In an effort to promote and sustain fair competition in markets in Uganda, the Competition Act 2024 of Uganda was birthed and commenced on April 19th 2024. This can be rightly classified as a major milestone in market efficiency as it marks the end of a challenging journey to the establishment of a national general competition law regime that started 20 years ago in 2004.

Despite the absence of a national competition law, sector-specific regulation had already existed. For example for the Communications sector, the Uganda Communications Competition and Accounting Regulations 2019. Additionally, Uganda has been subject to the regional competition regimes of the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) as a member state of both groups. It merits attention, however, that the aforementioned regimes only apply to matters with a cross-border effect within the respective regime member states.

Key provisions in the Act

• Administration of the Act lies with the Ministry of Trade Industry and Cooperatives which has been mandated to sustain fair competition in the market, protect consumer interests, investigate anti-competitive practices, handle competition matters referenced to it and generally implement the law relating to consumer protection. The Act also establishes under the Ministry a technical committee on competition and consumer protection to assist the ministry with the functions specified in the act. This position however differs from other competition regimes such as Kenya and Rwanda who established separate entities to handle competition matters. It remains to be seen whether this stance shall affect the implementation of the objectives of this act.
• The act defines the categorization of dominant persons and prohibits the exploitation of consumers by dominant persons or the exclusion of competitors by dominant persons. Furthermore, it defines and prohibits anti-competitive practices and anti-competitive agreements.
• In case a person proposes to enter into a merger, acquisition or joint venture, the Act prescribe that the person shall give notice to the Ministry and the Ministry has authority to inquire into the merger and either approve it or propose changes to its amendment. Mergers acquisitions and joint ventures.

Key impact considerations for businesses, and other key market players

For businesses: This means a thorough re-evaluation of supply chain management, pricing tactics, and marketing strategies to ensure the prevention of accusations of anticompetitive behaviour. This in the long run benefits consumers as businesses are forced to maintain competitive pricing and augment their offerings. Potentially dominant companies should also consider re-evaluation of their strategies to align with the new regulatory environment.

Multi-national corporations: Part four of the Competition Act disallows the abuse of dominant market positions, a behavior frequently exhibited by large international corporations accustomed to wielding significant market power in developing economies in which they operate. Similarly to the businesses above, these dominant multi-national corporations now need to re-assess their pricing tactics and marketing strategies to ensure compliance with the Act.

Foreign investors: There are concerns that the heightened scrutiny and restrictive regulatory mandates imposed by the Act may discourage foreign investment or involvement in Ugandan markets. Conversely, because the Competition Act is designed to foster and maintain equitable competition within Uganda’s markets, it can attract foreign investors who appreciate regulatory stability and fairness.

Opportunities and risks

Longer timelines for deals: Under the new act, the Ministry’s investigation and decision-making process, is stipulated to extend up to 120 days from the filing date. Unfortunately, this may significantly impact the timing for merging parties. These new requirements for mandatory notifications and pre-approvals are anticipated to lengthen the timelines for merger transactions in Uganda and are feared to discourage such transactions.

Safe levelled playing ground for investors: Investors who look out for regulated markets might perceive Uganda’s new competition law as a beneficial advancement. The law strengthens their confidence in the protection of the process of competition in a free market economy which shall in turn encourage the participation of such investors.

Modification of operations: The introduction of the Competition Act has necessitated that businesses looking to enter Uganda’s markets carry out thorough evaluations of how the Ministry of Trade might perceive potential mergers, joint ventures, or acquisitions.

Conclusion

If successfully implemented, Uganda’s new Competition Act will significantly impact both local and foreign businesses, bringing opportunities and challenges. Concerns about its potential to hinder foreign investment and business expansions will depend on its enforcement and the balance between regulation and encouraging investment. Businesses that adapt to these regulatory changes are expected to thrive in a more competitive market.