On 26 May 2022, the Egyptian Competition Authority (ECA) issued a ground-breaking decision on the abuse of a market dominant position by an online food delivery platform. The ECA particularly implicated exclusivity agreements and tying business practices. The decision indicates the ECA’s increased focus on anti-competitive practices in Egypt.
The Decision of the Egyptian Competition Authority
In a decision publicised on the 26th of May 2022, the ECA prohibited the use of certain contract clauses used by the operator of an online food delivery platform (Operator). The ECA was established in 2005 by the Competition Law No. 3 of 2005 (Competition Law) and is inter alia empowered to prohibit the use of anti-competitive contractual clauses imposed by market-dominant enterprises and to declare such clauses null and void (Articles 4 and 8 of the Competition Law).
Previously, the ECA rarely exerted the respective powers under the Competition Law. The present decision thus testifies to an increased determination to combat anti-competitive practices and to protect consumers.
The ECA held that the Operator was prohibited from using any of the following contractual clauses in agreements with its partner restaurants:
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- An exclusivity clause to prohibit a restaurant from partnering with other online food delivery platforms;
- Requiring a partner restaurant to also enlist on the Operator’s online platform for an additional fee (i.e., tying the use of the delivery service to the purchase of further services); and
- Requesting an alignment of prices offered on the Operator’s online platform with a restaurant’s own offering.
Reportedly, the ECA ordered the Operator to cease its use of the abovementioned contractual clauses. The Operator, in response, initiated a reconciliation which is ongoing.
The Abuse of a Market Dominant Position under the Egyptian Competition Law
The Competition Law generally prohibits anti-competitive practices. As commonly seen in international legislation, the Competition Law differentiates between horizontal and vertical constraints of competition. In addition, the scrutiny is stricter if an enterprise is considered to have a “dominant position” in a particular market.
Pursuant to Article 4 of the Competition Law and Article 7 of the Executive Regulation No. 1316 of 2005, an enterprise is considered to have a dominant position if it has a market share exceeding 25%, thus allowing a possibility for the enterprise to influence prices and/or the volume of supply in the market without facing effective competition.
Regarding the abovementioned Operator’s case, the ECA applied the following three rules from Article 8 of the Competition Law:
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- Article 8 (a) which prohibits any clause that has the effect of restricting the manufacturing, production, or distribution of a product;
- Article 8 (d) which prohibits tying of business clauses; and
- Article 8 (i) which prohibits exclusivity clauses.
Outlook
With this decision, the ECA has established a new precedent regarding vertical constraints of competition in Egypt. The respective principles will also be relevant for other vertical relationships, such as dealer or franchise agreements.
If you would like more information about this topic then please contact us.
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