The High Court has upheld a move by the Public Procurement and Disposal of Public Assets Authority to expand the list of potential suppliers of vehicles to public entities. The move, seen as positive for competition and therefore consumer benefit was hotly contested by Ugandan representatives of vehicle manufacturers who hitherto enjoyed a virtual monopoly.
The Case
In CFAO Motors Uganda Limited v The Public Procurement and Disposal of Public Assets (“the PPDA”), the Ugandan representatives of several motor vehicle manufacturers, sought to challenge a circular by the PPDA which permitted entities authorised by suppliers and distributors, to bid for the supply of vehicles to public entities. Until this circular, it was only entities authorised directly by vehicle manufacturers that could bid.
The applicants argued that opening the space to supplier or distributor representatives would compromise the quality of supplies and negate the value for money principle in procurement. They further argued that the circular perpetuated a state of illegality where a supplier falsely claims that it is authorised by a manufacturer to supply or distribute vehicles at the expense of dealers who are genuinely authorised by manufacturers.
The PPDA argued that its mandate included making changes to improve procurement efficiency and competition and that the circular was intended to encourage and promote competition, one of the principles of public procurement.
The court agreed with the PPDA and found that the circular breathed life into the procurement exercise by opening it up to all potential providers. It stated that the decision of the PPDA was well informed and intended to uphold the principle of competition in the procurement process which in turn helps to ensure value for money. The court found that the changes by PPDA would break the monopoly for the supply of motor vehicles that the applicants had long enjoyed.
Competition Law Considerations
The judgment, while invoking competition principles is based solely on the Public Procurement and Disposal of Public Assets Act, (Cap. 205). The court did not consider the recently enacted Competition Act, (Cap.66) (“the Act”).
The Act prohibits anti-competitive practices defined as practices that involve taking a decision or engaging in any concerted action or practice in the supply of goods which causes or is likely to cause an adverse effect on competition. The Act provides that inquiry into anticompetitive practices is the mandate of the Ministry of Trade, Industry and Cooperatives. In determining whether a practice is anti-competitive and likely to have an adverse effect on competition in the market, the Ministry would have to take into account whether the practice would result in the creation of a barrier to new entry, force existing competitors out of the market or result in any consumer benefit.
To the extent that the applicants sought to restrict suppliers of vehicles to public entities, their action may be considered as having an adverse effect on competition. Six of the applicants operate on the same level of the supply chain, selling, distributing and maintaining motor vehicles for well-known brands such Toyota, Mercedes Benz, Nissan, Mitsubishi, Hyundai, Tata among others. The seventh applicant, the Uganda Motor Industry Association, is a limited liability company formed by the same representatives of vehicle manufacturers. The suit was intended to maintain the applicants’ market power and restrict the entry of other players that are not directly authorised by manufacturers.
Conclusion
In finding that the PPDA acted within its mandate when it issued the circular, the court’s decision positively impacts competition in the public procurement of motor vehicles in Uganda. It will be interesting to see whether an appeal is filed and how the Ministry of Trade, Industry and Cooperatives will impact this corner of the market when it starts to implement the Competition Act.
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Read the original publication at ENSafrica