, for the benefit of business consumers or other consumers (whether paid for or otherwise and whether or not such activity is multisided).”

This includes online intermediation services like marketplaces and app stores, search engines, social networking platforms, video-sharing platform services, independent interpersonal communication services, operating systems, cloud computing services; and online advertising services.

CAK also seeks to add “superior bargaining position” in the Act, to mean “the ability of an undertaking to control, direct, define or determine the conditions of business operations with counterparties which are favourable to itself without reference to the undertaking’s dominant market position or market power in the relevant market.”

“Section 18 of the principal Act is amended in subsection (4), by deleting the words “abuse of buyer power” and replacing therefor the words “abuse of superior bargaining position,” the proposed amendment spells out.

In this case, “abuse of superior bargaining position” comprises delays in payment of suppliers without justifiable reason in breach of agreed terms of payment, unilateral termination or threats of termination of a commercial relationship without notice or on an unreasonably short notice period, and without a justifiable reason; and failing to provide the counterparty with terms, conditions or other rules associated with the transaction or service prior to the transaction or provision of the service.

It also includes the unilateral variation of contractual terms, conditions, or other rules associated with the transaction or service without prior notification to the counterparties; transfer of costs to a counterparty; and transfer of commercial risks meant to be borne by a party to the counterparty.

Demands for preferential terms unfavourable to the counterparty; imposing purchase prices below competitive levels or service fees above competitive levels; unreasonable collection and/or processing of data of the counterparty; imposing unduly difficult conditions for the termination of service; and obstruction of business activities or interference in the counterpart’s management of its business will also amount to abuse of superior bargaining position.

“A person who contravenes the provisions of subsection (1) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings or to both,” reads the proposed law.

For digital activities where dominance can be established even with market shares below forty per cent per the existing competition laws, CAK says it shall consider factors that typically grant significant market position, whether they arise from the digital activity being performed in one or multiple markets.

“This change has been necessitated by the fact that there are companies in the digital market whose market shares are below the threshold of dominance but whose conduct has the same negative effect on competition as dominant players,” a spokesperson for CAK told Citizen Digital on Monday.

“The envisioned enforcement procedure is the same as that enumerated in the current law.”

CAK has invited stakeholders to submit comments on the proposed amendment by June 11.

If passed, the new regulations will mirror similar antitrust laws in the United States and Europe, where tech giants have been probed multiple times and sometimes slapped with hefty fines for anti-competitive behaviour.

In March, for instance, European antitrust regulators said they were scrutinising Apple, Google and Meta over their power to enable people to switch to competing services like social media platforms, internet browsers and app stores.

Violating the European Union's new Digital Markets Act could result in fines of up to 10 per cent of the companies' global annual turnover.