Enforce effective competition in online markets

Effective competition is a driver of economic growth. Competition not only spurs efficiency among firms, but also ensures that more productive firms are rewarded for their innovation and adaptive strategies at the expense of complacent entities.

In addition, effective competition pushes firms of all sizes to innovate and differentiate, bringing new products and services to the marketplace. On the other end of the product value chain, consumers benefit from competitively priced goods and services that meet their changing and diverse needs.

Effective enforcement of competition law also reduces poverty and removes barriers of entry for new entrants to a market, thereby ensuring that big firms are not entrenched in a market. This type of business environment attracts national and foreign direct investment, boosting economic growth.

It is against this backdrop that competition agencies globally commemorate the World Competition Day (WCD) on December 5 in order to underscore the importance of effective competition to the economy.

This year’s WCD theme is: ‘ensuring effective competition in an increasingly online world’. This rallying call resonates well locally since we have experienced unprecedented growth of our digital economy.

Indeed, Kenyans are accustomed to the new norm where online markets, referred to e-tailers, have increasingly substituted traditional retailers who operate from physical locations.

Recent data from the World Bank Group shows that the ICT sector accounts for 17 percent of GDP growth in developing countries. Domestically, the Economic Survey of 2019 shows that the value of the country’s ICT sector expanded by about 13 percent from Sh345.6 billion in 2017 to Sh390.2 billion in 2018, driven by a steady growth in the digital economy.

The Digital Economy Blueprint, which President Uhuru Kenyatta unveiled in May 2019, lays out a framework through which stakeholders, including government agencies and the private sector, can help extract more value from the rapidly growing digital markets.

As more economic activities shift online, regulatory agencies are finding themselves at a crossroads as to whether to regulate or not, and if so, how far is too far? Regulatory frameworks should also be cautious against undoing the gains so far made in the development of online markets.

Disruptive technologies and concepts such as Artificial Intelligence and Big Data are gaining traction across the globe. Competition agencies, including the Competition Authority of Kenya, are now considering these concepts during merger analysis process and enforcement of competition laws and policy.

Indeed, the Authority recently reviewed its Market Definition Guidelines in order to capture emerging trends and to more broadly support the growth of Kenya’s digital economy.

Whereas regulations should be pro-innovation, pro-digital markets and pro-growth, there is need to secure the rights of all stakeholders in the digital space, both innovators and consumers.

The writer is director, planning, research, policy and quality assurance, CAK.