AN INTRODUCTION TO COMPETITION LAW AND POLICY: AN ANALYSIS OF THE FEDERAL COMPETITION AND CONSUMER PROTECTION BILL 2015.

AN INTRODUCTION TO COMPETITION LAW AND POLICY: AN ANALYSIS ON THE FEDERAL COMPETITION AND CONSUMER PROTECTION BILL. 2015. PROTECTING THE CONSUMER AND ENLARGING THE MARKET.[1]

                                    ‘YORI EHIMONY JR.

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 to Section 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 Act will 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.