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Enforcing competition law for an inclusive AI markets power
As Kenya journeys toward a competitive innovation-driven economy, regulatory frameworks must move in tandem to curb data-driven market abuse, while not tending to over-regulation.
While delivering the 12th CB Madan Memorial Lecture at the end of last year, Prof Luis Franceschi, founding Dean of Strathmore Law School and assistant secretary general of the Commonwealth, made a statement that I continue to mull over.
He said: “It is no longer the answer, but the question. In the past, we judged the student by how they responded to questions. The advent of artificial intelligence (AI) will make us judge by how they ask questions. Knowledge, transformation and innovation must happen in education, government and justice sector.”
Prof Franceschi’s assertion speaks to the new world order, where progress depends on the ability to think and ask the right questions. AI has transformed our reality to one where data and its analysis is, quite literally, at our fingertips.
Of course, one must have the capability to calibrate the information generated to arrive at contextualised conclusions, transformable into effective solutions.
Nowhere else is the impact of the surge in AI more evident than in the business world. This is expected given the nexus between automation and efficiency. Kenyan businesses have embraced AI to streamline their operations, reduce costs and improve productivity.
Local digital lenders use AI-driven credit scoring models while e-commerce platforms apply AI to optimise customer experience. AI-powered chatbots are now a common feature on Kenyan businesses’ websites.
That said, there is a downside to be wary of. For the Kenyan economy, dominated by a vibrant yet vulnerable MSME sector, the rise of AI presents a double-edged opportunity.
While AI-driven analytics increase efficiency, access to such technology remains uneven, reinforcing asymmetric market power in favour of well-resourced firms.
Additionally, AI systems rely on real-time data like customer preferences. Firms collecting and controlling this data, such as large delivery platforms, often become gatekeepers, raising barriers to entry for smaller competitors.
Another risk is posed by AI-powered dynamic pricing, which increases the potential for tacit collusion. Shared algorithms can be deployed by competitors to align prices without direct or easily discernable coordination.
These concerns raise critical questions for competition policy. Competition agencies have adopted different approaches including creating special digital market investigation units, amending existing legislation to address the unique challenges of digital markets and passing dedicated legislation, such as the Digital Markets Act of the European Union.
In Kenya, proposed amendments to the Competition Act Cap 504 seek to introduce the concept of strategic market position, which is better suited to assessment of market power in digital markets.
Whichever option is adopted, effective enforcement requires that agencies ask strategic questions and use the answers to guide enforcement.
In Kenya’s context, I propose we ask ourselves three questions: ‘Given limited resources, where do we start’? I recommend prioritising enforcement in sectors that hold the greatest implications for economic growth.
According to the 2024 Economic Survey, the top five sectors in terms of contribution to Kenya’s GDP are agriculture, forestry and fishing at 19.0 percent, real estate at 10.2 percent, transport at 9.0 percent, finance and insurance at 8.9 percent and wholesale and retail trade at 8.5 percent.
It is no wonder that these same sectors with the highest levels of adoption of digital tools. Surveillance and inquiries should prioritise them to harness the returns of increased competitiveness.
The second question is: ‘How do we ensure that determinations achieve the intended outcome of competitive markets? To address this, regulation needs to be scrupulously data-driven. Modern forensic equipment, such as what the Competition Authority of Kenya recently secured, refines data gathering and analysis for accurate enforcement that does not dampen innovation.
The final question is: ‘How do we keep up with developments in the fluid space of digital technology? The answer is, through collaboration with peer regulators, especially those in jurisdictions with more advanced technology.
The Authority has cultivated a close relationship with agencies on the global scene and actively participates in forums such as the International Competition Network.
Of equal value is engaging market participants in the digital space. Entrepreneurs are pragmatic and only a few are keen on engaging regulators in endless duels. Rather, the experience has been that market players support enforcement strategies that present a win for all.
The challenge in regulating digital technology, AI included, is striking a balance between supporting innovation and competition, while protecting consumers.
As Kenya journeys toward a competitive innovation-driven economy, regulatory frameworks must move in tandem to curb data-driven market abuse, while not tending to over-regulation.
Otherwise, the digital revolution, however efficient, will leave many behind.
The writer is the Manager, the Buyer Power Department, the Competition Authority of Kenya (CAK)
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