The Vinci Coffee Case Compounds Uganda's Pressing Need For A National Competition Law

• Published date: 08 June 2022
• Subject Matter: Anti-trust/Competition Law, Consumer Protection, Antitrust, EU Competition , Dodd-Frank, Consumer Protection Act
• Law Firm: ENSafrica
• Author: Ms Rehema Nakirya Ssemyalo

In April 2022, the Ugandan Parliament recommended that a government agreement with Uganda Vinci Coffee Company Limited be terminated on grounds that it was unconstitutional and contravened several other laws of Uganda.

In 2015, the government entered into an agreement with Vinci Coffee to set up a coffee processing plant to add value to the Ugandan coffee industry.

Vinci Coffee was to design, finance, construct and operate a processing plant with a capacity of 60 000 tonnes of coffee per year. The government agreed to give Vinci Coffee priority for the supply of quality coffee and not to license any exports of coffee beans unless the requirements of Vinci Coffee were satisfied. Vinci Coffee was also left to determine the price it would pay to its suppliers for coffee, provided the price was not lower than that set by the relevant authority or the prevailing international price.

Parliament found that Vinci Coffee would require 58.2% of Uganda's coffee production, including the entire supply of premium coffee beans. The agreement gave Vinci Coffee control of a large part of the coffee market. This coupled with its power to control prices would result in the stifling of competition and a restriction on freedom of commerce in Uganda.

Parliament ruled that the agreement created a monopoly and therefore it contravened the constitutional economic rights of farmers and persons engaged in the coffee value chain by restricting them from accessing and trading in coffee.

However, parliament wrongly relied on the East African Community Competition Act, 2006 (the "EAC Competition Act") to support its conclusions against Vinci Coffee. The EAC Competition Act only applies to regulate anti-competitive practices where an economic activity has a cross-border effect, ie, where a transaction involves two or more EAC member states.

The case for a national competition law

Consumer protection and competition law have received scant attention from government despite calls from various stakeholders. Eighteen years ago, the Uganda Law Reform Commission recommended the enactment of a national competition law. A Competition Bill was drafted in 2004 but was never presented to parliament. Most recently, a government minister undertook to the Parliamentary Committee of Trade, Tourism and Industry to table a competition bill before parliament but this has still not been done.

The Vinci Coffee agreement is not the first deal of its kind where a government grant of contractual rights...