NATIONAL UNIVERSITY OF RWANDA

FACULTY OF LAW

ANTICOMPETITIVE PRACTICES

Presented by Richard KAYIBANDA

Single Chapter: ANTICOMPETITIVE PRACTICES The essence of competition entails attempts by firm(s) to gain advantage over rivals. However, this is to be done within limits of acceptable business practices. Practices, by firms, that artificially limit competition by not building so much on their advantage but on exploiting their market position to the disadvantage or detriment of competitors, customers or suppliers shall be considered as crossing acceptable boundaries of business practices1 and thus considered as anticompetitive. These practices include agreements and abuse of dominance when some

requirements are met (for instance when they can restrict or distort competition), predatory pricing2, etc. Worth mentioning is that Rwanda as other countries fight against anticompetitive practices3. In this piece of work I shall discuss anticompetitive practices; viz agreements, abuse of dominance and predatory pricing. Section I. Agreements 1. Definition of agreement According to A. M. NGAGI whose opinion I share the Rwandan law on internal trade does not expressly mention the practices of agreements and abuse of dominance; but they are rather deduced from an interpretation of article 8 of the Law on internal trade 4. However, it is pertinent

1 2

OECD, Glossary of Statistical Terms, Paris, 2007, p. 38. J. B. BLAISE, Droit des Affaires, Commerants, Concurrence, Distribution, 3 d., Paris, L.G.D.J., 2002, p. 405. 3 Art. 8 of Law No 15/2001 Modifying and Supplementing Law No 35/91 of 5th August 1991on the Organization of Internal Trade, O.G., No 3 of 1/2/2001 (hereinafter Internal Trade Law). 4 See A. M. NGAGI, La protection des intrts conomiques des consommateurs dans le cadre du libralisme conomique en droit rwandais, Thse de doctorat, Butare, Editions de lUNR, 2005, p. 204.

to highlight that the Law on Rwanda Utility Regulatory Agency in its article 41, though of limited application5, refers to agreements without defining them. The Organization for Economic Cooperation and Development (OECD) defines the agreement as an explicit or implicit arrangement between firms normally in competition with each other to their mutual benefit6. Specifically, under the European Law, agreement is any arrangement, decisions by associations of undertakings and concerted practices which may affect trade [between Member States] and which have as their object or effects the prevention, restriction or distortion of competition [within the market]7. Noteworthy is that the second definition refers to illegal agreements in as far as it clearly describes its effects which are based on to decide its legality or illegality. In this work focus shall be on illegal agreement. The aforesaid definitions allow determining elements that constitute an agreement. 2. Components of the agreement An agreement violates competition law and is thus subject to sanctions if there is consultation between undertakings and there is restriction of competition (harm to the market). Moreover, a causal link between the two must be established.

Only telecommunications networks and/or telecommunications services, electricity, water, the removal of waste products from residential or business premises, the extraction and distribution of gas as well as persons and goods transport ( art. 1 of the Law no 39/2001 of 13/09/2001 establishing an agency for the regulation of certain public utility). 6 OECD, op. cit., p. 27. 7 See G. CORNU, Vocabulaire juridique, Associations Henri Capitant, Paris, PUF, 1987, p. 347. This author was referring the European Community treaty in its then article 85(now 101)

A. Consultation between undertakings In his analysis combining the Treaty on the Functioning of the European Union (hereinafter TFEU) and the French Code de Commerce, M. MALAURIE-VIGNAL avers that by consultation between undertakings, the two texts target the agreements (accords) and concerted practices as well as decisions by associations of undertakings8. 1. Contractual Agreements According to F. LEFEBVRE, there is agreement when parties reach a consensus on a project that restricts or is of the nature to restrict their trade freedom by determining their direction of mutual action or abstention on the market9. An agreement falls in the scope of prohibited anticompetitive practices irrespective of the fact that the agreement is written, oral or tacit 10. Moreover, it is neither required that the agreement be singed when it is written11 nor necessary that the agreement has binding force12. It should be highlighted that there must be the meeting of minds freely given for there to be an agreement under competition law13. There are two types of contractual agreements: viz horizontal and vertical agreements. However, for some authors like J. B. BLAISE and M. MALAURIE-VIGNAL, unilateral decisions

M. MALAURIE-VIGNAL, Droit de la concurrence interne et communautaire, 3 d., Paris, Armand Colin, 2005, p. 161 and J. B. BLAISE, op.cit., p. 408. 9 F. LEFEBVRE, Ententes, abus de position dominante, concentrations conomiques, Les Editions Francis Lefebvre, 2004, p. 71. 10 Ibid.; J. B. BLAISE, op. cit., p. 409. 11 Decision of Commission of European Community of 5-9-1979, case BP Kemi-DDSF. 12 M. MALAURIE-VIGNAL, op. cit, p. 162. 13 See Cass. Com. 7-4-1998: The Court decided that there can only be agreement qualifying as concerted action only if it is proven that parties have freely consented to restrict market access or free competition. In this case suppliers of a distributor who has obliged them (and were forced) to supply under supplementary conditions were not considered to have consented to the agreement. Also, when the agreements is the result of a legal text, the consent is given by an undertaking that is not autonomous, the consent is given under duress and exceptionally for crisis agreement there is no punishable agreement (See M. MALAURIE-VIGNAL, op. cit, p. 164-165 and 191 and K. SAFARI, Le regime juridique des atteintes la libre concurrence au Rwanda, Mmoire, UNR, 2007, p. 42 (non publi)).

(recommendations, instructions and general conditions of sale) are also among contractual agreements if they have been really accepted by purchasers (distributors)14. a. Horizontal agreements (cartels) They are agreements concluded between competitors15 not to compete with each other16. Undertakings that are parties to the agreements must be at the same level of the productiondistribution process17. Typically, cartels members may agree on: price fixing (the price they will charge or the discounts/credits terms they will offer their customers for goods or services) bid rigging (deciding who should contract in a competitive tender process), output quotas (limiting the levels of products or services supplied to the market in order to increase the price) and market sharing (choosing which customers or geographic areas they will supply, or preventing competitors from entering the market)18. b. Vertical agreement Vertical agreements are those between undertakings that operate at different levels of production chain like the manufacturer and the distributor 19. Worthy mentioning is that regulation of vertical agreements has evoked much controversy. Those who treat vertical agreement as restraining competition argue that the legal text do not distinguish between horizontal and vertical agreements20. Opponents of this idea argue that it is

14 15

See M. MALAURIE-VIGNAL, op. cit, p. 162 and J. B. BLAISE, op. cit., p. 411. Note, however, that J. B. BLAISE, op. cit., p. 409. 16 Office of Fair Trading, Cartels and the Competition Act 1998, A guide for purchasers, p.3. 17 J. B. BLAISE, op. cit., p. 409. 18 Office of Fair Trading, op. cit., p. 3. 19 See Tilottama RAYCHAUDHURI, Vertical Agreements in Competition Law: Striking the Right Balance between Regulation and Competition, NUJS Working Paper Series, WBNUJ, 2010, p. 5 and J. B. BLAISE, op. cit., p. 409. 20 Id., p. 10 and 409 respectively for two authors.

impossible to prohibit distribution contracts and that parties to the supply agreements are not competitor with each other21. c. Unilateral decision (recommendations and instructions) Suppliers and retailers tried to escape sanctions by arguing that restriction of competition is not the result of vertical agreement; but simply the unilateral decision of the supplier. When the manufacturer has established the distribution network, decision that they have taken in their commercial policy are tacit agreement concluded with retailers22. However, true acceptance of instruction or recommendation must be established23. It should be noted agreements may be classified according to several criteria like function of participants (horizontal and vertical, multilateral and bilateral, ), object (agreements to reduce the number of competitors and to restrict the freedom of competitors), as well as binding force of agreements (more or less tacit agreements resulting from non-verbal agreements with sanctions and to harmonize behavior, agreements resulting from verbal agreements with sanctions but no longer binding, mergers, etc)24. 2. Decisions by associations of undertakings An agreement can take the form of association of undertakings which can have legal personality or not25. The creation of associations is not per se punishable; but rather only when its social aim is obviously anticompetitive26. The association can have the statutory objective which is by nature anticompetitive (like fixing prices or quotas of production to be attributed to its members).
21 22

J. B. BLAISE, op. cit., p. 409. Id., p. 411. 23 M. MALAURIE-VIGNAL, op. cit, p. 162 24 A. M. NGAGI, Competition Law and Consumer Protection, LL.M Course notes, NUR, 2011, p. 27-28. 25 J. B. BLAISE, op. cit., p. 412. 26 M. MALAURIE-VIGNAL, op. cit, p. 165.

Sometimes, the statutory objective of the association is not anticompetitive; but it goes beyond its objective and favors or provokes restriction to competition27. And instruction from the grouping of undertakings constitutes a decision of the association even when it is devoided of any binding force provided that its acceptance by undertakings to which they are addressed affects the competition28. In Rwanda an example of such an anticompetitive agreement is the case for insurance companies where the premium tariffs for vehicles are the same for all companies since it is fixed by their association Association des Assurances du Rwanda (hereinafter ASSAR) with the power to punish those who do not comply with its rules and instructions29. 3. Concerted practices According to J. B. BLAISE and M. MALAURIE-VIGNAL, concerted practice is characterized by coordinated behaviors of undertakings in the absence of any legally binding agreement between them30. As highlighted by F. LEEBVRE, undertakings adopt the common behavior that leads to conditions of competition that do not correspond to normal market conditions 31. It is the case of exchange of information among enterprises32, attendance of a meeting whose agenda is anticompetitive unless the undertaking proves that it did not comply with anticompetitive practices decided by the meeting33, etc.

27 28

J. B. BLAISE, op. cit., p. 412. F. LEFEBVRE, op. cit., no 320. 29 See S. UWINGABE, Problmatique des ententes entre les socits dassurance et leur incidence sur la libert de la concurrence en droit rwandais, Thse de matrise en droit des affaires, Kigali, UNR, 2010, pp.22-27 and E. NTAMBARA, Du contrle des assurances au Rwanda, Thse de matrise en droit des affaires, Kigali, UNR, 2008, p.36. 30 M. MALAURIE-VIGNAL, op. cit, p. 163 and J. B. BLAISE, op. cit, p. 414. 31 F. LEFEBVRE, op. cit, no 325. 32 M. MALAURIE-VIGNAL, op. cit., p. 163. 33 F. LEFEBVRE, op. cit, no 325.

I share the opinion with J. B. BLAISE where he asserts that concerted practices require two elements. On one side, the practice or behavior of the nature to distort market competition like adoption of similar non competitive prices and, on the other side, refusal to adopt an independent behavior knowing that others will do the same34. Insofar as evidence of concerted practice is concerned, it is not enough to prove the parallelism of behavior (practices), consultation must also be proved; i.e there must be, as said above, at least the exchange of information or contact that affect the autonomous decision of undertakings 35. Again it must be proved that this parallelism is not justified by an economic plausible explanation36. B. Restriction of competition (harm to the market) Article L. 420-1 of the French Code de Commerce as well as article 101par. 1 of the Treaty on the Functioning European Union prohibit agreements that have as their object or effect prevention, restriction or distortion of free competition on the market. According to J. B. BLAISE, whose opinion I share, three terms used (prevention, restriction or distortion) have almost the same meaning since in three cases it is the matter of alteration of free competition designed by a generic expression of restriction of competition[emphasis added]37. There is a non exhaustive list of agreements that are considered as par se restrictive of competition.

34 35

J.B. BLAISE, op. cit., p. 414. D. DREYER, Le Droit de la concurrence, Universit de Fribourg, Facult des Sciences Economiques et Sociales, 2009, p.76. 36 See M. MALAURIE-VIGNAL, op. cit., pp. 170-172. 37 See J.B. BLAISE, op. cit., p. 420.

1) Agreements restricting access to the market or free competition play by other competitors (art. L 420-1, 1o) here it is the matter of exclusion such as agreements of boycott targeting a competitor or an agreements that establish private regulation of access to the profession and its exercise and long term contract of exclusive supply38. The Rwandan law on internal trade in its article 8 par. 1, without mentioning expressly agreements, prohibits any specific or implied agreements that aim at hampering free trade of goods and services. In my view, the aforesaid practices may fall within the scope of this provision. 2) Agreements of direct or indirect fixing of prices or any other trading conditions (art. L 4201,2o and art. 101 par.1 (a) TFEU). Targeted here are adoption of uniform prices, setting of scales by professional associations, spreading of price calculation modes, reduction, imposed resale price. One must also mention agreements on communication of information on prices39. Article 8 par. 2 of the Rwandan law on internal trade expressly prohibits conclusion of secret conventions related to fixing of the same price and not resulting from the normal mechanism of supply and demand. Also, the Law on Rwanda Utility Regulatory Agency in its article 41 refers to anticompetitive agreements that fix prices directly or indirectly40. 3) Agreement limiting or controlling production, markets, technical development or investment (article 101, par. 1 (b) of TFEU and article L 420-1, 3 o of the French Code de

38

Id., p. 421; Cons. Conc, decision no 91-D-56 of 10 December 1991 (In this case the Coca-Cola Beverages Sa, a subsidiary of the Coca-cola Company had established automatic distributors in public places of Bordeaux, and professional organization, on behalf of drink sellers, organized the boycott against products distributed by the former company which decided to remove the automatic distributors. It was decided that this constituted a restriction of competition) and Cons. Conc, decision no 94-D-11 of 1 February 1994 (The company Saint-Gobain Vitrages was sanctioned for imposing to its licenses the obligation of exclusion supply from the very company). 39 See J.B. BLAISE, op. cit., p. 424. 40 See art. 41 10 f the Law on RURA.

commerce). Here for instance targeted are quotas, limit of the volume of production members cannot exceed, freezing of investment or closing of some factories41. 4) Agreement on market sharing (art. L 420-1of the French Code de commerce and art. 101 par. 1 (c) of TFEU): it is the matter of geographical repartition of the market, sharing of customers as well as bid rigging (collusive tendering)42. On the two last agreements, the Rwanda law on internal trade does not explicitly refer to such practices unless one deduces them from provisions of article 8 of the aforesaid law since it mentions malpractices such as maneuvering and trickery and specific or implied agreements that aim at hampering free trade of goods and services which can be extensively interpreted. C. Causal link between consultation and restriction of competition Different authors43, agree that the use of expression like all agreementswhich have as their object or effect the prevention, restriction or distortion of competition in legal texts like the French Code de commerce and the TFEU refer the requirement of the causal link between the consultation and the restriction of competition. However, worth mentioning is that it is not required that the agreement be executed nor its effect produced of the aim achieved44. In my opinion, this requirement exists also under Rwandan internal trade law as it can be deduced from the use of terms like agreements aiming at (art. 8 of the Law on internal trade).

41 42

See J. B. BLAISE, op. cit., p. 424. Ibid. 43 See J. B. BLAISE, op. cit., p. 425; M. MALAURIE-VIGNAL, op. cit., p. 173 and D. DREYER, op. cit., p. 76. 44 See J. B. BLAISE, op. cit., pp. 425-426.

Section II. Abuse of Dominance In the absence of any explicit reference to the abuse of dominance under Rwandan law 45, the researcher resorts on more sophisticated foreign legislation. Historically, only the abuse of dominant position was prohibited and sanctioned. It is the Ordonance du 1er Decembre 1986 sur la libert des prix et la concurrence that introduced in France the prohibition and sanction the abuse of the state of economic dependence46. Thus, in this section the two are analyzed. 1. Abuse of dominance The abuse of dominance has not been defined by legal texts that provide for its prohibition47. First and foremost it is important to highlight the concept of dominance, which is not a problematic48, and abuse of dominance which falls under the scope of legal prohibition. A. Dominance The Rwandan law on internal trade does not explicitly talk of dominant position which is only deduced from the interpretation of its article 8 nor does it define dominance. It is rather the Law establishing Rwanda Utility Regulatory Agency, though applicable on a limited number of items49, that at least prohibits the abuse of dominant position does not define it50. It only states in its article 49 that the Regulatory Board determines a dominant public utility organization without even setting out criteria to base on.

45 46

See A. M. NGAGI, op. cit., p. 204; see also article 42 of the Law on RURA. See J. B. Blaise, op. cit., p. 437. 47 See M. MALAURIE, op. cit., p. 193. 48 See J. B. Blaise, op. cit., p. 437. 49 Only telecommunications networks and/or telecommunications services, electricity, water, the removal of waste products from residential or business premises, the extraction and distribution of gas as well as persons and goods transport ( art. 1 of the Law no 39/2001 of 13/09/2001 establishing an agency for the regulation of certain public utility). 50 See art. 42 of the Law on RURA.

According to Brian SHER NABARRO, dominance is a position of economic strength which enables a firm to prevent effective competition by giving it the ability to behave, to an appreciable extent, independently of competitors, customers and consumers51. According to F. LEFEBVRE, dominance results from the situation of monopoly enjoyed by a firm which can be a de facto monopoly or legal monopoly when it is provided for by the law52. However, this was limited by the decision of Court of Justice of the European Community by asserting that dominance differs from monopoly since the former does not exclude the existence of a certain competition53. In my opinion, the view of the Court is the right one since dominance is not necessarily enjoyed by one undertaking monopolizing the market. Then, it is necessary to determine the market and the place (position) of the firm on that market. B. Components of dominance According to A. M. NGAGI, dominance assumes that the firm in question occupies a prominent place in the market including the importance of market share it holds and that of competing firms54.

51

B. SHER NABARRO, Abuse of dominance in the EU: the evolving law and practice in Cross-border Competition Handbook, 2010 Volume 1, p. 9. 52 Id., no 606. 53 CJEC 13 Fvrier 1979, Hoffmann La Roche, Rec., p. 461. 54 A. M. NGAGI, op. cit., Competition and, p. 29.

From this one may sort out constitutive elements of dominance: viz the firm or group of firms able to occupy such a position and domination of the market (monopoly, apparent concentration of economic power)55. 1. Determination of the market Market being the place where supply and demand of a specific product or services meet 56, it is important to distinguish geographical from product/service market.. a. Geographical market It is the geographical are on which products or services of the firm(s) are commercialized57. Under article L 420-1 of the French Code de commerce, dominance covers the internal market or the substantial part of it58. Under Rwandan internal trade law, there is no such a provision but as it applies to internal trade it is the matter of internal market or, with inspiration from French law, the substantial part of it. Practically, it is determined account taken of criteria like the degree of border protection (tariffs), significance of importations, relationship between product cost and its transportation cost, etc59.

b. Product/Service market
55 56

Id., pp. 29-30. See J.B. BLAISE, op. cit., p. 440. 57 Ibid; B.J. BLAISE, op. cit., p. 441. 58 See also art. 102 TFEU which apply to the European Union. 59 See F. LEFEBVRE, op. cit., no 617

Reference is made, here, to all products or services that satisfy a specific demand, i.e. not only those sold by the firm(s); but also their substitutes serving the same use (interchangeable products or services)60. Substitutability is decided basing in relation to the demand, i.e basing on requirements, preferences and uses of consumers61. 2. The market share of the firm/group of firms For the European Court of Justice, for there to be dominance, the firm must control a significant part of the market. It argues, however, that a share of 40 to 45% does not amount to automatic control of the market62. It important to mention that, the trend is that in case a firms share is above 50% there is a rebuttable presumption that it occupies a dominant position63. However, some authors assume that there is a rebuttable presumption when the firms market share is over 80%64. However, I am of the same view as those who affirm that other factors like the share of other competitors should be verified65in conjunction with the firms market share. C. Abuse of dominance The prohibition is not on holding a dominant position; but rather on abuse of dominant position66.

60 61

See F. LEFEBVRE, op. cit., no 619. See for instance J.B. BLAISE, op. cit., pp. 440-441 and F. Lefebvre, op. cit., no 619. 62 CJCE 14-02-1978, aff. 27/76, United Brand. 63 CJCE 02-03-1994, aff. 53/92 P, Hilti and B. SHER NABARRO, op. cit., p. 9. 64 See J. B. Bernard, op. cit., p. 440. 65 J. B. BLAISE, op. cit., p. 441. 66 Office of Fair Trading, Abuse of a Dominant Position in Competition Law Guideline, 2004, p. 4; F. LEFEBVRE, op. cit., no 630.

While assessing any abuse of dominance, the question to ask is, according to the European Court of Justice, is whether the dominant undertaking (firm) has made use of the opportunities arising out of its dominant position in such a way as to reap trading benefits which it would not have reaped if there had been normal and sufficiently effective competition 67. Moreover, the Court decided that the abuse of dominance has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition68. As an example a dominant undertaking can strengthen its dominance by excluding aggressive small competitor by practicing predatory prices. In this case, the loss it suffers should be recovered when the competitor is no longer there since it may increase prices to its guise. While the Rwandan law on internal trade is not explicit on abuse of dominance which can only be deduced from the interpretation of its art. 8, the Law on RURA which, as abovementioned, is applicable on a limited number of items expressly prohibits the abuse of the dominant position by giving a non-exhaustive list of conduct that constitutes such abuse69. Those acts/ conducts include but not limited to: 1 directly or indirectly imposing unfair purchasing or selling prices or other unfair trading conditions; 2 limiting markets or technical development and adversely affecting users; 3 applying dissimilar conditions to similar trade agreements with other trading parties thereby placing them at a competitive disadvantage; 4 terminating an established business practice or agreement without justifiable reasons
67 68

CJCE 14-02-1978, aff. United Brands, par. 249. CJCE 13-02-1979, aff. 85/76, Hoffmann la Roche, par. 91. 69 See art. 42 of the Law on RURA.

This list which is quite similar to the one provided by TFEU 70 is supplemented by the article 4 of the ministerial order on additional and specific types of agreements, decisions, practices and codes of conduct considered to be anticompetitive or an abuse of dominant position71 It is worth noting that the aforesaid are verified when the dominance has first been established72. D. Forms of dominance Dominance can be exclusive in case the dominant position is held by one undertaking or collective in case the dominant position is held by several undertakings whose behaviors are interdependent, parallel or are the result of an agreement73. 2. Abuse economic dependence Rwandan law is silent about the abuse of economic dependence. And the researcher shall use foreign law in this field. As mentioned earlier in this work, this was introduced by the French Ordonance du 1er Decembre 1986 sur la libert des prix et la concurrence but it is now found in article L 420-2 par.2 of the Code de commerce which prohibits the abuse by any undertaking or group of undertakings of the state of economic dependence in which a customer or supplier is found vis-vis the former as long as it can affect the functioning or structure of the competition. These abuses can be sale refusal, tying, discriminatory practices
70 71

See art. 102 of the TFEU Ministerial Order No 8/DC/04 of 07/06/2004 on additional and specific types of agreements, decisions, practices and codes of conduct considered to be anti-competitive or an abuse of a dominant position [hereafter Ministerial Order of 07/06/2004]. 72 S. SOTHI RACHAGAN, Competition policy and Law in the Consumer and Development Interest, Communication from Consumers International: Asia Pacific Office, UNCTAD, July 2003, p. 6. 73 See F. LEFEBVRE, op. cit., no 608 and 609 and N. GREEN and A. ROBERTSON, Commercial Agreements and Competition Law, Practice and Procedure in the UK and EC, 2nd Ed., London, The Hague, Boston, Kluwer Law International, 1997, pp. 329-330 (Links may be due to the oligopolistic nature of the market, link through shareholding and agreements between undertakings).

This provision deals thus with any form of dependence that places an undertaking under the dominance of another or a group of others74. According to I. KOKKORIS, abuse of economic dependence relates to conducts by non-dominant firms which induce significant harm to consumers75. He continues that abusive conducts include those of non-dominant firms against other firms in weaker bargaining positions which are deemed capable of having negative effects on competition76. Dependence can be trademark dependence or purchasing dependence77. According to F. LEFEBVRE, though it was not reproduced in article L 420-2 of the Code de commerce, the absence of available alternative to the products or services provided by those undertakings is a requirement for there to be abuse of economic dependence78. In Rwanda, this can be the case for Energy, Water and Sanitation Authority (EWSA) and its customers in as far as electricity and water are concerned79. It is pertinent to highlight that in some instances both agreements and dominance are justified.

Section III. Rationale for [licit] cartels and abuse of dominance

74 75

See J.B. BLAISE, op. cit., p. 444. See I. KOKKORIS, Are we Underenforcing Article 102 TFEU?, 2010 p. 1[the article is derived from the authors book titled: A gap in the Enforcement of Article 102, published by the British Institute of International and Comparative Law]. 76 Id, p. 2. 77 See J.B. BLAISE, op. cit., pp. 445-446. 78 See F. LEFEBVRE, op. cit., no 665, K. SAFARI, op. cit., p. 49 and Conseil de La Concurrence, Dcision no 01-D49 du 31 aot 2001. 79 EWSA replaced two public institutions performing commercial or industrial activities; viz. Rwanda Water and Sanitation Corporation (RWASCO) established by Law No 43/2008 of 09/09/200 establishing Rwanda Water and Sanitation Corporation and determining its responsibilities, organization and functioning, O.G., No 23 of 01/12/2008 and Rwanda Electricity Corporation (RECO) established by Law No 44/2008 of 09/09/200 establishing Rwanda Electricity Corporation and determining its responsibilities, organization and functioning, O.G., No 23 of 01/12/2008. See EWSA website: http://www.ewsa.rw/index.html .

Agreements and conducts of dominant undertaking that normally should be considered anticompetitive can be justified and exempted from sanctions pursuant to legal text or economic progress justifications. 1. Legal text justification (See also Sherman act, section, 1 and Blaise p. 426) All agreements are not illicit; there are some that are good agreements80. This is in the same vein as art. L 410-4 of the French Code de commerce that exempts from prohibition anticompetitive practices (agreements and abuse of dominance) that are the result of application of the law or the regulation of its implementation. As highlighted by J. B. BLAISE, to be spared by the relevant prohibitive legal provisions, the practices must be the direct and unavoidable consequence of the invoked law or regulation81. According to M. MALAURIE-VIGNAL, this provision has no equivalent under European Union competition law82. 2. Economic progress justification (individual exemption) Article L 420-4 par. 2 of French Code de commerce and article 101-3 of TFEU grant exemption to restrictive practices for economic progress grounds. It is, however, pertinent to highlight the even if in the following lines deal with both agreements and abuse of dominance, the TFEU does not exempt abuse of dominance83.

80 81

Y. GUYON, Droit des affaires, T.1, 2 d., Paris, Economica, 2003, p. 958. See J. B. BLAISE, op. cit., p. 428 and LAMY, Libert des prix et nouveau droit de la concurrence, Paris, Lamy Sa, 1987, p. 65. 82 See M. MALAURIE-VIGNAL, op. cit., p.212. 83 See article 102 of TFEU as well as comments thereof by J. B BLAISE, op. cit.,p.443.

According to different authors84 whose opinion I share, the reading of the aforesaid legal texts clearly shows that four requirements must be fulfilled. Two of them are positive while others are negative. A. Positive requirements 1. Contribution to economic progress To benefit from exemption the practices must contribute to improving the production of goods or to promoting technical or economic progress. The French Code de commerce includes also job creation or sustainability85. According to F. LEFEBVRE, effects consist of the general advantage on economy and technical progress resulting from the practice and not the advantages that partners gain from the agreement86. Progress can, for instance, consist in warranty and after-sale services that consumers benefit from87. 2. Fair share of the resulting benefit with consumers The practices must allow consumers a fair share of the resulting benefit. Thus, the progress must not benefit only to undertakings party to the agreement; but it must rather entail downstream benefits. In the same way, it was decided that in case of bank card the introduction of fixed interbank charges was beneficial to consumers since it facilitated the interbank operations and development of a new means of payment88. For F. LEFEBVRE, the benefit may b the fall in

84

See for ex. J. B. BLAISE, op. cit., p. 429 ; M. MALAURIE-VIGNAL, op. cit., p. 213 ; A. M. NGAGI, op. cit.,Competition, p. 28. 85 Code de commerce art. 420-4 I. 2o. 86 F. LEFEBVRE, op. cit.p. 169. 87 J. B. BLAISE, op. cit., p. 429. See Commission CE 11-12-1986, aff. Associations belge des banques. Quoted by F. LEFEBVRE, op. cit., p. 176. 88 See J. B. BLAISE, op. cit., p. 430.

prices, quality improvement, supply regularization, introduction on the market on a new advantageous product89.

B. Negative requirements 1. Absence of unnecessary restrictions to competition Restriction to free competition can only be justified if they are substantial to the attainment of the aforesaid objectives. This requirement is about the respect of necessity and proportionality90. The economic progress must directly and necessarily result from the restriction of competition91. 2. Absence of any possibility of elimination of competition Finally, anticompetitive practices are exempted from legal prohibition if they cannot afford concerned undertakings the possibility of eliminating competition in respect of a substantial part of involved product or service. According to J. B. BLAISE, economic progress can justify competition restriction; but it can never justify elimination of competition. F. LEFEBVRE, in his argument, supplements J. B. BLAISE by highlighting that there is no elimination of competition if parties to the agreements do not occupy a significant share of the market and face effective competition from other undertakings that propose the same products or substitutable products92. It is pertinent to mention that other justifications are inoperative: it is the case for instance of foreign undertakings that invoke measures imposed by their States of origin 93 or a third State,

89 90

F. LEFEBVRE, op. cit., p. 176. J. B. BLAISE, op. cit.,p. 430. 91 Ibid. 92 See F. LEFEBVRE op.cit., p. 178. 93 Commission CE 29-11-1974, aff. Roulements billes. FL, p. 179.

fear of a serious market perturbation94 and necessity for undertakings to protect themselves from existing agreements between many other competitors95. Once anticompetitive practices are proved and they are not justified in any of the above mentioned cases there are envisaged sanctions. Section IV. Sanctions for cartels and abuse of dominance Under article 27 of Rwandan law on internal trade all the infringement to the very law (infringements may be agreements, abuse of dominance or predatory pricing) are punishable by a fine ranging from 20,000 to 2,000,000 of Rwandan francs. In addition to this, for the unlawful increase of prices, the culprit shall pay back the profit unduly benefited from the buyer who has been unfairly treated if he is known. In the contrary case, the payment shall be made to the public treasury. It is pertinent to mention that these fines are determined by the Commercial coordinator and confirmed by the Director holding the internal trade in his responsibilities or confirmed by the judiciary96. The minister having internal trade in his/her attributions may, in addition to fines, by emergency measures suspend the culprit from trading and remove his licence and then order a temporary closure of his business for a maximum period of three months97. Finally, even if the law on internal trade is silent contrary to some other legal text like the French Code de commerce and the TFEU which states that illegal anticompetitive practices are null and

94 95

Commission CE 08-01-1975, aff. Conserves de champignons Commission TPICE 06-04-1995, aff. 174/89, Socit mtallurgique de Normandie. 96 Article 29 of the Law on Internal Trade. 97 See article 29 of Internal Trade Law.

void98 , by application of articles 30 and 32 of the Civil Code Book III99 agreements and conventions that contravene the Law on internal trade are null and void. It is important to emphasize that the Law on RURA expressly provides for nullity of both anticompetitive agreements as well as the abuse of dominance for dealers in public utilities100. Section V. Predatory pricing 1. Concept of predatory pricing The Rwandan law into force does not clearly regulate predatory pricing101. Predatory pricing is usually defined in terms of dominant firm selling below cost102. The predator, already a dominant firm, sets its prices so low for a sufficient period of time that its competitors leave the market and others are deterred from entering103. Predatory pricing is prohibited because of the concern that the dominant company sacrifices present revenues with the purpose of driving rivals or deterring potential entrants from the market and then recouping its losses through higher profits earned later in the absence of competition104. 2. Requirement for Predatory pricing The predatory pricing is decided if constitutive elements below are fulfilled. A. Price offers and price practices

98 99

See article L 420-3 of French Code de commerce and art. 101 par. 2 TFEU. The two articles talk respectively of nullity of a conventions with illegal cause and the explanation of illegal cause. 100 See articles 41 and 42 of the Law on RURA. 101 See articles 11-13 of Internal Trade Law. 102 See N. GREEN and A. ROBERTSON, op. cit., p. 452. 103 See OECD, Predatory Pricing, Report, 1989, p. 7. 104 N. GREEN and A. ROBERTSON, op. cit., p. 452.

For J.B. BERNARD, prices offers and practices must present a certain generality and a single act is not targeted105. As any other anticompetitive practices, price offers and practices apply to both products and services106. B. Offers or sales to consumers The offers and sales must be towards consumers. Commercial relations between professionals are not covered by the prohibition107. C. Processed products According to J.B. BLAISE, offered or sold products must have been processed. Whether the product has been processed or not is left to the decision of the judge108. For the same author, retail price which is low than wholesale price of products is governed by the Consumers code under French law. D. The price abusively (unreasonably) low Prices must be abusively low. This is the objective notion decided in relation in relation to production, transformation or marketing cost. Under Rwandan law, this is also envisaged in case of public utilities109. One can consider that the price is abusively low when its unitary price of sale is below the average unitary cost110. However, it seems that in some cases they compare prices with those

105 106

J. B. BERNARD, op. cit., p. 449. Dcision du conseil de la concurrence du 27/11/1996. 107 Dcision du conseil de la concurrence du 12/3/1997 and Dcision du conseil de la concurrence du 27/5/1997. 108 J. B. BERNARD, op. cit., p. 450. 109 Art. 4 (vii)Ministerial Order of 07/06/2004. 110 J. B. BERNARD, op. cit., p. 450.

practiced by a firm with similar exploitation111. In case of dominant undertaking, the predatory character of the price is decided whet the latter is below the average variable cost112. E. The object or the effect of the practice The object or the effect of the practices (setting of low prices) must be to eliminate a firm or a product from the market or deterring them from entering113. This is what is called Predatory price or destroyer price. 3. Sanctions for predatory pricing Under Rwandan law on internal trade, the sanctions for predatory pricing are the same as for other illegal anticompetitive practices; viz agreements and abuse of dominance as detailed supra under section IV.

Conclusion
In this research it is observed that anticompetitive practices are not clearly regulated under Rwandan law. Only the law on internal trade tries to regulate competition and anticompetitive practices in general terms. The practice has showed that there are some anticompetitive practices like the agreements of fixation of premium by the association of insurance companies which is clearly anticompetitive; but which is occurring while people are passively watching.

111 112

Dcision du Conseil de la concurrence du 12 mars 1997. Average variable cost is the sum of all variable costs divided by output. Variable costs are those which change with output (see N. GREEN and A. ROBERTSON, op. cit., p. 454). 113 J. B. BERNARD, op. cit., p. 450.

Noteworthy is, however, that some sectors like the public utilities is clearly regulated. Thus, the researcher recommends the Rwandan lawmakers to intervene as soon as possible in the remaining domains so as to promote free competition and benefits thereof.