POST COVID-19 ECONOMIC RECOVERY BLOCK EXEMPTION GUIDELINES UNDER THE COMPETITION ACT NO. 12 OF 2010

RELAXATION OF COMPETITION LAWS TO SPUR POST-COVID 19 ECONOMIC RECOVERY IN KENYA: A SOLUTION OR A PARADOX?

1.1 Background

The impact of the Corona Virus Disease of 2019 popularly known as COVID-19 on Kenya’s economy and the world at large is far-reaching. The effects are a combination of both the demand and supply shocks. A supply shock is characterised by the reduction of the economy’s capacity to produce goods and services at designated prices ; for instance; lockdown measures which could prevent workers from doing their job . On the other hand, a demand shock is characterised by the reduction of the consumers’ ability or willingness to purchase products and services at the designated prices ; for instance; avoidance of restaurants by consumers for fear of contracting the virus .

The impact of COVID-19 shocks on the economy can be categorised into the following: contraction of the economy, productivity losses and welfare losses . They are expounded in more detail below.

a) Contraction of the Economy:

Preliminary data indicated that Kenya’s economy would contract by 0.3% in 2020 on the minimum but could be as high as five (5) per cent. A severe fall in economic growth rates translates to a significant impact on income.

b) Social Welfare Losses

According to the International Monetary Fund (IMF), almost all households surveyed in Kenya stated that their income had decreased significantly as a result of the pandemic.

c) Productivity Losses

Various sectors reported a loss in the number of hours worked. The loss of number of hours worked translated to productivity losses.

1.2 Post COVID-19 Economic Recovery Block Exemption Guidelines under the Competition Act No. 12 of 2010 (PCBEG)

The Competition Authority of Kenya (CAK) in a bid to mitigate the drastic effects of the COVID-19 pandemic on the economy as illustrated hereinabove is willing to take careful relaxation of the Competition Laws in order to spur Post-Covid Economic Recovery. The CAK in February 2021 therefore developed the Post Covid-19 Economic Recovery Block Exemption Guidelines under the Competition Act No. 12 of 2010 seeking to cushion and promote economic recovery post the pandemic as well as define forms of cooperation that will support economic survival, recovery and growth of specified critical sectors to sustain continuous supply of essential goods and services in line with the Government Economic Recovery Strategy.

1.3 Legal Framework guiding the PCBEG Guidelines

The Post Covid-19 Economic Recovery Block Exemption Guidelines under the Competition Act No. 12 of 2010 (PCBEG) are anchored under Section 30(2) of the Competition Act, No. 12 of 2010 which stipulates that:

(2) The Authority may, with the approval of the Cabinet Secretary, by notice in the Gazette, exclude any category of decisions, practices or agreements by or between undertakings from the application of the provisions this Part.

Rules 23 and 24 of the Competition (General) Rules, 2019 shall also guide the applicability of the Block Exemption Guidelines. Rule 23 stipulates that Section 30(2) of the Act shall apply to vertical restraints included in practices, decisions or agreements between undertakings and agreements entered into for purposes of export. Rule 24(1) provides that in the determination of the category of practices, decisions or agreements that warrant grant of Block Exemptions under Section 30, the Authority shall be guided by the Block Exemption Guidelines set out in the Third Schedule of the Rules and shall consider:

• The market share of each of the undertakings which are party to the Agreement;

• Whether or not the agreements have any restrictions;

• The nature of the markets; and

• Any other relevant consideration.

Rule 24(2) stipulates that agreements for purposes of export shall be eligible for exemption under Part IV of the Competition Rules, 2019 i.e. Block Exemptions.

Copying Not Allowed ! Contact Kipkenda & Company Advocates.