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PREPARED FOR WORK SHOP ON COMPETITION POLICY AN LAW

ADMINISTRATION FOR STAFF AND MEMBERS OF TRADE PRACTICES INVESTIGATION COMMISSION,

ETHIOPIA

IntroductionPrior to 1945, most of the world thought that

cartels brought widespread benefits. Cartels are not necessarily the opposite of

liberalism and competition, but a variation on them.

External shocks or demand instability destabilized cartels as much as cheating.

Cartels are a subset of inter-firm cooperation, which ranges from highly, fluid spot markets with no individual market power to fully integrated enterprise hierarchies.

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While long-term contracts with suppliers, subcontractors, wholesalers, or retailers or enterprise groups might be anticompetitive, they are not cartels.

In the modern business world trade associations, professional organizations and similar institutions usually perform many of the activities and achieve in a legal or indirect way the goals of direct collusive agreements.

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What is a cartel?

• Combination of independent business organizations formed to regulate production, pricing, and marketing of goods by the members.

• A group of parties, factions, or nations united in a common cause; a bloc.

• A combination of independent often international companies intended to limit competition and increase profits.

• A fine line exists between legitimate associations and cartels. Cartels can also be defined depending on their objective: 

 

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• Procedural Cartels :these are contractual or condition

• Market Cartels: these types include Spot markets, Oligopolistic competition (Implicit collusion), trade associations among others.

• Hard-Core cartels (illegal); these are customer cartels, specialization cartels, territorial cartels, quota cartels, price cartels.

• Industrial/Social policy: Import/Export cartels, rationalization cartels, recession cartels, Co-operative Marketing.

Cartels under the armpit of national sovereignty.An example of a relatively new international cartel is

the Southeast Asia rice producing countries.

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Addressing cartels through competition law: Kenya Perspective

Law• The Restrictive Trade Practices, Monopolies

and Price Control Act (Cap. 504). • Enacted in 1988.• Cap 504 Laws of Kenya has the principal

authority to investigate cartels.• Participation in a hardcore cartel is an

offence under Section 11 (1) and Section 12 (2) of Cap 504 Laws of Kenya.

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Decision-making institutions.MPC,Minister,RTP Tribunal, andHigh Court of Kenya   Handling complaints and initiation

of proceedings.

Leniency• There is no leniency programme.

Investigative powers of the enforcing institution

• entitled to access all business documents he deems necessary for investigation

• The Commissioner is entitled to copies of records of business transactions within reasonable time.

• Private locations.

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Procedural rights of businesses/individuals. -Information can only be accessed by a third party through a Court Order.

• Decisions by: Commissioner, Minister, RTPT and High Court

• • Sanctions on the merits of the case: can be monetary, custodial or both.

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• Cartel agreements are economically unstable.

• Once a cartel is broken, the incentives to form the cartel return and the cartel may be re-formed.

• International and national cartels are hard to burst.

• Cartels do not abolish competition, but regulate it.

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END OF PRESENTATIONTHANK YOU ALL FOR YOUR ATTENTION!

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