How Business Behaviour is Regulated in Egypt

The freedom to compete is fundamental in every society and implies a process under which lawmakers try to regulate rather than eliminate competition. Business behaviour of persons, whether it be ‘natural or juristic persons, economic entities, unions, financial associations and groupings, [or] groups of persons’ transacting in the Egyptian market is therefore regulated by the Law on Protection of Competition and Prohibition of Monopolistic Practices enshrined under Law no.3 of 2005 (‘the Law). The Egyptian Competition Authority (ECA), however, monitors its implementation via a complaints mechanism which addresses acts committed inside as well as outside of Egypt. Behaviour will be scrutinized, only if likely to “prevent, restrict or harm freedom of competition” in the country, the ultimate aim being to prevent monopolistic practices. This paper will describe the positive impacts of the Law on the consumer as well as the market, and subsequently highlight the prohibited acts and agreements in order to argue that the ECA has a vital role in the proper implementation of the rules and significant power to control competition in Egypt.  

 

On one hand, the benefits for the consumer under the Law are twofold:

 

§  significant productivity of companies and an increase in the quality of services and commodities as a result of the reduction of their prices; and

§  opportunities for innovation accompanied by a development and diversity of commodities and services available in the market.

 

On the other hand, the market’s benefits include:

 

§  more job opportunities and a higher rate of economic growth; and

§  a more attractive climate for new investors which are allowed to enter the market

 

These positive impacts are the result of the restrictions on the performance of certain acts and agreements. The first prohibited act is defined under Article 6, which prohibits agreements or contracts between competing persons that are at the same level in any relevant market if they intend to cause any of the below:

 

§  increase, decrease or fix prices of sale or purchase of commodities;

§  divide or allocate product markets according to geographic areas, distribution centers, type of customers, goods, seasons or time periods;

§  coordinate in relation to proceeding or refraining from tendering, auctioning, negotiating and other procurement bids; or

§  restrict production, marketing or distribution operations.

 

Article 7 prohibits “agreements or contracts between a person and any of its suppliers or clients [vertical relation] if intended to restrict competition”. In that regard, the ECA plays a crucial role in using a specific set of criteria under Article 12 of the Executive Regulation to identify such agreements. This criteria includes:

 

§  the effect of the given agreement or contract on the freedom of competition in the market;

§  the benefits accrued to the consumer by virtue of the agreement or contract;

§  preserving the quality of the product, its reputation, as well as its safety and security requirements; and

§  the extent of compliance of the terms of agreements or contracts with established commercial norms in relation to the activity subject to examination.

 

Lastly, Article 8 and Article 4 prohibit the abuse of a dominant position, contain an exhaustive list of acts that the dominant person is prohibited to do, and define a person’s dominance as being composed of three elements:

 

§  Market share exceeds 25% of the total relevant market;

§  An effective impact on the prices or the supply of the product in the relevant market;

§  Other competitors do not have the capability to limit the person’s activities in the relevant market.

 

Again, the ECA play a vital role by determining the situations of dominance according to the Executive Regulations of the Law. More specifically, the role of the ECA, as defined under Article 11, comprises the examination of any violation of the three Articles mentioned above. A successful complaint will result in the Authority ordering the violator to modify the situation and remove the violation.

 

As a result of how these provisions are constructed, the ECA has a decisive role in advancing the objective and purpose of the Law, and it has proven such on many occasions. In its decision No.1 of 2018, for example, when FIFA was found to be in violation of Articles 7 and 8 for granting only to beIN Sports the right to broadcast the 2018 World Cup in Egypt, the former ordered beIN Media Group to air 22 matches to MENA fans on its free channels in light of significant pressure from the ECA. Further examples of extraterritorial application of domestic competition law in response to grave harm to Egyptian consumer and market competition are becoming more common and are the result of pressure applied by the Regulatory Authority.

 

In conclusion, the ECA has the power to solely control business behaviour of persons transacting in Egypt. This paper shed light on the above by describing the provisions under Law no.3 of 2005 and pointing out the role of the ECA in their implementation.