In Market
economies, there is inherent danger that market players may distort or even
eliminate competition in order to maximize profits, or in order to acquire and
abuse their market power. This has demanded legislative and policy intervention
and for many countries, such intervention has taken the form of competition law
and policy. In its simplest form, competition law and policy aims at playing
the role of an umpire in what may conveniently be regarded as a market jungle,
where financial might is right and profits can be made by unscrupulous
manufacturers, often at the consumers chagrin.
It therefore
follows that if left unchecked, financially buoyant corporations will muscle
out the financial less fortunate firms, create entry barriers, and reduce innovation,
quality, efficiency and output in the market. This has an overwhelming effect
in the production and distribution channels in the society. Consumers are
forced to pay so much for so little as they are manipulated by the greed of
entrepreneurs and lack of a functional competitive market.
To allay the
consternation of consumers and to protect the market, many countries around the
world have enacted competition laws and designed pro-competitive policies to
meet the many needs of the society at large, as the effect of an
anticompetitive regime has larger ramifications on the society. For instance,
industries will fail to compete in the market, consequently, they will not need
to employ labour as there is no need for expansion in a ‘one way’ market industry,
and they may even be tempted to lay off personnel; these increases
unemployment, inefficiency and by extension, crime rate.
It therefore
becomes imperative for the law to create a benchmark of acceptable trade
practice. This is done by the creation of rules to regulate their business
activities in such a manner that they conform to fair and equal standards of
trade. These rules are known as Competition Laws or Antitrust.
Competition law
is a set of rules, disciplines and judicial decisions maintained by governments
relating either to agreements between firms that restrict competition or to the
concentration or abuse of market power on the part of private firms.[2] These
laws prohibit the misuse of market powers by firms and businesses. For
instance, preventing undertakings which are dominant in their markets from
overcharging their customers or imposing unfair trading terms and conditions
upon them.[3]
Competition law
authorizes and regulates government intervention against anticompetitive
behavior, such as price fixing and price rigging, and the concentration of
economic power. When the law succeeds in safeguarding or increasing marketing
competition, such that both buyers and sellers are generally price-takers, it
brings widely economic benefits, boosting economic efficiency, growth and
innovation and thus, both consumer and aggregate welfare.[4]
In a similar
vein, Bob Lane defines competition as “the struggle by firms to achieve
superiority over other firms in the market place” and further defines competition
law as “the rules limiting the freedom by which they may do so”.[5]
The lack of
Competition legislation in Nigeria has been described as the reason why
producers of utilities do not feel obligated to answer the queries of the
consumers. There are sectorial regulations in some industries but this only
raise the question of how enforceable are these regulations and do they really
live up to their billing and hype? This has prompted the Government to send a
proposed bill to the national assembly to pass same and create some balance and
accountability in these sectors. Another role to be played by a competition
regulation is to eliminate entry barriers in certain businesses and encourage
new players in the market: such entry will naturally create competition and the
consumer will undoubtedly be the king of the market.
The Bill is an
Act which aims at repealing the Consumer Protection Act, CAP C25, LFN, 2004;
Establish the Federal Competition and Consumer Protection Tribunal for the
development and promotion of Fair, efficient and Competitive Markets in the
Nigerian economy, facilitate access by all citizens to safe products, secure
the protection of rights for all consumers in Nigeria and for other related
matters.[6]
The objectives of
the proposed Act are to promote and maintain competitive markets in the
Nigerian economy,[7] promote economic efficiency,[8] protect and
promote the interest and welfare of consumers by providing consumers with
competitive prices and product choices. The bill further seeks to prohibit
restrictive business practices which prevents, restricts or distorts
competition or constitutes an abuse of a dominant position of market power in
Nigeria; and contribute to the sustainable development of the Nigerian economy.
The Act is applicable to all undertakings and all commercial activities within,
or having effect within Nigeria.[9]
Establishment of the Federal
Competition and Consumer Protection Commission;
The Act
establishes the Federal Competition and Consumer Protection Commission (“the commission”)
for the purpose of carrying out the functions, duties and responsibilities as
conferred upon it by virtue of the provisions of the Act.[10] The Bill
provides that the commission shall be independent in the performance of its
functions, duties, powers and responsibilities so conferred on it. In a bid to
ensure fairness and sincerity in purpose, the Bill directs that any member of
the commission who has a personal interest in any contract or arrangement or
matter to be considered by the commission or of a committee shall forthwith
disclose such interest to the commission or committee and shall not vote on any
question relating to the contract, arrangement or matter. This is in an
initiative to forestall a case where a member of a committee has a conflict of
interest and might be minded to manipulate the system to favor such interest.
This provision seeks to ensure objectivity among the members of the commission.
Also, the Act
provides for the establishment of a Competition and Consumer Protection Tribunal.[11] The
Tribunal is expected to adjudicate over every conduct prohibited under the Act.
The tribunal shall hear appeals from or review any decision from the exercise
of the powers of any sector specific regulatory authority in a regulated
industry in respect of competition and consumer protection matters; issue such
orders as may be required of it under the Act; and make any ruling or such
other orders as may be necessary or incidental to the performance of its
functions under the Act.[12]
RESTRICTIVE AGREEMENTS;
The 2015 Bill
provides that “Any agreement among undertakings, or the decision of an
association of undertakings that has the purpose of actual or likely effect of
preventing, restricting or distorting competition in any market shall be unlawful
and, subject toSection 61 of this Act, void and of no legal effect
whatsoever”.[13] This is a strong stand against any form of restrictive
trade practice among associations, cartels or any commercial unit.
For avoidance of
doubt, the bill lists out the particular acts to be prohibited by the proposed
Act. They include;
a; Directly or
indirectly fixing a purchase or selling price of goods or services, this is
subject to Section 108 of the Act.
b; dividing
markets by allocating customers, suppliers, territories or specific types of
goods and services.
c; limiting or
controlling the production or distribution of any goods or services, markets,
technical development or investments, subject to Section 109 of the Act.
d; engaging in
collusive tendering, subject to Section 110 of the Act.
e; making the
conclusion of an agreement subject to acceptance by the other parties of
supplementary obligations which by their very nature or according to commercial
usage, have no connection with the subject of such agreement.
The prohibited
acts which contravene certain Sections of the bill have been itemized for
avoidance of doubt by commercial undertakings which have formed the habit of
often using ignorance of the law and the absence of an active antitrust
legislation to breach competitive lines.
In a related
breath, Section 64 prohibits any term or agreement for the sale of any good or
services, if the purport of such term or agreement is to establish or provide
for the establishment of minimum prices to be charged on the resale of the
goods or services in Nigeria. In other words, this Section proscribes
minimum resale price maintenance in the market. It has been identified as a
major trade restrain among experts in antitrust and a major setback in market
competition. Interestingly, the Bill creates a new form of restrictive trade
practice prohibition, where it prohibits the unlawful withholding of products
from a dealer by a supplier.[14] For the purpose of the Act, an
undertaking will be treated as withholding goods or services from a dealer if
the undertaking refuses to supply those goods or services to the order of the
dealer,[15] the undertaking refuses to supply the goods or services to the
dealer except at prices or on terms or conditions as to credit, discount or other
matters which are significantly less favorable than those at or on which the
undertaking normally supplies those goods or services to other dealers carrying
on business in similar circumstances;[16]
ABUSE OF DOMINANT POSITION[17]
The 2015 Bill
goes further to give an elaborate description on instances where a corporation
may be designated as a dominant firm in the market. It provides that, for the
purpose of the Act, a corporation will be considered to be in a dominant
position if it is able to act without taking account of the reaction of
its customers, consumers and competitors.[18] This definition
puts into consideration in defining a dominant firm, the effect the act of a
large firm might have, not only to its competitors, but also on the consumers and
the competitors. Much has been said on the subject in the last chapter, the
argument was made that there is nothing fundamentally wrong with a firm being a
dominant firm in the market. Its status might have been achieved by dedication
to purpose, hard work, investment and goodwill; hence a large corporation
should not be punished for excelling in the market environment. It has quickly
been added, that a large firm, in making decisions and carrying out its
business acts must be extremely considerate and cautious on the effect (usually
adverse) such acts or decisions might have on the consumers, customers or the
competitors in the same market and within the same geographical location.[19] As
a punitive and prohibitive step, the bill provides in Section 74 (3) that
any undertaking that abuses its dominant position in the market commits an
offence under the proposed Act and on conviction be liable to a fine of not
less than ten (10) per cent of its turnover in the preceding business
year or such higher percentage as the court may determine under the
circumstances of the particular case.
MONOPOLY[20]
Where it appears
to the commission that there are convincing grounds for believing that a
monopoly situation may exist in relation to the production or distribution of
goods and services of any description or in relation to the export of any goods
and services of any description in Nigeria, it shall cause an investigation to
be held into a particular type of agreement across various sectors to determine
the extent of the situation in relation to the market. The Bill identifies a
situation of monopoly to exist in relation to;
1.
the supply of goods of any description’
2.
the supply of services of any description,; or
3.
the exports of goods of any description from
Nigeria, to the extent that it has an effect on competition in a market in
Nigeria.[21]
MERGERS[22]
For the purpose
of the proposed Act, a merger occurs 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.[23] This control may be
achieved by way of the purchase or the lease of the shares, an interest or
assets of the other undertaking in question, the amalgamation or the
combination with the other undertaking in question, the amalgamation or
combination of the other undertaking in question.[24] It could also be by
way of a joint venture.[25] It is further explained that an undertaking
has control over the business of another undertaking if it beneficially owns
more than one half of the issued share capital or assets of the undertaking; is
entitled to cast a majority of votes that may be cast at the general meeting of
the undertaking or has the ability to control the voting of a majority of those
votes, either directly or indirectly; is able to appoint or to veto the appointment
of the directors of the undertaking. Subject to the notification of threshold
to be determined from time to time as set out in Part XII, a proposed merger
shall not be implemented unless it has first been notified to and approved by
the commission.
Section 95 of the proposed Act provides that when considering a merger or a proposed
merger, the commission shall determine whether or not the merger is likely to
substantially prevent or lessen competition. This shall be done by assessing
the strength of competition in the relevant market and the probability that the
undertakings in the market, after the merger, will behave competitively or
co-operatively, taking into account, any factor that may be relevant to
competition in that market, including, the ease of entry in the market, the
level and trends of collusion, the level of countervailing power in the market,
among other considerations.[26]
CONCLUSION
On the whole, the
bill looks promising and all-encompassing, it touches on both competition regulations
as well as consumer protection, and the danger however remains in the
management of the commission if by chance the bill is passed into law. The
commission will need to be manned by professionals who are knowledgeable in
antitrust laws, economics, intellectual property and representatives of the
various sectors of production. It is essential that all necessary bodies are
carried along for a productive dispensation of competition policy in
Nigeria.
That competition
law and policy has continued to enjoy a remarkable growth rate across the world
in recent times need no lengthy discussion. Its advantages have been seen to
cut across economic efficiency, consumer choice boost and protection, removal
of entry and exit barriers, protection of small and intermediate firms in the
market, improvement of the foreign direct investments (FDI) of countries, while
boosting the chances of local firms to compete internationally. This work has
therefore argued that, left unchecked, the untoward and unregulated trade
practices will continually relegate Nigerian markets to the background and have
extremely adverse effects towards the economic and trade development and growth
in the country.
RECOMMENDATIONS
The first step to
take is to harmonize all pending Bills before the National Assembly, remove
offensive sections contained in the Bills[27] and create independent
enforcement institutions. The Bills were products of legal transplants which
did not necessary take the peculiarities of Nigeria trade and market system into
consideration.
Competition
policy and law offers developing nations an added tool to manage their affairs.
The challenge then is to design a competition policy that fits local realities
and meets local needs. This is an aspect that often deludes the attention of
many enthusiastic proponents of competition law and policy.
Evidently a “one
size fits all” approach is practically inappropriate in developing competition
policy and law. It is essential to create a distinction between countries at
low levels of development and hence meager institutional capacity on one hand,
and semi-industrialized countries with greater institutional capacity on the
other hand.
Second, for
competition law and policy to make any meaningful success in Nigeria, allied
policies such as privatization, liberalization and commercialization have to be
placed on the front burner. Their functional existence shall ease up the market
system and usher in competition law and policy. Otherwise it would only make a
mockery of the process.
Third, any
eventual competition law and policy must be wary of falling into the temptation
of inundating itself with too many competition goals and objective. Much has
been said about the lack of infrastructural capacity and structural facilities
in the country, thus, blindly transplanting the U.S. Antitrust in its entirety
or the U.K. Competition Actwill be delirious and quite wasteful.
The E.U. Competition law is recommended to the extent that it advocates for
opening up of markets. For a country like Nigeria, operating Cartel is not so
significant and may not necessarily be an objective of the competition law, in
its stead, emphasis may be laid on the extermination of monopoly, opening up
the cement industry for example, focusing on merger activities, and abuse of
dominance in significant public services such as power, agriculture, shelter,
flood, water and other sectors.
Fourth,
Government’s fettering of competition process must be cautioned by law. Due to
vested interest in the markets, and owing to the outrageous level of greed and
corruption in developing countries, governments seem to protect the producers,
(from where their campaign funds emanate from) instead of the consumers. A
major reason why competition regimes have not seen the light of day in Nigeria
is because the government lacks genuine incentives to create a competitive
environment. Most political office holders, legislative members and other
public office holders have vested interests in the thriving monopolies ranging
from the power sector to the various production industries, water supply and
importation activities. The Federal government needs to provide overall
direction for the development competition in Nigeria. This may include
employing capable personnel in the implementation process.
Fifth, there is
need to intensify on competition law and policy advocacy in the polity about
the benefits inherent in the regime. The markets are perishing due to lack of
knowledge of this importation subject. Even worse is the fact that the
legislature, which is on the front seat to bring to life this budding Bill,
lacks any appreciable knowledge of competition law and policy. It was reported
that one of the reasons why the Federal Competition Bill was not sent for the
second reading was because the National Assembly were of the opinion that the
country already had a consumer protection agency. It is therefore recommended
that a crash course seminar be provided for the public to sensitize them on the
imperatives and benefits of this global trend.
The fact that
competition policy should contribute towards economic development is more or
less an agreed concept, it is largely the barriers to competition that exist
that are sources of apprehension. There is need therefore, for competition
culture to prevail in the whole economy to remove distortions. This should
start at the helm of administration before it can cascade to the consumer.
Political will
turns out to be one of the key factors that determine the success of
implementation of competition policy and laws. If competition law and policy is
to yield all the envisaged benefits, political will and consensus for reform is
a necessary condition.
[1] The
Federal Competition and Consumer Protection Bill 2015 SB 544
(Executive Bill)
[2] Dimgba.
N. 2008. The Needs and Challenges to the Establishment of a Competition
Law Regime in Nigeria. Ibid. P.4.
[3] Green,
N., Hartley, T.C., Usher, J.A. 1991 Single European Market. Oxford
University Press, New York. P.207. the authors further defined competition laws
as that (which) prohibit undertakings from getting together to fix the prices
they will charge their customers.
[4] Buthe,
T.,2014 The politics of Market Competition: Trade and Antitrust in a
Global Economy. Ed. by Martin, L. Oxford handbook of the Politics of
International Trade. Gellorn, Kovacic and Calkins are other authors who have
been persuaded to view the roles and effects of Competition law from the same
perspective. See their book:Antitrust Law and Economy in a Nutshell. 2004. 5th
ed. St. Paul, MN: West Publishing.
[5] Lane, B.
2000. EC Competition Law. Longman, Harlowe et al, P. 6
[6] See the
preamble of the Bill.
[7] Section
1 (a)
[8] Section
1 (b)
[9] Section
1 (c) & (d)
[10] Section
3 (1)
[11] See Section
39 of the Bill.
[12] Section
48
[13] Section
60, Part viii
[14] See Section
67
[15] Section
67 (1)[a]
[16] Section
67 (1)[b]
[17] Part
IX Section 71
[18] Ibid
[19] Section
73 (1) of the proposed Act list the considerations necessary in decided the
dominance of a firm.
[20] Part
X, Section 77
[21] Section
78
[22] Part
Xii, Section 93
[23] Section
93 (1) [a]
[24] Ibid,
[b]
[25] Ibid
(b)[iii]
[26] See
generally, Section 95.
[27] These
provisions include:
1.
Empowering the Ministers of Justice and Trade
unregulated powers to interfere with the activities of the Commission’
2.
‘Tying’ the funds of the enforcement institutions to
the governments account. This shows insecurity of purpose,
3.
Fusing the goals of the Laws together, without any
direction as to the objectives of the Laws.
Yori Ehimony Junior
Law Attorney & Antitrust Advisory
Photo Credit – law.ucl.ac.uk
