Introduction
The Government of Tanzania introduced the Fair Competition (Abuse of Dominant Position) Regulations, 202G through Government Notice No. 244 on 14 August 202G.
Established under Section 99 of the Fair Competition Act, Cap 285 R.E. 2023, the regulations provide the Fair Competition Commission (FCC) with a framework to assess and address anti-competitive conduct by dominant market players.
By Adv. Elaine Bawazir M Ms. Judith Mallya.
ESTABLISHING DOMINANT POSITION AND GENERAL TEST FOR ABUSE OF DOMINANT POSITION.
Establishing Dominance
The Regulations require the Commission to define the relevant product and geographic markets when assessing dominance. The assessment considers factors beyond market share, including market share exceeding 40%, market dependence, pricing power, customer switching options, import competition, control of essential facilities, and barriers to entry or expansion.
General Test for Abuse of Dominant position.
The Regulations apply a two-stage test for abuse of dominance: the person must first hold a dominant position in the relevant market, and secondly engage in conduct that exploits customers or prevents, restricts, or distorts competition.
KEY FORMS OF ABUSE
Unfair Trading Conditions
A dominant person may be investigated for unfair trading practices, including excessive prices, unfair contractual terms, discriminatory conditions, exclusivity arrangements, or disproportionate obligations imposed on customers or suppliers. The Commission assesses contractual imbalances, restrictions on commercial freedom, and the relationship between prices and costs to determine exploitation.
Predatory Pricing
The Commission shall declare that predatory pricing exists where a dominant person: prices below cost for a sustained period; possesses the financial capacity to absorb losses; intends to eliminate or weaken competitors; and has a realistic prospect of recovering losses through subsequent price increase or other restrictive conduct.
Margin Squeeze
The Commission shall declare the existence of a margin squeeze in the relevant market, unless there is a reasonable justification. A margin squeeze concerns a person operating at different levels of the supply chain.
It addresses in detail a situation where a dominant person controls an essential upstream input and sets downstream prices in a way that prevents an efficient competitor from operating profitably.
Cross-subsidisation
This concerns the shift of costs from on market, product or service to another. The regulation identifies cross subsidization by taking into account: dominance in at least one market; evidence of shifting costs between goods, markets or services; evidence of predatory or below-cost pricing; consumer harm; impediments to market entry or the survival of smaller competitors and conduct that creates an appreciable restriction or distortion of competition.
Refusal To Deal
The regulations identifies that a person does not necessarily have to business with everyone, however, addresses situations where a dominant person unjustifiably refuses to deal without reasonable economic justification, and the refusal has the purpose, effect or likely effect of exploiting customers or appreciable restricting or distorting competition.
The Regulations define an essential facility as a critical infrastructure, resource, raw material, or service that cannot reasonably be duplicated and is necessary for competition.
The Commission may intervene where a dominant person controls such a facility, access is denied without justification, and no viable alternative exists.
Tying & Bundling
The Regulations define tying as requiring customers to purchase one product or service to obtain another, while bundling involves offering multiple products or services together. These practices are not automatically unlawful but may be abusive where they restrict customer choice and competition.
The Commission considers factors such as separate product markets, dominance in at least one market, lack of customer choice, competitive harm, and absence of sufficient efficiencies before establishing abuse.
Price Discrimination
The Regulations identify price discrimination where a dominant person charges different prices for the same product or service without justification.
The Commission considers factors such as market dominance, ability to segment customers, lack of cost-based justification, control over arbitrage, and whether the practice exploits customers or restricts competition.
Loyalty Discounts & Rebates
The regulations focus on instances where loyalty discounts and rebates are prohibited. That is where the person offering the rebate is dominant; the scheme has an exclusionary effect; and it has the purpose, effect or likely effect of appreciably preventing, restricting or distorting competition.
Abuse of Intellectual Property Rights
The Regulations recognise that intellectual property rights may raise competition concerns where abused, including unjustified refusal to license, excessive licensing terms, discriminatory licensing conditions, unnecessary restrictions, strategic patent filings to block competitors, and legal actions intended to delay competition.
Making Agreements Subject To Unrelated Supplementary Conditions
The regulation raises concerns contractual conditions unrelated to the actual subject matter of an agreement. A condition is considered supplementary where it imposes an obligation, requirement or restriction unrelated to the core subject matter of the agreement.
The concern arises where a dominant person makes acceptance of that unrelated condition a precondition for entering into the agreement, without reasonable economic justification.
PRACTICAL INSIGHT
The Regulations introduce a comprehensive framework for identifying and addressing abusive conduct by dominant persons.
Businesses with significant market power should review their pricing, distribution, contracts, rebates, licensing, and other practices to ensure compliance.
Dominant persons should also maintain records supporting legitimate commercial justifications for potentially sensitive practices.
Ultimately, dominance itself is not prohibited; liability arises when market power is used to exploit customers or harm competition.
AfriCorp Attorneys
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P.O Box 10709, Dar es Salaam,
Tanzania
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info@africorp.co.tz www.africorp.co.tz
