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ISSN No:-2456-2165
Abstract:- This study evaluates the influence of state aid state subsidies, under the East African Community
granted to providers of services of general interest. It Competition Act1and has in place the Competition Act and
looks at how state aid affects competition in Tanzania. sector legislation to regulate the provision of public services
The study employed a descriptive design. Simple random in transport, energy and utilities, communications and air
sampling and purposive sampling were used to obtain transportation;2There still exist imperfect competition.
data from respondents. A self-administered questionnaire
and interview were used to collect primary data. Data Studies that have been carried out in Tanzania and
was analysed using descriptive and narrative approaches. elsewhere have concentrated on effects of dominance in the
market. Only a few studies have been carried out to evaluate
Findings of this study revealed that state aid gives the effect of state aid in competition. Sector regulated
economic advantages to specific firms, discourage industries rely on State subsidies and are often characterized
investment and may create dominance leading to by lack of competition in production or supply of services
distortion of domestic and interstate competition between and have ability to raise prices. 3 The problem which this
firms. This being the case state aid is normally study investigates is whether or not State subsidies rendered
prohibited. However, it has been further observed that to providers of Services of General Interest affect
state aid is necessary to serve particular marginalised competition in the market.
community, address market failure and that it is only
prohibited under community competition laws if it does Background to the Problem
not constitute compensation. In addition, the study State authorities have been mandated to subsidize
further discovered that the East African Competition Act, provision of essential services necessary for the entire
2006, which came into force in 2014, regulates state population to access. Such services, popularly known as
subsidies whose economic consequences affect other services of general interest, cannot be supplied by the market
member states irrespective of whether all member states at affordable conditions without public intervention to offset
have enacted comprehensive competition laws and the additional cost. State intervention in terms of aid or
established institutions to that effect. It is the economic subsidies, as it is known in the competition legislation of
effect of state subsidies that affect interstate market. Tanzania,4 may distort the market if not properly regulated.
State aid regulation ensures that access to public services is
It has been recommended that states should only aid compatible to avoid distortion of competition in trade and
undertakings on services of general interest to the extent commerce.
that does not affect other firms operating in the same
market for profit making; also should assist the small and Services of General Interest (SGI) are services that
medium-sized enterprises according to the law. There public authorities classify as being of general interest and,
should be established state aid rules to regulate aid therefore, subject to specific public service obligations.5The
awards to undertaking for avoidance of overreliance on
rules established on other jurisdiction.
1
Part V of the East African Community Competition Act,
I. INTRODUCTION 2006.
2
RingoW.Tenga, Op.cit.
Tanzania like other nations is obliged to ensure the 3
United Nations Conference on Trade and Development:
availability of services of general interest to its citizens as Model Law on Competition (2010)- Chapter VII.
basic needs for an immaculate and secure living. These 4
Section 3 of the Fair Competition Act, 2003.
services depend on public State aid which finances the 5
Communication from the Commission to the European
operations of service providers. Such services would Parliament, The Council, The European Economic and
otherwise be inaccessible in the market without public Social Committee and The Committee of the Regions, “A
intervention. This has called for regulation of provision of Quality Framework for Services of General Interest in
such services to promote competition. Although the Europe”20.12.2011COM(2011) 900 final. Also Available
government of Tanzania regulates state aid, in the form of at:https://ec.europa.eu/info/topics/single-market/services-
12
general-interest_en, Accessed on 5th January, 2018, at EU Modernization of the State Aid Rules, COM (2012)
11:06 hrs. 209, issued on 8th May, 2012.
6 13
Ibid. The East African Community Competition Act, 2006.
7 14
https://ec.europa.eu/info/topics/single-market/services- Section 16 and 17 of the East African Community
general-interest_en, Accessed on 5th January, 2018, at Competition Act, 2006.
15
11:06 hrs. The Fair Competition Act, No.8 of 2003.Which replaced
8
Claus-Dieter Ehlermann and Martin Goyette, “The the Fair Trade Practices Act of 1994.
16
Interface between EU State Aid Control and the WTO The Surface and Marine Transport Authority Act, 2001
Disciplines on Subsidies”, EU state aid versus WTO [Cap. 413]
disciplines on subsidies ‒ estal 4|2006, p. 695; Available 17
The Energy & Water Utilities Regulatory Authority, 2001
at [Act No. 11 of 2001].
18
https://www.wilmerhale.com/uploadedFiles/WilmerHale_ The Tanzania Communications Regulatory Authority Act,
Shared_Content/Files/Editorial/Publication/Ehlermann_G 2003 [Act No. 12 of 2003].
oyette.pdf, Accessed on 3rd March, 2018, at 16:00 hrs. 19
The Tanzania Civil Aviation Authority Act, 2003 [Act No.
9
Art. 16 General Agreement on Tariffs and Trade[1947]. 10 of 2003].
10 20
Treaty of Paris of 1951. RingoW.Tenga, Consumer Protection Model and the
11
The Treaty on the Functioning of European Union in Tanzania Legal Compliance Framework-With some
2007, formally article 87-89 of the Treaty establishing the Reference to the Communication Sector, Tanzania
European Community. Revenue Authority Workshop, June, 2009, p.2.
III. STATE AID DESTORT COMPETITION The measure (aid) be granted by a member state or
through state resources(State funding)
It has been found that state aid granted to providers of It has been observed that the East African Fair
services of general interest may distort competition if the Competition Act of 2006 only prohibits subsidies that distort
following criteria of state aid elaborated in Belgium v. competition. However no established rules regulating the
Commission48exist. The criteria, based on the prohibition as assessment of state funding as regulated in other jurisdiction
per Article10749and section 1650 are shown below. have been put in place. Under the European Union rules
prohibit state resources in whatever form, whether financial
A. Assistance Granted must Constitute Aid or not. The Tanzania Fair Competition Act, like the EAC
It has been observed under case law that assistance may Competition Act, does not stipulate clear criteria for abuse of
distort competition if it is a state aid. For a measure to dominance for that case we rely on rules established in other
constitute state aid the following matters, as elaborated in the jurisdiction as it was stated in Tanzania Breweries Limited v.
case of Belgium v. Commission51 must exist. Serengeti Breweries Limited and Fair Competition
Commission 52 with regard to decision from other
jurisdiction, UK, EU and India there would be no hesitation
to their application.”
There is a dearth of state aid rules to most sector C. Distort or Threaten to Distort Competition
regulated undertaking in Tanzania apart few regulated Courts have held that irrespective of the degree of
utilities such as the Energy and Water Utilities Regulatory competition in the community state aid distorts
Authority Act.59 Some sector like Airline industries have no competition. 61 According to the current EACCA Deputy
guiding rules on subsidies which leads to monopoly. State aid registrar, in April this year the authority was set to conduct
rules are necessary to create a fair and competitive market market inquiries to particular industries suspected of
field. engaging in price fixing.62The EACCA has to establish EAC
state aid rules just as required in other jurisdiction. Any
undertaking regardless of whether it receives assistance from
the state or not, will be held liable if its economic
consequence reach beyond the domestic boarder.
54
Tanzania Broadcasting Corporation. However, under the de minimis aid, normally the
55
Ntully Huggins v. MIC Tanzania Limited and Tanzania subsidy does not distort competition and the threshold does
Communication Regulatory Authority.Tribunal App. not require notification. Some member states adopt the use of
No.3 of 2012. Block Exemption Regulations to ensure aid grants are clear
56
Fair Competition Act of 2003.
57
The Energy Subsidies Policy, Revised Draft, December,
60
2013, p.1. The East African Community Competition Authority
58
Neale, A.D., The antitrust Laws of the United States, A [EACCA].
61
study of Competition Enforced by Law, Cambridge, Case 730/79 Philip Morris Holland BV v. Commission
Cambridge University Press, 1966. [1980] ECR 2671; [1981] 2CMLR 321.
59 62
The Energy and Water Utilities Regulatory Authority Act, https://africanantitrust.com/category/eac/ Accessed on
Cap 414 [R.E 2002]. 12th June, 2018 at 9:40 hrs.