Introducing the Egyptian Competition Authority
The purpose of establishing the Authority for Protection of Competition and Prohibition of Monopolistic Practices
The Egyptian Competition Authority (ECA) is affiliated to the Prime Minister (the competent minister). It was established to be the agency responsible for monitoring the market and enforcing the provisions of the Law. It ensures that market agents carry out economic activity in a manner that does not harm competition. It also aims to spread the culture of competition and support competition policies in the Egyptian society.
Establishing the Egyptian Competition Authority (ECA)
The ECA was established with the enforcement of the Law on the Protection of Competition and Prohibition of Monopolistic Practices on May 16, 2005. The ECA began investigating, searching and collecting evidence as of January 2006.
Difference between the Egyptian Competition Authority (ECA), the Consumer Protection Agency (CPA) and the Anti-Dumping, Subsidy and Safeguard Department
Sometimes confusion occurs because there is a unified goal for those three entities, which is to protect consumers and markets from any harmful practices. However, the role of each of them differs from the other:
The Egyptian Competition Authority (ECA) was established in order to provide a competitive environment in which people and companies can freely conduct their economic activities, which enhances competition in the market and contributes to making goods and services available to consumers with higher quality and lower prices
The Consumer Protection Agency (CPA) was established to preserve consumer rights if it obtained defective, unusable or non-compliant products.
Finally, the Anti-Dumping, Subsidy and Safeguard Department was established in order to protect the markets from dumping and unfair trade practices by ensuring that the value of goods exported to Egypt matches their normal value in the country of origin. Their tasks also include taking measures to combat subsidies of any form in the event of a negative impact on the local industry. Finally, to take preventive measures in the event of a significant increase in imports of a certain commodity, that may affect the local industry.
Relationship of the Egyptian Competition Authority (ECA) with other regulatory agencies in the Egyptian market:
There are other regulatory agencies in the Egyptian market, such as the National Telecommunications Regulatory Authority, the Egyptian Electric Utility & Consumer Protection Regulatory Agency, the Egyptian Insurance Regulatory Authority, and other regulatory agencies. Each of these regulatory agencies is concerned with a specific sector. The Egyptian Competition Authority’s relationship with all these agencies is a complementary relationship whose primary goal is to protect consumer rights and the public interest. The Egyptian Competition Authority realized the importance of this relationship and took the initiative to consolidate it with many of these agencies by signing cooperation protocols with each other, and continues to make efforts in this regard.
It is worth noting that the law provides that one of the functions of the Egyptian Competition Authority is to coordinate with the sectoral regulatory agencies in matters of common interest, without prejudice to the functions of the various agencies.
Functions of the Egyptian Competition Authority (ECA):
The law has defined the functions of the ECA that ensure its objectives are met. These functions include:
- Examining complaints, conducting research initiatives and providing advisory opinions;
- Developing a database on the economic activity of the state;
- Taking the measures provided for in Article (20) of the Law;
- Providing opinion on draft laws and regulations concerning the Competition Law;
- Coordinating with similar authorities in other countries on matters of common interest;
- Informing the public of the contents of the law and spreading the culture of competition;
- Publishing a periodical containing decrees, recommendations and measures taken by the ECA;
- Preparing an annual report on the activities of the ECA and its future plan.
Employees who are granted the status of judicial enforcement officers and the powers granted to them accordingly:
The law identified a group of employees of the ECA, who shall have the status of judicial enforcement officers, namely the Executive Director, Legal and Economic Researchers and the Information Technology Specialist. Such employees shall be entitled to review records and documents, as well as to obtain any information or data from any governmental or non-governmental authority for the purpose of examining cases considered by the ECA.
Such powers extend to public business sector companies, and are not bound by the restriction provided for in Article (55) of Law No. 203 of 1991 pertaining to public business sector companies regarding the need to obtain permission from the Chairman of the Holding Company’s Board of Directors before proceeding with judicial enforcement actions.
The penalty for not cooperating with the employees of the ECA when proceeding with judicial enforcement actions is a fine from twenty thousand Egyptian pounds up to five hundred thousand Egyptian pounds.
Does the ECA charge fees on complaints submitted to it or services it renders?
The ECA does not get fees for examining complaints submitted to it. As for the other services provided by the ECA, the Executive Regulation identified the fees as follows:
The request for exemption provided for under Article (9) of the Law and the request of renewal of this exemption shall be subject to a fee of ten thousands 10,000 LE payable at the time of the submission of the request to which the receipt evidencing payment shall be attached.
The request for reviewing or that of issuing a certificate or an official copy of one of the documents that the Authority is allowed to circulate shall be subject to a fee of one hundred 100 LE.
Formation of the board of directors of the ECA:
In accordance with the amendments to Law No. 56 of 2014, the law specified that the ECA shall be managed by a board of directors to be formed by a decision of the competent minister, as follows:
- A full-time chairman with outstanding experience, representing the ECA before the courts and in dealing with third parties;
- A Judge from the Council of State at the position of a Vice President, chosen by the President of the Council of State;
- Two representatives of the concerned ministries, nominated by the competent minister;
- Three experienced specialists;
- Three representatives from the Federation of Egyptian Chambers of Commerce, Federation of Egyptian Industries, and Federation of Consumer Protection, with each federation choosing its representative;
Examination of Complaints:
There are specific steps by the ECA to examine any condition, and they start with the following:
- Receiving the complainant, and in the event that the complaint is submitted by e-mail or fax, the ECA contacts the complainant to summon him to the headquarters of the ECA;
- Notifying the Executive Director;
- If the complaint is accepted in terms of its seriousness and that it is within the responsibility of the ECA, the complaint form is filled in and submitted to the Executive Director;
- Notifying the Chairman;
- Selecting the working group;
- Examining the complaint;
- Preparing the final report;
- Submitting the final report to the Chairman, and presenting it to the Board of Directors at the first upcoming meeting to take a decision in the case.
There are three types of decisions that can be issued by the Board of Directors of the ECA when examining any case, and they are as follows:
Decision in the event of a violation: In this case, there are mandatory measures taken by the ECA in all cases, and procedures that depend on its discretionary authority in each case separately. The ECA board of directors is obligated to take administrative measures to mandate the violator to remove the violation and amend its status. The ECA board of directors retains discretion to request criminal proceedings from the Public Prosecutor’s Office or to reconcile with the violator.
Decision to dismiss the complaint: It is either after studying the case and proving that there is no violation, or after reviewing the subject matter of the complaint and it was found that it is outside the responsibility of the ECA.
Decision to take precautionary measures: when the ECA board of directors issues a decision to suspend practices that the evidence shows – before the completion of the research and study – they violate the provisions of the articles (6, 7, 8) when they cause serious damage to competition or the consumer that cannot be remedied. This is according to the recent amendment to the Competition Protection Law.
Cases of non-competence of the ECA:
There are many reasons why the ECA is not competent to consider the complaint, the most important of which are:
- The complaint is not related to an economic activity;
- The complaint relates to a practice or act that does not fall within the acts mentioned in Articles 6, 7, and 8;
- The complaint relates to agreements or practices of a public facility directly managed by the state;
- The complaint relates to practices or agreements that do not directly or indirectly affect the Egyptian market;
- Challenging ministerial decrees that would affect competition.
What is meant by competition?
Competition in general means a number of producers or traders race to produce or market a number of goods and services by trying to attract the largest number of customers.
Competition and competitiveness:
Competitiveness differs from competition, which was previously defined. Competitiveness is the ability of companies to face the competition of others by improving the quality of their products, reducing their cost or both, in other words, finding a competitive advantage that allows them to remain in the market for a period of time. Competition is the primary driver for companies operating in the market to increase their competitiveness.
Relationship between competition and open market:
There is a close relationship between competition and the open market. The open market economy depends on the free entry and exit of people or companies to the market, in which prices are determined in accordance with the supply and demand forces of each commodity or service. This enhances competition in the market and leads to increased innovation and development of goods and services by companies, benefiting consumers in terms of quality and prices.
There is often confusion between the concept of monopoly, control and monopolistic practices, so what is the difference between them? The public usually confuses these three concepts, and they are often used as alternatives to each other, which is not the right thing.
In economic terms, monopoly means a single product of a commodity or service, and there are no practical or objective alternatives to this commodity or service from the consumer’s point of view. The producer can therefore control the market and prevent the entry of new competitors.
Control, as defined by the Competition Protection Law, means the situation that usually occurs when a person has three combined factors:
- An increase in the person’s market share of more than (25%);
- The person has the ability to make an effective impact on the prices of goods or services;
- Competitors’ inability to limit the influence of the controlling person;
Finally, monopolistic practices are achieved when the controlling person exploits its position within the market to raise prices and achieve monopolistic profits, takes competitors out of the market or creates obstacles to prevent the entry of any new or potential competitor, which affects competition within the market and therefore affects the consumer. (For more information on forms of monopolistic practices, please refer to Article 13 of the Executive Regulations).
Based on the foregoing, the Competition Protection Law does not criminalize control or monopoly, but rather the misuse of the position of control.
Is every price increase caused by monopolistic practices?
There is no doubt that the price increase may be the result of monopolistic practices. However, not every price increase is a result of these monopolistic practices. Rather, the increase may be the result of several other reasons, including:
- High cost at factories;
- Increase in consumer demand exceeds market supply;
- The nature of the market may be non-competitive due to government decisions that distort the competitive process in the same market.
Why does the competition protection law not criminalize monopoly?
This is because monopoly may result from several reasons that have nothing to do with incorrect activity by the company. For example, this monopoly may be the result of legal proceedings or rules, such as a judgment by the court that this company is only the licensee to engage in this activity. This is known as legal monopoly, as happened in the case of “Telecom Egypt” when the Telecommunications Law stipulated that the company alone has the right during a specified period of time to establish, operate and exploit international communication networks between Egypt and any other country. On the other hand, monopoly may be a result of the nature of the activity itself, as some activities require a person to have a large share in the market in order for the investment to be economically feasible. This is what happens in some sectors such as “the electricity sector and the water sector”, which is known as natural monopoly. Finally, the monopoly may be the result of the company’s economic efficiency compared to the rest of its competitors.
What tools does the government have to cope with the high prices?
The government has many tools to deal with the rise in prices. Among the most important and profitable ones is to facilitate the entry of new competitors into the market, and to encourage competitors to expand production. This is done by removing all legal and procedural restrictions that contribute to the high cost of operating factories and operating companies. This may lead to an increase in supply, lower prices, increase in quality, or encourage innovation, or all of them.
What is meant by merger and acquisition?
A merger is achieved when two or more persons enter into a contract that entails the union of their financial liabilities, and it is either by affiliation or by amalgamation:
Merger by affiliation: when a company affiliates one or more other companies into it;
Merger by amalgamation: It occurs when all the companies wishing to merge are dissolved and a new company is established that receives all the assets and liabilities of the companies that are merged.
An overview on the Law of Protection of Competition and Prohibition of Monopolistic Practices:
The Law on the Protection of Competition and the Prevention of Monopolistic Practices was issued by Law No. 3 of 2005 on February 15, 2005. In August 2005 its executive regulations were amended by Resolution No. 1316 of 2005, and in 2008 some provisions of the law were amended by Law No. 190 and 193 of 2008, and then the executive regulations were amended in 2010 according to Resolution No. 2957 of 2010. Finally, on July 12, 2014, the Prime Minister’s decision was issued to amend some provisions of the law pursuant to Presidential Decree Law No. 56 of 2014.
The law aims to create a competitive, free and honest environment in which all persons operating in the market abide by the provisions of the law, which will benefit the consumer and achieve economic efficiency.
Applicability of competition law:
The law applies to all natural and legal persons and entities operating in the market in general. For more details on the definition of persons, please refer to article (2.a) of the Law and Article (5) of the Executive Regulations;
The provisions of this law shall also apply to acts committed abroad if they result in preventing, restricting or harming freedom of competition in Egypt, which constitute crimes according to the Law on Protection of Competition and Prevention of Monopolistic Practices. (For more details, please refer to Article 5 of the law).