A comprehensive study is under preparation of the information technology (IT) sector in Egypt, including possible risks and the enforcement policies of the Competition Protection Law in this sector, head of the Egyptian Competition Authority (ECA), Amir Nabil, said.
He added in an interview with Daily News Egypt that the ECA has participated in this study besides other competition protection authorities in the world, and it will be published soon.
Nabil noted that the authority will not allow any monopoly in the IT sector, which is currently given great attention because it is important for economic growth during the coming period.
Nabil explained that the IT sector, which leads the Fourth Industrial Revolution, is capable of providing a large number of job opportunities for youth and creating new and varied ideas that add to the economies of countries. He added that this sector must be protected from malfunctioning or harmful acquisitions by major companies.
The ECA is keen on protecting the IT sector from monopoly practices, he pointed out, and ensuring all competition elements for this promising sector.
Why is the ECA so concerned about the IT sector?
We focus on the IT sector being one of the emerging sectors which can achieve significant qualitative leaps for the Egyptian economy, especially as IT is the driving force of the Fourth Industrial Revolution. We will not allow monopoly in the digital economy and IT, and the recurrence of cases of economic concentration, so the authority has long advocated the need for pre-control of mergers and acquisitions (M&A) to regulate the market, increase competition, and reduce monopoly practices.
IT sector is one of the priorities of the current markets, especially the so-called participatory and digital economics because it is a sector filled with new ideas and innovations which add to the economies of countries. This innovation must be protected alongside the competitive environment that allows it to grow, expand, and succeed because competition will encourage diligence and invent new ideas to withstand competitors. Without a climate of competition, there will be no innovation. The authority has also found that this type of digital economy is capable of employing a very large number of young people and provide solutions for many important sectors in the country.
Through the studies prepared, in cooperation with a number of other competition authorities, the authority found that there is an imminent danger to this sector, which is the data necessary for companies to operate being concentrated in the hands of a few companies. We found that many of the promising ideas that are implemented by entrepreneurs are exposed to acquisitions by big companies, who buy these ideas, and do not allow their circulation or development to avoid the emergence of new competitors in the market, which we call “fatal acquisitions” because they lead to high rates of economic concentration and monopolisation.
Have you prepared a study for the IT sector in Egypt?
Yes, the ECA has completed a study on the IT sector and its risks. The priorities of the authority are enforcing the Competition Law in this important sector and the objectives sought to be achieved. This study is very important because this sector needs to have a database to help us later in our work.
What are the most prominent sectors or markets that the authority has focused on lately?
The competition protection system monitors all markets, whether transfer, production, industry, or services. All sectors are important to the Egyptian economy, and we have specialised departments in the authority that cover all sectors. The authority also receives a large number of complaints and reports for investigation.
How do you see the importance of maintaining a real market competition and the impact of monopoly on the economy?
Competition is the backbone of any market. If competition is absent, it means that we return to arbitrage, and certain companies will control the market. Many economic problems emerged in the Egyptian market due to the lack of real competition. For example, Glovo’s exit from Egypt was due to monopolisation that the authority eventually stood against. Therefore, the role of the ECA was necessary and important.
Is the lack of awareness of competition rules in the Egyptian market hinders the work of the ECA?
We certainly face challenges in terms of changing the culture of the society that have been established for many years. Many of the practices that some have adopted before the issuance of the Competition Law have ended as the market now relies in pricing on supply and demand. After 15 years from issuing the Competition Law, there is no excuse for companies to violate the law, so we are currently working to counter monopoly practices in all markets, and we will not allow any violation of the law.
Does the ECA enact new changes to its law?
We are already working on amending the law. These amendments have been approved by the cabinet and are currently in parliament for discussion and approval. The aim of these amendments is essentially to ensure greater autonomy for the ECA from the government, as we are one of the regulatory bodies to which the Constitution grants full independence to perform its supervisory role. The amendments also give the agency the power to impose administrative fines to counter monopoly practices, rather than waiting for judicial rules. The amendments also include developing investigative mechanisms and collecting proofs to enable the authority to play its role effectively.
What are the most controversial items in the law that negatively affect competition?
Apart from these amendments, the ECA believes it’s unnecessary to intensify the penalty for violations to Article 6 of the current law. It is related to pricing manipulation in which market competitors agree on raising or reducing prices collectively or restricting production and distribution operations. Such violations involve a sort of bad faith and conspiracy against consumers depriving their right to obtain goods or services at the best prices. The punishment for this crime in some countries may be imprisonment.
What are the latest developments of ECA’s investigation into Uber’s acquisition of Careem?
We have already prepared a market study on the potential effects of the acquisition. The report has been sent to the two companies, and we have received their responses. We are currently studying their responses to reach the final decision in accordance with the principle of transparency. We previously set a 60-day deadline to make our decision but then we extended this period for another 60 days. The final report will be published for greater transparency and as reference in future studies in this important sector.
The ECA has three scenarios for this transaction: first to reject it if we found that it would harm the market. Second to approve it on specific terms to limit the harm. Third to unconditionally approve it and subject this approval to renewal every two years.
But the UAE has approved the deal, does this mean that Egypt will soon approve it too?
Each market has its different circumstances. The UAE transportation sector is quite different from Egypt, in terms of infrastructure, geographical distribution of population, and the consumer culture. All these elements affect the competition. The UAE’s Ministry of Economy’s approval of the deal does not necessarily mean that Egypt will agree or reject it. We are still in the study phase, and there are other markets that are also studying the deal, such as Saudi Arabia and Pakistan.
How did you manage to bring Glovo back to Egypt?
When Glovo decided to exit the market, no one thought that this was the result of a monopoly practice. Glovo’s exit was not its decision, but it came after pressure from Delivery Hero, which owns 16% of its shares, to limit the Egyptian market to another brand owned by Delivery Hero, which violates the Competition Law.
We met with the two companies and have been able to bring Glovo back to Egypt to keep up the competitive environment in the market.
Does the ECA have the power to stop M&A that occurs abroad?
It is important to emphasise that the role of the ECA is not limited to the violations that occur inside Egypt, but its role also extends abroad, as long as this violation will affect the local market. This is not regulated by the Egyptian law only, but all international conventions related to competition protection and monopolistic practices.
According to Article 5 of the Law, the ECA has the right to examine and study any deal or agreement that takes place abroad if it has repercussions on the domestic market, as was the case in the broadcast issue of CAF football matches.
The ECA has cancelled some items of Apple’s distribution contracts with local agents and asked both parties to amend these contracts. What is the situation now?
Apple has committed itself to amend these contracts in Egypt and the Arab region. This commitment allows for the so-called parallel import. Therefore, we have opened the door to a large number of potential exporters to the Egyptian market, and 80 exporters have been authorised to import and sell Apple products in the Egyptian market, up from only three companies.
This means that competition will increase and thus the Egyptian consumer will get better prices because the big profit margin will be reduced. Even if the new parties did not enter the competition, opening the market to any potential competitor will put the main market players under pressure to maintain their market share.
How do you see the media reports saying that frequent issues raised by the ECA with large companies may have a negative impact on investment?
On the contrary, protecting competition is a protection of investment too, and there will be no real investment in Egypt if we allowed monopolistic practices. Our role in the ECA to provide a comfortable and fair environment for domestic and foreign investors. The Competition Protection Law essentially defends potential competition, which simply means that it protects potential investment opportunities from monopoly.
Does the ECA have authority over state-run companies if they violate the Competition Law?
There is no exemption for any company under the Competition Law, even if it was owned by the government.
Any state-run company is subject to the control and authority of the ECA. We cooperate with various government agencies to ensure that competition rules are properly applied.
But we should distinguish between the economic activity and public services offered by state-run companies or agencies.
Has the ECA received any complaints regarding the Ministry of Trade and Industry’s decision to impose temporary import tariff of 15% on iron billets?
The ECA is not concerned with this matter, and we have not received any complaints from the steel manufacturers. The state’s decisions aims to protect Egypt’s domestic iron and steel industry against unfair competition, and this is part of the state’s role to work for the public interest, whether through protecting a particular industry or deepening domestic industrialisation, in accordance with the rules of the World Trade Organization, which have allowed such procedures for the protection of economies and industries.
This does not mean that the ECA has a specific position on these fees, but rather, it is essentially a matter of organisation of work.
The cement market in Egypt suffered from major crises during the recent period, have you received any complaints regarding competition in this sector?
The ECA prepared a study on developments in the cement sector and the closure of some factories of production lines. What is happening in this market specifically are non-competition problems, but other conditions, including a stagnation and low demand, at a time when supply has increased dramatically.