UNIVERSITY OF NAIROBI

PARKLANDS EVENING CLASS

GPR 406 - COMPETITION LAW

GROUP 8 ASSIGNMENT
MERGERS

GROUP MEMBERS:
G34/143175/2021 – ROSE MBURA NJUKI
G34/143461/2021 – LIONEL ODERA
G34/143065/2021 - ⁠GABRIEL NJUGUNA MWICHIGI
G34/143309/2021 – BERNARD OBIERO OTIENO
G34/143093/2021 – DIANA MAGOHA KERUBO
G34/142710/2021 - MARK WAHOME KARANJA
G34/13921/2019 – MUTHURI ISRAEL MUNENE

DATE: 23rd APRIL 2025

1. Introduction
Merger is a corporate strategy where a company combines with another company and
operate as one entity in order to enjoy certain benefits in the market.
Section 41 (1) of the Competition Act defines a merger to have occurred when one or more
undertakings directly or indirectly acquire or establish direct or indirect control over the whole
or part of the business of another undertaking.
Mergers are regulated by The Competition Act Cap 504 Laws of Kenya Part IV. Section
41 of the Competition Act stipulates that Mergers can be said to happen in the following
ways:
 A company acquires or leases shares, assets or acquires interest in another
company.
 Acquiring a controlling stake in a section of a business
 Acquiring a company under receivership
 Acquiring a controlling stake in a foreign company that has a controlling stake in
subsidiary in Kenya.
 Acquiring a controlling stake in a company that is capable of operating independently
 Exchange of shares between companies that leads to a change in ownership
structure
 Takeover of a company by another.
Since a merger involves acquisition of control, Section 41 (3) of The Competition Act
stipulates what constitutes control as follows
 Ownership more than one half of the issued share capital
 Entitled to majority of votes that may be cast in the annual general meeting.
 Power to appoint or veto an appointment of a majority of the directors.
 It’s a holding company and the undertaking is a subsidiary of the company as per the
Company Act Cap 486.
A subsidiary is a company of which another company is its holding company.
A holding company means a company that (a) controls the composition of that other
company's board of directors; (b) controls more than half of the voting rights in that
other company; (c) holds more than half of that other company's issued share capital;
or (d) is a holding company of a company that is that other company's holding
company.
 If it is a trust, it has control over the majority of the trustee votes, has power to
appoint majority of trustees or change or appoint the majority change a beneficiary
 If it is a nominee, it has power to control majority of members interests

2. Why Do Firms Merge?

2.1. Economies of Scale and Scope
Firms often merge to achieve cost efficiencies by increasing their scale of operations. By
expanding production, firms can lower marginal costs, thus achieving allocative efficiency.
Economies of scope refer to efficiencies gained from carrying out related activities, such as
reducing overall administrative expenses
2.2. Other Efficiencies
Beyond economies of scale, mergers can provide access to improved distribution networks,
guarantee raw material supplies (vertical integration), enhance access to financial resources,
or foster research and development through combined technological resources. Firms may
also merge to effectively utilize better managerial skills or acquire specific patents and know-
how
2.3. Creation of National Champions
Governments may encourage domestic mergers to form "national champions" that are more
competitive internationally. However, while such firms may succeed globally, the absence of
rigorous domestic competition could potentially reduce their effectiveness and
innovativeness in the long term.
2.4. Market for Corporate Control and Management Efficiency
Mergers can discipline corporate management by creating a "market for corporate control,"
where inefficient management is susceptible to being replaced by more competent
management through takeovers. Shareholders dissatisfied with current management have
an incentive to sell to bidders who promise better returns.
2.5. Facilitation of Market Exit
Mergers offer a strategic exit opportunity from an industry for firms wanting to divest. This
flexibility encourages investment and entrepreneurial risk-taking because investors know
there is an exit strategy that can reward their investment.
2.6. Market Power and Competitive Advantage
Some mergers occur explicitly to increase market power, enabling firms to raise prices or
restrict output by eliminating competition. While explicit pursuit of market dominance is rarely
publicly stated due to regulatory scrutiny, it remains a significant motivation for merging firms
.
2.7. Greed, Vanity, Fear
Not all mergers are motivated by rational economic benefits. Factors such as personal
ambition, fear of being outpaced by competitors, speculative greed, or executive vanity can
also drive mergers, although these motives are generally viewed critically and sceptically by
competition authorities
3. Process of a merger in Kenya

The merger process in Kenya is outlined in sections 43-49 of the Competition Act,1 The
Consolidated Merger Guidelines and the Merger Regulations. The merger process under the
Act has been divided into three stages under the Act for conceptual ease. These stages
include notification, determination, and revocation.2
Notification Stage

The first stage is the notification stage. At this stage, every undertaking involved in the merger
must inform the Authority either in writing or in the prescribed form.3 Although a notice may be
sufficient, the Authority may request further written information from any undertakings. 4

1
Competition Act (Cap 584)
2
These steps are not explicitly listed in the act but are deduced from it for the ease of understanding
the merger process.
3
s. 43 (1)
4
s. 43 (2)
However, such a request must be made within thirty days of receiving the notification. 5 In some
cases, the authority may deem it fit to conduct a hearing conference before the expiry of the
determination period as stipulated in s. 45 (1). In such a scenario, the Authority must give
reasonable notice to the involved undertakings in writing and furnish them with information
about the convening of the conference, specific date, time, and venue, and the matters to be
considered at the conference.
Determination Stage
The second stage is the determination stage. Three possible scenarios may arise after the
notification stage. First, the Authority may accept the implementation of the merger.6 Secondly,
the Authority may decline the implementation of the merger. 7 Alternatively, the Authority may
approve the implementation of the merger with conditions. 8 The Authority bases its decision
on the appropriateness of the above scenarios based on various factors.9 Such factors include
the effects of the merger on competition, trade, continuity of supply and services, benefit to
the public, effects on employment, and the ability of small undertakings to enter a market.10
Moreover, the Authority may consider the extent of the merger's impact on the competitiveness
of national industries globally and any benefits that may be derived from the merger. 11
Additionally, the Authority issues the decision in writing to the involved parties and by notice in
the gazette.12 In the event the Authority objects to a merger transaction, or accepts it with
conditions, then it is obliged to issue written reasons. Furthermore, they may issue written
reasons at the request of a party.13
Concerning a proposed merger, the Authority may take various periods to make a
determination, depending on the case. There are different possible scenarios for making a
determination. First, in the best-case scenario, the Authority may make a determination within
sixty days of receiving a notification.14. Alternatively, if the authority requests for further
information during the notification stage, it may make a determination within sixty days of
receiving the requested information.15 Moreover, if the Authority deems it fit to convene a
hearing conference under s. 45 (1), then it will make a determination within sixty days after
the conclusion date of the conference.16 Finally, where the Authority opines that the proposed
merger contains complex issues to be determined, it must give notice in writing to the involved
undertakings of the decision to extend the relevant period, though the extension should not
exceed sixty days17.
It is critical to note that the Authority has investigative powers and may invoke them at this
stage. For instance, according to s. 46 (3) of the Competition Act, the authority may investigate
the particulars of a proposed merger
Revocation as per s. 47

5
Ibid
6
s. 46 (1) (a)
7
s. 46 (1) (b)
8
s. 46 (1) (c)
9
The operative word in the statute is including which means that the list is not exhaustive
10
s. 46 (2) (a) - (f)
11
s. 46 (2) (g) and (h)
12
s. 46 (6) (a)
13
s. 46 (6) (b)
14
s. 44 (1) (a)
15
s. 44 (1) (b)
16
s. 44 (1) (a)
17
s. 44 (2)
The Authority has the power to revoke a decision regarding the implementation of a merger
transaction. However, this power is not discretionary and can only be invoked under two
conditions under the Act. Firstly, where an undertaking provides misleading information that
the authority materially relies on. The second condition is where an undertaking fails to comply
with a material condition.
Where the Authority revokes the implementation of a merger, it is obliged to communicate the
revocation in writing to the involved parties, such as the undertakings involved in the
transaction or any other interested party. Any affected party has a right to be given an audience
to make representations concerning the proposed action within thirty days after receiving the
notice.
Sanctions
Any misfeasance or malfeasance by a party to the merger will likely attract sanctions. For
example, giving materially incorrect information or failing to comply with any condition attached
to the approval of a merger is an offence that may attract a fine not exceeding ten thousand
shillings, an imprisonment term not exceeding five years, or both.18
Appeal as per s. 48

A party to any merger transaction has the right to appeal any decision by the authority
concerning the merger. An aggrieved party should appeal the Authority’s decision in writing to
the Tribunal within thirty days of notification of the Authority’s decision.19
After receipt of an application, the Tribunal will give notice of the application for review and
invite interested parties to make submissions as stipulated in the notice published in the
Gazette20.
There are four possible scenarios. For instance, the Tribunal may overturn the authority’s
decision, amend it, confirm it, or return the matter to the Authority for reconsideration on
specified terms.21 This will be communicated in writing to the concerned undertakings, the
Authority, with written reasons by notice in the Gazette.22.
If a party is dissatisfied with the Tribunal’s ruling, they can escalate their appeal to the High
Court within another thirty-day window. However, as per the Act, the High Court’s decisions
are final.23

4. Merger Control
Merger control refers to the regulatory process of reviewing mergers and acquisitions to
ensure they do not result in anti-competitive outcomes such as the creation of monopolies or
oligopolies that could harm consumers through higher prices, reduced choices, or stifled
innovation.
Merger regulation in Kenya is provided for in the Competition Act No 12 of 2010 ('the Act')
through the Competition Authority of Kenya (CAK). The CAK has developed a rich

18
Ss. 47 (4) (a) and (b)
19
s. 48 (1)
20
s. 48 (2)
21
s. 48 (3)
22
s. 48 (4)
23
s. 49 (2)
jurisprudence interpreting what constitutes a merger, how control is to be determined, and
when public interest can warrant approvals subject to conditions.
4.1. Reasons for Merger Control
Merger control involves predictive assessments of how mergers will affect future market
competition. Authorities must forecast potential anticompetitive impacts, making merger
control distinct from other areas of competition law, which typically focus on past behaviours.
This forward-looking nature necessitates careful and theoretical scrutiny of transactions.
Prevention lessening or elimination of competition
Mergers may lead to an increase in market power by eliminating competition between
merging firms. Such market power enables firms to restrict output, raise prices, or diminish
quality, which harms consumers. Competition authorities intervene to prevent these negative
outcomes by maintaining competitive market structures.
Maintaining Competitive Market Structures
The primary aim of merger control is not merely to prevent future abuses of market power
but to ensure the preservation of competitive market conditions, thereby safeguarding
consumer interests. A competitive market is believed to provide better outcomes for
consumers, including lower prices, higher quality, and greater innovation.
Avoidance of Future Abuse (Ex-ante Control)
Merger control is proactive ("ex-ante") rather than reactive ("ex-post"). This means that it
prevents the formation or strengthening of market dominance before abuses occur. This
proactive approach is justified as it reduces the likelihood of future anticompetitive
behaviours and avoids lengthy, resource-intensive investigations after abuses have occurred
.
Assessment of Horizontal, Vertical, and Conglomerate Effects
Competition authorities are particularly concerned with horizontal mergers—those between
direct competitors—because these typically pose a greater risk to competition than vertical
or conglomerate mergers. Horizontal mergers can lead to significant unilateral or
coordinated effects that reduce competition
Consumer Welfare Maximization
Ultimately, merger control seeks to maximize consumer welfare, not merely to regulate
businesses. Authorities focus strictly on assessing competitive effects, though some systems
also consider broader public interest criteria. Primarily, competition policy aims to keep
markets competitive to benefit consumers.

4.2. Mechanisms of control

4.2.1. Notifications
Most mergers must be notified to the CAK and cleared before they are put into effect.
Section 43 (1) of the Competition Act requires that when a merger is proposed, all parties
involved must formally notify the CAK. This notification can be submitted either in writing or
through a prescribed format, ensuring the Authority is informed about the transaction.
The Authority assesses control through share ownership and other evidence that indicates
influence over the target undertaking's business decisions. The following transaction require
notification of the authority under the merger guidelines.
Acquisition of Direct Control
A transaction can lead to direct control if one party can exercise full and decisive influence
over the target's affairs. Terms of commercial arrangements, such as share or asset
purchase agreements, and other contractual provisions that show the ability to make key
decisions, act as evidence. There is a presumption of direct control if more than 50% of the
share capital is owned. However, even less than 50% can be considered control if it comes
with voting rights and decision-making power. The Authority also considers veto rights,
influence overboard appointments, and control over senior management, strategic policy,
budget, or business plans.
Acquisition of Indirect Control
A transaction may result in indirect control if the acquiring party can materially influence the
target's business affairs, even without complete control. This can occur, for instance, when a
minority shareholding allows the acquirer to influence key strategic decisions, especially
when other shares are widely dispersed. The Authority's direct or indirect control
determination is made on a case-by-case basis, considering all relevant evidence of the
ability to influence the target undertaking's commercial decisions.
Joint Ventures
Joint ventures may reduce competition if they integrate parts of the parent companies'
business activities and assets, but this depends on the joint venture's permanence and
autonomy. To be considered a merger, a joint venture must be a "full-function" entity,
operating independently in the market for a long duration, typically 10+ years, with dedicated
management and sufficient resources.
Joint ventures with a purposefully finite period, such as those for a construction project, do
not qualify as having a long duration and thus are not considered full-function. Joint ventures
that only perform a specific function of the parent companies, like R&D or production, without
market access, are considered auxiliary and not full-function. However, using a parent
company's distribution network does not disqualify a joint venture from being full-function if
the parent acts as an agent for the joint venture. The presence of parent companies in
related markets and substantial transactions between them and the joint venture are
considered when assessing its full-function character. An initial start-up period of reliance on
parent companies is acceptable. Internal restructuring within a group of undertakings
controlled by the same entity does not constitute a merger. Finally, transactions solely for
financing purposes are assessed on a case-by-case basis, and parties may seek advisory
opinions from the Authority.
Specific thresholds for considering mergers are outlined for different sectors, including
general undertakings, healthcare, carbon-based minerals, and the oil sector, with varying
turnover or asset requirements.
The Merger Guidelines further provides that mergers that meet the following thresholds must
be notified to the Authority:
a) Where the undertakings have a minimum combined turnover or assets of 1 billion
shillings and the turnover or assets of the target undertaking is above 100 million
Kenyan shillings.
b) In the health-care sector, where the undertakings which have a minimum combined
turnover or assets of 500 million shillings and the turnover of the target undertaking is
above 50 million shillings.
c) In the carbon-based mineral sector, if the value of the reserves, the rights and the
associated exploration assets to be held as a result of the merger exceeds 4 billion
shillings.
d) In the oil sector, where the merger involves pipelines and pipeline systems which
receive oil and gas from processing fields belonging to and passing through the meters
of, the target undertaking, even where the value of the reserves is below four billion
shillings.
Some transactions may meet the definition of a merger but are not subject to mandatory
notification as outlined in the Merger Guidelines. These transactions include:
a) Where an acquisition of less than 25% of voting shares that does not lead to control,
as detailed in paragraphs 17 et seq. and 22 et seq., when the shares are bought
solely for investment purposes or in the normal course of business.
b) The acquisition of additional voting securities by an entity already possessing more
than 50% of the shares, unless the transaction shifts joint control to sole control.
c) Acquiring assets that meet the mandatory notification thresholds but are acquired
solely as an investment or in the regular course of business does not result in control
over the acquired entity. This includes the acquisition of shares or voting rights by a
person.
d) Sector-specific thresholds, such as transactions within specific monetary limits (e.g.,
100 million to one billion shillings in mergers), are exempt from notification mandates,
particularly in healthcare and carbon sectors.

4.2.2. Competitive Assessment

Competitive assessment is a critical mechanism in merger control, involving a detailed
examination by competition authorities to determine whether a proposed merger will
significantly impede competition within the relevant market. The core objective of competitive
assessment is to ensure that mergers do not harm market dynamics, consumer welfare, or
economic efficiency. Under the Kenyan Competition Act and the Consolidated Merger
Guidelines provided by the Competition Authority of Kenya (CAK), competitive assessment
constitutes a rigorous evaluation guided by clearly defined criteria and methodologies.
Competitive assessment also involves a counterfactual analysis, which explores what the
competitive landscape would likely resemble if the merger were prohibited or did not take
place. This hypothetical scenario helps authorities understand whether the merger will
genuinely alter competition significantly or if the market would evolve similarly even in the
absence of the merger.
Definition of the relevant market
A key starting point in competitive assessment is the definition of the relevant market,
encompassing both product and geographical dimensions. Market definition identifies the
boundaries within which competition occurs, providing a framework for subsequent analysis.
Authorities consider the substitutability of products from both demand and supply
perspectives, determining if consumers can easily switch to alternative products or if
producers can quickly adjust their outputs in response to market changes.
Market concentration analysis
Following market definition, the authority undertakes a market concentration analysis. This
involves measuring the market shares of firms before and after the merger and applying
quantitative metrics such as the Herfindahl-Hirschman Index (HHI). High market
concentration post-merger typically raises competition concerns because it indicates fewer
competitors with increased market power. The greater the concentration, the higher the
likelihood of competitive harm, triggering deeper scrutiny by the competition authority.
Unilateral effects and Coordinated effects (Horizontal merger assessment)
A horizontal merger involves two or more undertakings that operate at the same level of the
supply chain and produce or offer substantially similar goods or services in the relevant
market. These mergers are closely scrutinized because they typically carry the highest risk
of reducing competition, especially where the merging parties are direct competitors.
The CAK further investigates two critical competitive effects in competitive assessment:
unilateral effects and coordinated effects. Unilateral effects occur when the merged entity
acquires sufficient market power to independently raise prices, reduce output, diminish
product quality, or curtail innovation without fear of losing significant market share.
Coordinated effects, on the other hand, arise when a merger increases the likelihood of
remaining competitors engaging in tacit or explicit collusion, leading to coordinated actions
detrimental to competition. Authorities must assess factors such as market transparency,
history of collusion, similarity in products, and ease of monitoring among competitors.
Unilateral Effects
Unilateral effects arise when the merged entity is likely to reduce competition
independently, without any coordination with competitors. This can happen through:
 Loss of competition between the merging firms.
 Reduction in incentives to innovate or maintain quality.
 Increased prices or reduced output, given diminished competitive pressure.
A high post-merger market share (particularly over 50%) typically triggers further
investigation. However, a large share alone is not conclusive; the Authority considers
broader market dynamics and constraints.
The CAK conducts a unilateral effects test by examining whether the merger would enable
the merged entity—or another undertaking—to acquire or strengthen a dominant position.
This assessment is influenced by factors such as:
 Market power refers to the ability of a firm to raise prices above competitive levels or
to reduce quality, innovation, or output without immediate competitive repercussions.
In assessing market power, the CAK considers both the current and post-merger
structure of the market. This involves analysing the market shares of the merging
entities, the concentration, and the stability of these shares over time. While high
market shares, particularly those exceeding 50%, may indicate potential market
power, they are not determinative on their own. The Authority considers additional
qualitative factors such as the extent of product differentiation, brand loyalty,
 customer switching costs, and pricing behaviour to gauge the real capacity of the
merged firm to act independently of its competitors.
 Barriers to entry are critical in determining whether new competitors could
realistically enter the market and restore any lost competition post-merger. If entry
into the market is easy, timely, and likely, even a highly concentrated market may not
raise competition concerns. The CAK examines various types of barriers including
Legal and regulatory constraints, such as licensing requirements or sectoral
restrictions. Economic barriers, including the need for substantial sunk costs,
economies of scale, and access to distribution channels. Strategic barriers, like
aggressive pricing by incumbents or long-term exclusive contracts that lock in
customers.
The Authority emphasizes that new entry must occur within a reasonable time frame,
typically less than two years, and must be sufficient in scale and scope to effectively
constrain the behaviour of the merged firm.
 Countervailing power refers to the ability of large and sophisticated buyers to resist
or offset potential price increases or quality reductions imposed by a powerful seller.
The CAK considers the extent to which buyers in the relevant market, such as
wholesalers, retailers, or public procurement bodies, can switch suppliers, sponsor
market entry, or vertically integrate as a self-supply mechanism. If such buyers can
exert significant negotiating leverage, the risk of harm from a unilateral exercise of
market power may be mitigated. However, the Authority is cautious in overestimating
this factor unless there is clear, evidence-based support showing that buyers have
historically succeeded in restraining supplier power.
 On the upstream side, the CAK evaluates supplier power, the extent to which
suppliers to the merging parties possess power that could influence the merged
firm's ability to exercise market power. If suppliers are few, concentrated, or capable
of dictating input terms (e.g., pricing or exclusivity), they may limit the scope for the
merged firm to raise prices downstream. Conversely, if suppliers are fragmented or
dependent on the merging parties for their revenue, the merger could exacerbate
buyer power by enabling the firm to impose unfavourable terms on suppliers,
ultimately distorting the supply chain and reducing consumer welfare. This analysis is
particularly relevant in markets where vertical linkages or integration risks exist.
 Imports play a potentially mitigating role in markets where local competition is
weakened by a merger. The CAK assesses whether imported products serve as
credible substitutes to locally produced goods in terms of price, quality, availability,
and delivery times. The Authority examines the openness of the market to
international trade, the existence of tariffs or non-tariff barriers, and the
responsiveness of foreign suppliers to price or quantity shifts. If imports have
historically disciplined domestic producers or have the potential to expand in
response to price increases, they may serve as a constraint on the exercise of
market power by the merged entity. However, reliance on imports is not always
straightforward, especially in regulated or highly localized markets, and is therefore
scrutinized closely.
Coordinated Effects
Coordinated effects occur when a merger increases the likelihood of firms in the market
coordinating their behaviour, tacitly or explicitly in a way that reduces competition such as
agreeing on prices or output to the detriment of consumers. Even without formal collusion,
firms may begin to behave less competitively due to the merger, especially in markets that
are:
  Concentrated – with few players
 Transparent - easy to monitor prices and behaviour
 Stable - low product differentiation and predictable demand.

Below is a detailed explanation of the key components used in the analysis of coordinated
effects of a merger:
 The CAK would analyse the possible impact of a merger on creation of terms of
coordination. Coordination is more likely when firms can easily arrive at a shared
understanding of how to act collectively. This involves agreeing on actions such as
pricing strategies, output limitations, or market division. Firms may also use
simplifying mechanisms, such as standard pricing rules or cross-shareholding
arrangements, to overcome complexities in coordination. Structural features such as
symmetry in market shares or cost structures, and cross-ownership or joint ventures,
can also increase the potential for coordination.
 The authority would consider the possible effect of the merger to cause coordination
deviation. For coordination to be sustained, firms must be able to detect when
others deviate from the agreed conduct. Monitoring is more effective in transparent
markets where pricing and market behaviour are publicly observable. Transparency
helps firms interpret whether a competitor's pricing move reflects deviation or a
response to changing demand or costs. Even in less transparent markets, tools like
voluntary disclosures, joint ventures, or industry associations may aid monitoring.
 Available deterrent mechanisms for deviation. Deterrence involves credible
threats of retaliation against firms that deviate from coordination. For this to work:
o Retaliation must be timely and economically significant,
o The threat must outweigh the benefits of short-term deviation,
o Retaliation can occur in the same or adjacent markets (e.g., ending joint ventures
or price wars).
The credibility of these deterrent mechanisms depends on the retaliating firms'
incentives if long-term coordination gains exceed short-term retaliation losses, the
mechanism becomes viable.
 Effective coordination also depends on whether non-coordinating firms and
customers can disrupt the coordinated outcome. For example, a coordinated
reduction in capacity only affects consumers if non-participating firms lack the
capacity or incentive to expand and large buyers do not tempt firms to deviate via
lucrative contracts. Large customers who can offer volume or long-term deals may
destabilize coordination by incentivizing defections.
 Mergers involving potential competitors are especially concerning under
coordinated effects. If a firm poised to enter a market merge with an incumbent, the
merger could eliminate a credible threat that was disciplining market behaviour. This
is especially problematic when the potential entrant holds significant assets or
capabilities that would allow for rapid market entry or no other comparable potential
competitors remain post-merger. Such transactions may reduce future competition
even if the merging firm was not currently active in the relevant market.
 In assessing coordinated effects, the CAK also considers whether a merger will
increase the buyer power of the merged entity in upstream markets. This can
happen when:
 o The merged firm obtains lower prices by restricting input purchases,
o This leads to reduced output downstream, harming consumer welfare,
o Rival firms in the downstream market face higher input costs or exclusion due to
the merged firm's dominance.
However, buyer power is not always anti-competitive. If it results in genuine cost
savings passed on to consumers without restricting competition or output, it may
enhance consumer welfare
In essence, the CAK’s goal is to ensure that horizontal mergers do not eliminate or reduce
competitive pressures in a way that harms consumer welfare through higher prices, reduced
choices, or slowed innovation. Each case is assessed on its unique facts, with both
economic and legal reasoning applied to balance potential harms against claimed
efficiencies or public interest benefits.

Non-Horizontal Mergers: Vertical And Conglomerate Effects

Vertical Effects
Foreclosure refers to a scenario where a vertical merger enables the merged entity to
restrict access to critical markets or inputs by its rivals, impairing their ability or incentive to
compete effectively. Foreclosure may discourage new entries, hinder the expansion of
existing players, or reduce the intensity of competition, resulting in increased prices or
reduced innovation for consumers.
Input Foreclosure arises when the merged firm restricts access to an essential input it
would have previously supplied to downstream competitors. The Authority assesses:
1. Ability to Foreclose Access to Inputs:
This exists where the merged entity holds significant market power upstream and can
control supply conditions. If rivals are unable to switch to efficient alternative
suppliers, they may face higher input costs or reduced quality.
2. Incentive to Foreclose Access to Inputs:
The incentive is assessed by balancing the upstream profit loss (from restricting input
sales) against the downstream gain (from weakening competitors and raising prices).
Factors such as profit margins, product substitutability, and market share are
considered.
3. Overall Likely Impact on Effective Competition:
Foreclosure is harmful if it raises consumer prices, reduces innovation, or raises
barriers to entry. Harm is likelier if foreclosed rivals are important competitors or if
switching costs are high.
Customer foreclosure occurs when a downstream firm (now merged with an upstream
supplier) limits rival suppliers’ access to a significant customer base. This restricts upstream
competitors’ ability to sustain operations or invest in competitiveness.
1. Ability to Foreclose Access to Downstream Markets:
The Authority looks at whether the merged entity is an important customer and
whether upstream rivals would struggle to find alternative buyers. Foreclosure may
occur if the downstream market is highly concentrated or exhibits network effects.
 2. Incentive to Foreclose Access to Downstream Markets:
Similar to input foreclosure, this is determined by profitability. If downstream
foreclosures enhance upstream profits due to reduced competition or higher prices,
incentive exists. The Authority also considers how capacity constraints or efficiencies
impact the decision.
3. Overall Likely Impact on Effective Competition:
If customer foreclosure significantly reduces revenue opportunities for upstream
rivals, it may impair their ability to invest in innovation or scale, leading to reduced
competition in both the upstream and downstream markets.
A vertically merged firm may gain access to commercially sensitive information from
competitors who rely on it as a supplier or customer. This can lead to less aggressive
pricing or strategic exclusion of competitors from key channels. The firm might leverage this
informational advantage to outcompete rivals in the long term.
While vertical mergers are less likely to result in coordinated behaviour than horizontal
ones, the potential exists. The Authority considers the same principles as for horizontal
mergers. Vertical integration can facilitate coordination if, for example, it aligns the interests
of previously independent competitors or improves monitoring via shared platforms or
market transparency
Conglomerate Effects
Conglomerate mergers involve firms that operate in different product markets. Although
generally less problematic than horizontal or vertical mergers, they can still result in
competitive harm through foreclosure. This occurs when the merged entity leverages a
strong position in one market to disadvantage rivals in a related market, often through full-
line forcing, tying, or bundling practices. The authority would therefore consider the following
factors in cases of conglomerate mergers:
Possibility of tying and bundling. Tying involves requiring customers to purchase one
product (the tied good) as a condition for buying another (the tying good). Bundling is the
practice of offering two or more products together, either as a package deal or while still
offering them separately. While these practices can be efficiency-enhancing, they may also
reduce competition when they restrict consumer choice, raise switching costs or hinder
rivals’ market access.
The ability to foreclose competitors depending on whether the merged entity has sufficient
market power in at least one market. Such power allows it to effectively influence purchasing
behaviour by linking sales of products in separate markets. This is typically feasible when
one product is essential or has few substitutes, there is a high degree of complementarity
between the products or there exists a significant overlap in the customer base for the
products.
The incentive to foreclose is assessed by evaluating the economic gains versus losses
from such conduct. The CAK considers whether:
 The merged entity gains more by weakening rivals and increasing future pricing
power than it loses from fewer sales in the short term,
 The cost of implementing the tying or bundling strategy is justified by its strategic
benefit,
  Network effects or economies of scale increase the profitability of foreclosure
strategies
CAK would also consider the detrimental impact to prices and consumer choice. If
foreclosure significantly reduces rivals’ sales to below a viable scale, it can lessen their
competitive constraints, allowing the merged firm to raise prices or degrade quality without
losing business. This may lead to increased prices, fewer choices for consumers and
reduced incentives for innovation or entry. The CAK notes that such outcomes are more
likely where rivals lack the ability or incentive to respond by expanding output or
repositioning themselves competitively.
Though less common, conglomerate mergers may also give rise to coordinated effects,
especially when:
 The number of effective competitors is reduced,
 The merged entity’s expanded portfolio increases multi-market contact, facilitating
tacit collusion,
 Foreclosed rivals opt to align their behaviour with the dominant firm rather than
contesting the market.
Coordination becomes more feasible in transparent, stable markets with relatively symmetric
players. It may result in collective price increases or reduced output, even without explicit
collusion.
Efficiencies
The CAK recognizes that both horizontal and non-horizontal mergers can generate pro-
competitive efficiencies. These efficiencies may enhance rivalry or deliver consumer benefits
in ways that counteract the potentially adverse effects of the merger on market competition.
Types of efficiencies considered
1. Horizontal Merger Efficiencies:
These include economies of scale and scope, increased innovation through
consolidated R&D, streamlined distribution and marketing, and reduced transaction
costs.
2. Non-Horizontal Merger Efficiencies:
A prominent claim is the elimination of double marginalization, where integration
between an upstream and downstream firm removes cumulative markups, thereby
lowering final prices to consumers. The CAK examines whether the pre-merger
markups are significant and supported by verifiable evidence such as supply
agreements or pricing data.
3. Supply-Side Efficiencies:
These involve cost reductions resulting from improved production methods or access
to cheaper inputs. The Authority evaluates whether these cost savings will be passed
on to consumers, and requires verifiable historical data to support the claims.
4. Demand-Side Efficiencies:
These may include:
o Network effects, where product value increases with broader usage.
o Product bundling at lower combined prices.
 o One-stop shopping convenience due to economies of scope. Evidence may
involve industry practice or quantified consumer incentives.
o Dynamic Efficiencies:
These refer to long-term gains such as improved innovation, management
skills, and R&D synergies. The CAK notes these are hardest to verify and
require timelines to realization, specific innovation indicators (not just
investment figures) and independent verification where possible.
5. Investment Alignment:
Efficiencies may also result when the merger aligns previously misaligned investment
incentives, eliminating barriers to investment. Evidence may include internal strategy
documents or investment histories.
The CAK applies the following criteria when evaluating the credibility and significance of
claimed efficiencies:
 The Authority only considers efficiencies that are backed by verifiable, objective
evidence. Vague or speculative efficiencies are disregarded.
 Efficiencies must result specifically from the merger and not from other restructuring
or market behaviour.
 The efficiency benefits must be realizable within a reasonable period and must
benefit consumers, not just shareholders.
 The efficiencies must be substantial enough to offset any expected harm to
competition.
The responsibility to substantiate claimed efficiencies lies entirely with the merging parties.
They must clearly describe the efficiency, specify when and how it will be achieved, show
how it enhances the firm's ability to compete and demonstrate why it cannot be achieved
without the merger.
Failing Undertaking
A failing undertaking refers to a business that is in such serious financial difficulty that it is
likely to exit the market if not acquired. In such cases, the CAK may approve a merger that
would ordinarily be problematic if the competitive deterioration anticipated in the market
would occur even in the absence of the merger. In other words, the loss of a competitive
player is inevitable, whether the merger occurs or not.
For a failing undertaking argument to be accepted, the following three conditions must be
met:
1. The undertaking in question must be demonstrably on the verge of exiting the market
due to financial distress. The exit must be inevitable and occur in the near future if
the merger does not proceed.
2. There must be no less anticompetitive alternative buyer available. If there are
potential purchasers who could acquire the firm without creating or enhancing market
power, those options must be ruled out.
3. Without the merger, the assets of the failing firm must be likely to exit the market
entirely; meaning they would not be used by another firm to provide competitive
 goods or services. This could happen, for instance, if the assets are liquidated or
repurposed outside the competitive sphere.
The burden of proof lies on the merging parties. They must present comprehensive and
verifiable evidence that the merger does not cause the competitive harm and it merely
reflects it. This involves supplying audited financial records, insolvency filings,
documentation of unsuccessful attempts to find less anticompetitive buyers and expert
analysis forecasting imminent failure.

Evidence In a Competitive Effects Assessment

The quality, credibility, and relevance of evidence presented by merging parties are critical to
the Authority’s ability to determine whether a merger will substantially lessen or prevent
competition in the post-merger market.
The CAK emphasizes that its competitive effects assessment is merger-specific, meaning it
is conducted individually for each notified merger. The Authority relies strictly on the
evidence presented before it to evaluate a merger’s likely impact on competition. While it
retains powers under the Competition Act to summon or request information from merging
parties, the primary responsibility rests with the merging undertakings to proactively provide
sufficient and reliable documentation. The Authority particularly expects evidence to support
arguments made in favour of the merger, especially in relation to ease of entry, efficiencies,
countervailing buyer power and failing undertaking defences.
The guidelines list of acceptable sources of evidence, including public reports, market data,
internal strategic documents, merger rationale documentation and behavioural and intent
evidence.
4.2.3. Public Interest Assessment

The CAK’s assessment also integrates a comprehensive public interest analysis. Beyond
traditional competition metrics, public interest criteria include the impact of the merger on
employment, innovation, export competitiveness, efficiency gains, and the survival and
growth prospects of small and medium enterprises (SMEs). In Kenyan merger control, these
public interest dimensions often hold substantial weight, ensuring mergers contribute
positively to broader economic and social goals.
5. Kenyan Merger Cases: Practical Applications
5.1. What constitutes a merger?
In Makini School Limited v Competition Authority of Kenya [2023] KECT 446 (KLR), the
Tribunal affirmed the CAK's determination that acquisition of governance rights and strategic
control over the operations of the institution amounted to a merger, although the acquired
shareholding was not a controlling stake. The decision underlined that the applicable test
was whether the acquirer gained the power to significantly affect the commercial policy of
the target.
The case was a revolving on whether Makini School's acquisition of R.K. Bhayani Nursery
and Primary School located in Kisumu constituted a merger as embodied in the provisions of
Kenya's Competition Act and whether the acquisition needed prior approval by the
Competition Authority of Kenya (CAK). In 2019, Makini took over the premises that had been
occupied by Bhayani School, took in its students and some of its teachers, and kept running
the outfit at the same premises without informing or seeking the approval of the CAK. Makini
contended that it had only rented out the premises and provided Bhayani's students and
staff with a home as an act of goodwill, maintaining that there had not been any official
change of ownership.
The Competition Authority of Kenya (CAK) established that Makini had effectively taken over
the business operations of Bhayani, having done so without seeking the necessary
regulatory approval, which was a breach of Section 42(2) of the Competition Act. In light of
this, the Authority imposed a financial penalty of Kshs 7,239,876 on Makini. Unsatisfied with
this decision, Makini attempted to challenge the ruling before the Competition Tribunal.
In its decision, the Tribunal affirmed the CAK's finding, reaffirming that a merger, under the
meaning of Section 2 of the Competition Act, encompasses the acquisition of shares,
businesses, or other assets that leads to a change of control over a business or part of a
business. The Tribunal made several important findings in interpreting this definition. First, it
recognized that students and teachers are at the heart of the operating dynamics of a school
and may be valuable assets in a merger context. It was expressly stated that "students and
teachers of a school are assets which can be acquired within the meaning of section 2 of the
Competition Act." The Tribunal further held that the acquisition by Makini of Bhayani's
students and employees constituted the acquisition of a going concern, and not merely
tangible assets. It was mentioned that "the students and teachers were not bare assets but
constituted an enterprise. At the end, the Tribunal explained that a merger does not
necessarily involve payment of a purchase price or other consideration; what matters is the
assumption of control over business operations, irrespective of whether money changes
hands.
Lastly, the Tribunal arrived at a final finding that the actions of Makini School were deemed
to constitute a merger under the provisions of the Competition Act. By virtue of such a
finding, it was held that such a merger was in need of prior approval by the Competition
Authority of Kenya (CAK). By failing to seek such an approval, Makini School violated the
relevant statutory provision and became subject to the ensuing penalty. This case illustrates
the point that, especially in the educational context, the coming together of essential
elements like students and teachers can be construed as a merger, even if there is no
contractual agreement or exchange of funds.
Likewise, in Standard Group Plc v Competition Authority of Kenya [2021] KECT 106
(KLR), the Tribunal decided that acquisition of rights to appoint top managers, approve
budgets, and determine content strategy constituted a merger even though the transaction
involved a minority shareholding. The court was eager to point out that decisive influence-
instead of ownership-was the most important factor in determining control.
This is in line with foreign interpretations. Whish and Bailey note that the "essence of control
is the ability to exert decisive influence over an undertaking's strategic choices," regardless
of the size of shareholding or voting rights. This includes joint control as well as instances of
negative control, where the power to veto important decisions in effect leads to shared
control.
This case was concerned with whether the acquisition by Standard Group of intellectual
property rights and trademarks for the Mount Kenya Star and Pambazuko newspapers
constituted a merger within the meaning of Kenya's Competition Act and was thus subject to
approval in advance by the Competition Authority of Kenya (CAK).
Standard Group signed agreements in 2018 to purchase trademarks and intellectual
property of the two regional newspapers at a price of Kshs 13.75 million for Mount Kenya
Star and Kshs 3.5 million for Pambazuko. These acquisitions were made without notification
or approval from the CAK.
Upon carrying out an investigation, the CAK determined that these acquisitions constituted a
merger under Sections 2 and 41 of the Competition Act, considering that Standard Group
had gained control over significant assets and goodwill of the two publications. The CAK
also cited possible penalties under Section 42(5), which can be in the form of fines of up to
10% of the previous year's gross annual turnover. Kenya Law.
Standard Group appealed against this perception by stating that the transactions were
merely involving the acquisition of assets and not entire businesses, and therefore failed to
satisfy the legal definition of a merger. They pointed out that the initial publishers continued
to remain independent, and that there was no transfer of control of the businesses per se.
Further, Standard Group alleged that the CAK failed to issue a reasoned final decision and
denied them a fair hearing, including the opportunity for an oral hearing.
The Competition Tribunal made an inquiry to determine if the letter from the CAK was a final
decision and if due process had been followed. The Tribunal ruled that the letter written by
the CAK on 31st March 2021 was not a properly reasoned final decision that could be
appealed against. In addition, it was ruled that Standard Group had not been accorded a fair
hearing since their demand for an oral conference had not been granted.
Thus, the Tribunal remitted the case to the CAK to complete its investigations, conduct a fair
hearing, and issue a final decision according to law. Kenya Law. The matter underscores the
necessity of seeking regulatory approval of transactions that may well amount to mergers
under the Competition Act, even in instances of purchases or sales of purely assets or
intellectual property. Moreover, it points to the imperative of regulatory bodies adhering to the
dictates of fair administrative action, such as granting parties a chance of fair hearing before
entering decisions that might attract substantial penalties.
5.2. Acquisition of minority Shareholding with veto or controlling rights
The CAK has its Merger Guidelines (2019) stated that the acquisition of a minority
shareholding may still constitute a merger where it constitutes control by way of veto rights,
board representation, or shareholder agreements24.
In Amethis Packaged Food Limited and Kenafric Development Limited
(CAK/MA/04/486/A), Amethis had acquired a minority stake but had been afforded
extremely broad veto rights over some operating and strategic decisions. The CAK held that
the transaction was a merger and was notifiable under the Act.25

The acquisition transaction involving Amethis Packaged Food Limited, wherein a controlling
share in Kenafric Development Limited was taken by way of purchase, was concluded with
Amethis owning a 49% shareholding in Kenafric. Although it is a fact that such shareholding
is not a majority ownership stake, the impact of the acquisition was substantial
notwithstanding Amethis was ceded specific veto rights which, in the opinion of the
Competition Authority of Kenya (CAK), were sufficient to constitute control under Sections 2
and 41 of the Competition Act. Control under the Act's definition also encompasses
instances where one party acquires the power to exercise significant influence or control
over the operation of another without acquiring absolute ownership.

24
Competition Authority of Kenya, Merger Guidelines (2019)
25
Amethis Packaged Food Limited and Kenafric Development Limited CAK/MA/04/486/A
The CAK further stated that the combined turnover of the parties exceeded the relevant
thresholds and, as a result, the transaction constituted a notifiable event subject to prior
approval.
Amethis, a new investment entity with no prior commercial track record in Kenya, was taking
up an interest in Kenafric, which was an existing business conducting confectionery and
foodstuffs activities. In its determination, the Competition Authority of Kenya (CAK) found
that the merger would not substantially lessen or prevent competition in the affected market.
Furthermore, there were no issues of public interest pertaining to the merger. The CAK
hence granted its unqualified approval of the merger, thereby reaffirming the doctrine that
minority purchases can be considered as mergers if the same confers control by way of
rights or control of strategic decision-making.
In the case of Sunsuper Pty Limited and Macquarie Airfinance Limited
(CAK/MA/04/995/A), the acquirer was granted approval rights over major finance
agreements and capital allocation. The Authority ruled that such influence over major
financial decisions constituted control26.

The transaction was for the acquisition by Sunsuper of a minority equity stake in Macquarie
Airfinance, which is involved in the leasing and financing of commercial aircraft. Although the
shareholding was below 50%, the agreement provided Sunsuper with veto and approval
rights over basic strategic issues such as approvals of expenditure, appointment of senior
management, and changes to the business plan. The Competition Authority of Kenya (CAK)
analysed these rights and concluded that they gave substantial oversight of the policy and
commercial dealings of Macquarie, hence amounting to control under the provisions of
Sections 2 and 41 of the Competition Act.
Since the combined turnover of the parties surpassed the statutory threshold for merger
notification, the transaction was notifiable. Upon consideration, the CAK determined that the
merger would not result in a substantial reduction of competition, particularly because the
parties did not have similar activities in Kenya nor were there any public interest concerns.
The CAK conditionally approved the merger.
The takeover of Icolo Limited (CAK/MA/04/987/A) by PRIF Africa Holding Limited
resulted in PRIF, the investment firm focused on infrastructure, taking over the controlling
shareholding of Icolo Limited, which is Kenya's carrier-neutral data centre operator. The data
centres serve the crucial function of providing hosting for cloud services, colocation, and
interconnectivity for a diverse set of clientele across various sectors such as
telecommunication, finance, and content delivery. The transaction gave PRIF sole decision-
making authority over the strategic and operational issues of Icolo, thus constituting it as a
merger under Sections 2 and 41 of the Competition Act.
The Competition Authority of Kenya (CAK) conducted an in-depth analysis to determine the
impact that the transaction would have on the digital infrastructure market in Kenya. It was
observed that PRIF did not have any business operations in Kenya, whereas the concerned
market—carrier-neutral data centre services—was at an embryonic phase of development
with limited players and increasing demand. The CAK also stated that the merger would
attract investment in digital infrastructure, which is in line with public interest factors of
technological advancement and job creation. Significantly, the CAK affirmed that there were
no vertical or horizontal overlaps between merging entities that could potentially create

26
Sunsuper Pty Limited and Macquarie Airfinance Limited (CAK/MA/04/995/A)
competition-related problems. As such, with no adverse effects on public interest or market
structure, the merger was approved without any conditions.27

In CDC Group PLC and I&M Holdings Limited (CAK/MA/04/410/A), rights were granted to
CDC to make important decisions and appoint directors. Despite the fact that their
shareholding stake wasn't controlling, the CAK considered that the transaction conferred
strategic joint control that was subject to merger clearance28.
The acquisition of Blowplast Limited (CAK/MA/04/501/A) by Kibo Plastic Packaging
Limited saw Kibo take a significant equity stake in Blowplast, which produces an extensive
array of plastic packaging items, such as bottles, caps, and containers, predominantly
utilized in food, beverage, and personal care industries. In the course of the transaction,
Kibo acquired decision-making control, hence acquiring control over Blowplast's strategic
activities, in accordance with the definition of a merger in Sections 2 and 41 of the
Competition Act.
In analysing the merger, the Competition Authority of Kenya (CAK) reviewed possible
adverse impacts on competitive forces in the plastic packaging sector. Notwithstanding both
businesses operating within the same markets, CAK concluded that their contact was one of
complementarity, rather than confrontation in terms of competition, and that their market
bases only very marginally intersected. Second, the packaging sector also possessed a very
large number of competitors and had relatively low entry barriers, thus preventing the new
consolidated entity from even attaining or exercising market superiority. The CAK also
examined if the merger created any public interest issues, including job losses or decreased
innovation, and concluded there were none. The Authority, however, recognized that the
acquisition may create operational synergies, increased efficiency, and possible investments
in production capacity that may ultimately benefit consumers. The merger therefore received
unconditional clearance.
In The Telkom Kenya Limited & another v Competition Authority of Kenya [2020] KECT
131 (KLR) the tribunal upheld the expansive interpretation by the Competition Authority of
Kenya, holding that the establishment of a joint venture by Airtel Kenya and Telkom qualified
as a merger. The Tribunal ruled that the consolidation of assets and the establishment of a
jointly controlled undertaking was notifiable, especially in light of the size and strategic
effects in the telecommunication sector29.

The subject case was a potential merger being considered between Airtel Networks Kenya
Limited and Telkom Kenya Limited. The primary goal of the merger was to consolidate their
diversified products in carrier, enterprise, and mobile services and thus become more
capable of competing better in the extremely competitive telecommunication business. The
Competition Authority of Kenya (CAK) approved the merger, with the caveat that it is subject
to a fulfilment of a set of specific conditions. Particularly among these is that there is a
requirement for surrendering some spectrum licenses to the government upon their expiry.
There were also conditions imposed on the sale of the merged entity, to remain in effect for
five years, along with requirements that call for the retention of a specified number of
workers for this duration.
In response to the conditions, Telkom Kenya and Airtel fought back by appealing against
them at the Competition Tribunal. The claimants contended that the conditions placed upon

27
PRIF Africa Holding Limited and Icolo Limited CAK/MA/04/987/A
28
Kibo Plastic Packaging Limited and Blowplast Limited CAK/MA/04/501/A
29
Telkom Kenya Limited & another v Competition Authority of Kenya [2020] KECT 131 (KLR)
them were not just burdensome and onerous but also unclear in their description, ultimately
arguing that these conditions were a contravention of their rights as business entities in the
market. The Tribunal conducted a detailed review of the diverse conditions under contention
and accordingly held that certain of these were unjustified or in need of substantial
clarification. Following these findings, it went on to modify certain conditions, such as, but
not limited to, restricting the reporting obligation to a period of two years and making
necessary clarifications with respect to the terms of spectrum reversion. Most importantly,
the Tribunal put great weight on the critical requirement that conditions of regulation be not
only proportionate and transparent, but also consistent with the overall goals of encouraging
fair competition while protecting at the same time the interests of the public.
5.3. Approval of mergers with conditions to remedy competition and public interest
concerns
Section 46(1) of the Act grants the CAK the authority to approve a merger subject to
conditions where the transaction is likely to significantly lessen competition or be detrimental
to the public interest. The authority enables the Commission to require structural or
behavioural remedies that mitigate the concerns while preserving the transaction benefits.
The case of Simba Corporation Limited and Associated Vehicle Assemblers Limited
(CAK/MA/04/539/A) involved a vertical merger involving Simba Corporation, the dealer and
distributor of motor manufacturers, with Associated Vehicle Assemblers Limited (AVA), a
contract vehicle assembler. The vertical integration presented input foreclosure, where
following the acquisition, Simba would be able to foreclose access to AVA's vehicle assembly
capacity to rival makers or dealers. Since AVA was one of the few vehicle assemblers in
Kenya, such conduct would substantially distort downstream vehicle distribution competition.
The CAK resolved these issues by the introduction of a non-discrimination clause. As such,
Simba was required to offer motor vehicle assembly services to third-party customers on the
same terms as before the merger. This provision maintained the competitive neutrality of
AVA's services, facilitated access by competing players like Isuzu and Toyota Tsusho, and
minimized the threat of vertical leveraging that would entrench Simba's market power. This
decision is important in establishing a precedent in the regulation of vertical mergers with
large upstream and downstream market power in Kenya.
HID Corporation Limited and De La Rue Kenya Limited (CAK/MA/04/900/A) were
involved in a merger where HID Corporation bought out De La Rue Kenya, a company
engaged in the production of security and currency documents. As much as this industry is
not typified by extensive competition, it is very much of public interest because of its national
security, technology, and employment implications.
The CAK, in identifying the importance of the industry to national strategy, outlined three
conditions related to public interest:
Protection of Local Jobs: Guarantee of preserving Kenyan jobs following the merger.
Localisation of Production: To prevent offshoring of printing of currency and documents—
tasks which, if offshored, compromise national security.
Commitment to Ongoing Investment: HID had to present a plan for the facility's
investment and development at the time of its acquisition. Notwithstanding that the
transaction did not pose appreciable competition concerns because of the niche market, the
conditions set by the CAK demonstrate nuanced appreciation of Section 46(2) of the
Competition Act. This particular section provides for the prohibition or conditional approval of
mergers based on substantial public interest factors.
The decision established a significant precedent in demonstrating that the Authority can
utilize merger reviews to advance industrial policy and national security objectives, even in
markets where competition is reduced.
In Gulf Energy Holding Limited and Kenol-Kobil Limited (CAK/MA/04/950/A), the said
merger was highly publicized horizontal merger between the two major players in the
downstream petroleum industry, specifically in fuel distribution and retail. The merged entity
would have substantial control over a large majority of retail fuel stations, thus posing threats
of market dominance, price collusion, and foreclosure of independent resellers.
The CAK established possible competitive harm caused by concentration of the market and
subsequently imposed structural and behavioural remedies.
• Divestiture of Fuel Stations: Gulf/Kenol was required to divest several retail stations to
reduce post-merger market share and maintain market competition.
• The disclosure of Fuel Supply Agreements substantially excluded tying and exclusive
dealing arrangements, which can have the impact of limiting entry by independent
retailers or smaller rivals.
This case demonstrates the Authority's efforts to avoid undue concentration while at the
same time protecting consumer interests both in terms of pricing and service quality.
Notably, it also demonstrates a readiness to impose structural remedies, i.e., divestments,
which are relatively rare in developing jurisdictions due to the enforcement difficulties
involved.
In the case of National Cement Company Limited and ARM Cement Limited
(CAK/MA/04/878/A), the acquisition followed ARM Cement's financial collapse, which
threatened large-scale lay-offs and disruption of domestic cement supply. A local competitor,
National Cement, moved to acquire ARM's assets in a takeover viewed as a rescue attempt.
Although the dying firm exception would have otherwise warranted unqualified approval, the
Competition Authority of Kenya (CAK) took an activist approach to safeguard jobs and
industrial stability.
The conditions given were:
• Employee Retention: The acquiring company had to maintain a significant percentage of
ARM's workforce.
• Continued local production of cement is required to avert plants' mothballing or asset
stripping, which would alternatively cause regional monopolies or shortages.
This case is significant in the sense that it demonstrates the restraint exercised by the
Authority; although it appreciated the imperative of business continuity, it did not lose focus
of its statutory duty under Section 46 to safeguard employment and domestic manufacturing
capacity. In addition, the transaction also highlighted the fine balance that regulators must
strike in their management of failed companies—promoting rescue proposals and at the
same time ensuring accountability for the effect on public interest.
The Competition Authority of Kenya (CAK) has a context-specific approach, whereby review
of mergers entails not only traditional competition analysis but also consideration of public
interest factors, such as employment, access to goods and services, industrial policy, and
even national security. The Authority has demonstrated a growing confidence in the
imposition of bespoke conditions-ranging from behavioural remedies (non-discrimination
orders, job protection, and contractual disclosure) to structural remedies (asset divestiture)-
to remedy specific risks revealed under investigation. This approach enhances market
resilience, encourages vulnerable industries, and precludes merger activity from damaging
public welfare. The cases also illustrate how the Authority applies a differentiated approach
to a sectoral basis. In strategic sectors such as security printing, national interest is given
priority over market concentration. In highly competitive markets, for example, fuel retailing
or car assembly, the emphasis is on contestability and access. Where there are failing
companies, the CAK seeks to balance facilitation and enforcement. The mergers' analyses
therefore mark a shift in the enforcement of Kenya's competition law towards a balancing of
economic efficiency with equity and public interest. In addition, the regulatory framework is
now stronger, more representative, and sensitive to local realities.
5.4. Approval of merger with conditions to remedy public interest concern
Section 46(2) of the Competition Act provides criteria for approval of mergers, including
those acceptable on public interest grounds. In UPL Corporation Limited and Arysta
Lifescience Inc (CAK/MA/04/757/A), the CAK found that though the merger posed few
competitive concerns, it endangered jobs and local production. It imposed conditions such
as jobs protection, maintenance of research facilities in Kenya, and ongoing supply to
agrochemical distributors in Kenya.
This was a proposed acquisition of Aryasta LifeScience Inc. by UPL Corporation Limited
which is a Mauritius- registered company within the international UPL Group. The transaction
saw UPL taking over 100% of the issued share capital of Arysta and, by extension, control of
its business.
The CAK reviewed the merger and established that the combined sales of the merging
companies were more than KES 1 billion in 2018, meaning that they were required to notify
the authority of the merger. The markets to be involved were the national markets for
herbicides, fungicides, and insecticides. Even though the merger was not likely to pose
competition issues since there were other players in the market and the merged entity would
have a low market share, the CAK perceived potential detrimental impacts on public interest.
CAK approval was on specific conditions aimed at mitigating public concern interests
especially those facing Small and Medium Enterprises (SMEs) and farmers. These
conditions included:

 The firm had to keep agrochemical products in small pack sizes ranging from
50ml/50g to 1 litre/1 kilogram for 12 months from the date of the merger. This was
important since Arysta had been targeting small farmers and small enterprises in the
past by making available products in small, affordable sizes, unlike competitors who
tended to make larger quantities available.
 Distribution Model Continuation: The new firm had to continue Arysta's pre-existing
distribution model for 12 months after the merger. The model encompassed the
utilization of a national agent, distributors and stockists, and the conduct of training
programs with farmers on agrochemicals products. This move provided ongoing
assistance and accessibility to farmers and SMEs that were reliant on pre-
established Arysta distribution channels and training programs.
 Compliance Reporting: The newly formed company had to submit a compliance
report to the CAK within a span of 12 months according to the given mandatory
conditions.
5.5. Acquisition of minority shareholding with joint control rights
Joint control arises in a situation where two or more undertakings jointly exert control over
strategic decisions. The CAK clarifies this in the Merger Guidelines as a situation where
several parties must agree on major decisions relating to an undertaking's business policy.
In Sai Office Supplies Limited and Lino Stationers Limited (CAK/MA/04/410/A), the
acquisition of a minority shareholding included veto rights over budgets, product
development, and strategic direction. The Competition Authority of Kenya (CAK) found that
the acquirer attained joint control, thus triggering merger notification. The proposed
transaction was unlikely to result in a substantial lessening or prevention of competition
since there were no restrictions on the importation and distribution of office equipment,
provided the equipment adhered to Kenya Bureau of Standards (KEBS) requirements. The
Competition Authority of Kenya approved the acquisition with the condition to retain a
specified number of employees to mitigate negative public interest concerns.