Introduction

Proclamation No. 813/2013 that came into force on 21st March 2014 forms the bedrock of
competition and consumer protection laws of Ethiopia. Merger Directive No.1/2016 issued by
the Competition and Consumer Protection Authority complements it.
This piece aims at giving a summary of the basic features of the two laws. It, thus, dwells on the
objectives of the law, the prohibited activities, namely, abuse of dominance, anticompetitive
agreements, merger that has significant impact on competition and acts of unfair competition. It
also gives a brief account of the protections due to consumers. Lastly, this work outlines the
enforcement mechanisms that the law puts in place.

2. Objectives and Scope of Application of the Proclamation

The Proclamation was issued with the objective of creating a competitive and free market that at
the same time safeguards the interests of consumers. More particularly, its aim is protecting the
business community from anti-competitive and unfair practices, thereby accelerating economic
development.[1] Regarding consumers, its goal is safeguarding them from misleading market
conduct.’[2] Besides, it aims at ensuring the goods and services that consumers get are not only
safe and suitable for their health but also fair in terms of prices.
The Proclamation applies to ‘any commercial activity or transaction in goods or services
conducted [in Ethiopia] or having effect within’ Ethiopia.[3] So, it applies even to commercial
activities outside Ethiopia in so far as they hamper competition or adversely affect consumers in
Ethiopia.
3. Proscribed Anti-competitive Conduct

The law outlaws certain practices that are deemed anti-competitive. These are abuse of
dominance, anti-competitive agreements, merger that has significant adverse impact on
competition and acts of unfair competition. The most salient prohibitions imposed by the law
include the following.

3.1 Abuse of Dominance

The law proscribes abuse of dominance that a business person may have in the market.
Particularly, it prohibits every business person that may have a dominant position in the market
either by himself or acting together with others from, for instance, limiting production, hoarding
and selling at prices lower than the cost of production to harm competitors. It also prohibits
directly or indirectly imposing unfair prices, and refusing to deal with others unjustifiably.[4] It
regards as abuse of dominance conduct like imposing restrictions on the manufacture or
distribution of competing goods or services, and limiting ‘where, to whom, or in what conditions,
or quantities, or at what prices the goods or services shall be resold or exported’ without
justifiable economic reason.[5]
3.2 Anti-Competitive Agreements and Concerted Practices

Besides, the law prohibits anti-competitive agreements, concerted practices and decisions by
business persons and associations in a horizontal relationship.[6] The outlawed acts include
directly or indirectly fixing prices, ‘collusive tendering, dividing markets by allocating
customers, suppliers, territories or specific types of goods or services.’[7]
Even in a vertical relationship, agreements that have the ‘effect of preventing or significantly
lessening competition’ or that ‘involve the setting of minimum resale price are prohibited. These
are permissible if they are justified by technological or other pro-competitive gains that outweigh
their anti-competitive effect.’[8]
3.3 Mergers that Cause Significant Adverse Effect on Competition

The Proclamation outlaws agreements or arrangements of merger that cause or are ‘likely to
cause significant adverse effect’ on competition.[9] Merger is defined broadly to go beyond the
amalgamation of two independent business entities into one. For instance, the joining of hands
by two business organizations by pulling together part of their resources for the purpose of
carrying on a certain commercial activity could be deemed as merger. Similarly, the direct or
indirect acquisition of shares, securities or assets of a business organization is deemed as merger.
[10]
To ensure compliance with this rule mergers need approval by the Trade Competition and
Consumers’ Protection Authority.[11] The Authority does not automatically prohibit mergers
just because the merger is likely to have significant adverse effects on competition. It will
consider any remedial measures that may be taken to eliminate the adverse impact of the merger
on competition. For this purpose, the businesses involved may be called upon to forward ideas. If
measures to this end can be devised then the authority approves the merger subject to compliance
with those conditions.[12] In the same vein, the Authority may approve a merger that is likely to
have a significant adverse effect on competition if the merger is likely to result in technological,
efficiency or other pro-competitive gains that outweigh the adverse impact of the merger on
competition.[13]
The Competition and Consumers’ Protection Authority has issued a directive to discharge the
responsibilities entrusted to it by the proclamation regarding prevention of mergers that may
have significant adverse consequences on competition. Merger Directive No.1/2016 aims at
putting in place the criteria for the assessment of merger, procedures to be followed and the time
frame within which decision on merger notification is to be made.

The Authority takes into account several factors in its determination of whether the merger has
significant adverse impact on competition. These include: whether the transaction results in
taking controlling interest in a business organization, the annual turnover of the business, assets,
market share of the business, concentration of suppliers in the market and the relevant market
itself.[14] The Directive attempts to further concretize the standards for the assessment merger
by listing about twenty parameters that help scrutinize the proposed transaction from the vantage
point of competition, the market and public interest. These include the considerations that follow.
[15]
a) The obstacles to entering into the same line of business and the potential for the
elimination of competitors from the market;

b) The growth, innovation, price and intrinsic nature of the market;

c) The potential to cause disruption to suppliers and consumers in the market;

d) The state of demand and supply of the product/service;

e) The price and quality standard of the product/service;

f) The state of the distribution channels of the product/service and

g) Whether the approval of the merger contributes to the acceleration of economic

development.

These standards are very subjective and difficult to quantify. Besides, the directive is not clear
regarding the relative weight to be accorded to the various considerations. In sum, a business
person will not be able to predict the outcome of the assessment by looking at the standards the
Directive has come up with. If that is any consolation, merger applicants with a combined
 annual turnover, asset or registered capital below ETB 30, 000,000 (thirty million) are not
subject to an assessment study.[16]
3.4 Acts of Unfair Competition

The law prohibits acts of unfair competition. In particular, it requires business people to refrain
from ‘any act which is dishonest, misleading, or deceptive and harms or is likely to harm the
business interest of a competitor.’[17] The law provides a list of acts that are deemed acts of
unfair completion when carried out by business persons. The acts that are, thus, outlawed include
those listed below.[18]
a) Acts that cause or are likely to cause confusion with the goods or services offered
by another business person;

b) Disclosure, possession or use of business information belonging to another person

without the consent of such person in a manner that is contrary to honest commercial
practice;

c) False or unjustifiable allegations that discredit or are likely to discredit another

business person or the goods or services offered by such business person;

d) False comparison of goods and services with those of another business person in
the course of commercial advertisement;

e) Dissemination of false or unreliable information to consumers regarding the method

of manufacturing, place of manufacturing or quality of goods or services of another
business person and

f) Obtaining or attempting to get confidential business information of another

business person through the current or former employees of the competitor.

4. Consumer Protection

The Proclamation contains several provisions that aim at the protection of consumers. Among
other things, these provisions confer on consumers the right to get ‘accurate and sufficient
information’[19] as regards the goods and services they buy. They also require the affixing of
labels on goods being sold, prohibit false or misleading advertisements and other conduct that is
likely to adversely affect consumers.[20]
Besides, under the Proclamation, a consumer has, without prejudice to warranties or more
advantageous contractual terms, the right to demand from the seller in case of defective goods
for a replacement or refund of the price paid. Similarly, the consumer has, in case of defective
service, the right to demand re-delivery of the service free of charge or refund of the fee paid.
[21] The Proclamation also vests in the consumer the right to compensation for damage sustained
as a result of the use of defective goods or service. Failure to refund or provide replacement for
defective goods may also engender the duty to pay compensation where such failure has caused
damage.[22] More importantly, contractual waiver of any rights conferred by the Proclamation
on consumers is ‘of no effect.’[23]
5. Mechanisms for Enforcement

The Proclamation has come up with an institutional mechanism to ensure its full implementation.
Particularly, it establishes the Trade Competition and Consumers Protection Authority
accountable to the Ministry of Trade. It entrusts the Authority with the overall implementation of
the Proclamation.[24] The Authority can conduct investigation where there are sufficient
grounds to suspect that an offense that attracts administrative or criminal liability has been
committed.[25] The Proclamation also establishes, under the auspices of the same Authority, an
adjudicative bench with judicial power.[26] This judicial body has jurisdiction on disputes
between traders, consumers and traders and even the Authority itself and persons accused of
infringing the Proclamation. The judicial body can order administrative measures, impose fine
and even award compensation to victims of anti-competitive behavior and consumers, as the case
may be.[27]
The competition law of Ethiopia entitles persons who incur damage as a result of ‘acts of unfair
competition’ to payment of compensation in accordance with the ‘relevant laws.’ The Civil
[28]

Code of Ethiopia lays down the basic principle as regards the extent of compensation under
Article 2091. The said provision reads: ‘[t]he damages due by the person legally declared to be
liable shall be equal to the damage caused to the victim by the act giving rise to the liability.’
That means damages due are compensatory rather than punitive. In contrast to this, some
jurisdictions give private citizens incentive to participate in the enforcement of competition law.
Under the United States completion law[29], for example, an innocent party to an agreement that
breaches competition law, and for that matter a third party that has been injured by the wrongful
competition, is entitled to not only compensatory but also treble (punitive) damages.[30]
A person aggrieved by the decision of the judicial bench within the Authority may appeal to the
Federal Appellate Tribunal also established by the Proclamation. The decisions of this Appellate
Tribunal are final on questions of fact. An appeal lies to the Federal Supreme Court on matters of
law.[31] Only regular courts have jurisdiction as regards criminal liability that the Proclamation
imposes.[32]

[1] Trade Competition and Consumers’ Protection Proclamation No. 813/2013,FEDERAL

NEGARIT GAZETTE, 20TH Year, No. 28, Article 3
[2] Id., Article 3(1).
[3] Id., Article 4(1)
[4] Id., Article 5(2)a to d.
[5] Id., Article 5(2) g and h.
[6] Id., Art. 7(3) c. A horizontal relationship is a type of relationship that exists between
competing business persons that operate a certain market. In contrast, vertical relationship exists
between business persons and their consumers or suppliers or both.
[7] Id., Article 7(1)b
[8] Id., Article 7(2) and (3)
[9] Id., Article 9(1)
[10] Id., Article 9(3)
[11] Id., Article 9(2), 10 and 11.
[12] Id., Article 11(1)C
[13] Id., Art. 11(2)
[14] Merger Directive No. 1/2016, Article 7.2
[15] Id., Article 20
[16] Id., Article 16
[17] Proclamation 813/2013, Article 8(1).
[18] Id., Article 8(2).
[19] Id., Article 14(1)
[20] Id., Article 16, 19 and 22
[21] Id., Article 20(2)
[22] Id., 20(3). Other provisions of the Proclamation in, Articles 14 to 26 require access to
information, labelling of goods, prohibition against hording and the like in order to protect
consumers.
[23] Id., Article 21
[24] Id., Article 27 and 30
[25] Id., Article 36(1)a and b. Breach of some provisions of the proclamation could attract
rigorous imprisonment of upto seven years according to Article 43(2). Criminal action is
instituted by the prosecutors of the Authority before an ordinary court. The judicial bench in the
authority and the appellate Administrative Tribunal established under the Proclamation have has
no jurisdiction as regards criminal liability of offenders according to Article 37(1)b
[26] Id., Article 28
[27] Id., Article 32. The administrative measures it can take include the suspension and even
revocation of business license of the offender according to Article 32(2)c. The fines that can be
imposed can be as high as 10% of the annual turnover of the offender according to Article 42.
[28] Id., Article 32(1)b
[29] The main competition law in the United States is the Sherman Antitrust Act of 1890. The
Sherman Act has been expanded by the Clayton Act and the Federal Trade Commission Act of
1914. See Julian D M Lew QC, Competition Laws: Limits to Arbitrators’ Authority, in
LOUKAS A. MISTELIS and STAVROS BREKOULAKIS (eds), ARBITRABILITY:
INTERNATIONAL AND COMPARATIVE PERSPECTIVES 248 (Kluwer Law International
2009)
[30] Id., at 249 to 250
[31] Proclamation No. 813/2013 Article 39(2)
[32] Id., Article 37(1)(b)