Featured, Regulatory Alerts

Competition Law and Policy In Nigeria: An Overview of The Federal Competition and Consumer Protection Bill, 2016

Introduction

The Federal Competition and Consumer Protection Bill (“The Bill”), although christened differently at birth, has attracted as much attention as the Petroleum Industry Bill for over one decade. Despite the fuss, there is yet to be any set of codified rules prohibiting anti-competitive behaviours in the Nigerian market. The glimmer of hope promised by the passage of The Federal Competition and Consumer Protection bill by the National Assembly in December, 2017 has been swiftly extinguished by the numerous oppositions the bill has suffered from stakeholders including in particular the Nigeria Employers’ Consultative Association (NECA) which boldly accuses the National Assembly of fraudulently inserting a 0.5% tax bill which was neither in the draft bill nor discussed during public hearing. The bill was purposed to repeal the Consumer Protection Act and establish The Federal Competition and Protection Commission (“Competition Commission”) and the Competition and Consumer Protection Tribunal (“The Tribunal”) for fair, efficient and competitive markets in the Nigerian economy, facilitate access to safe goods, secure consumer welfare and promote efficiency. With these new developments, the exact date a comprehensive code of competition law will enter into our corpus juris remains an illusion.

What is Competition?

Competition is an evasive term which defies universal definition, and its understanding differs depending on the context of usage. In defining competition and competition law (antitrust), the use of the language of economics is almost inevitable. According to Dale Wayne in his paper, Issues in Competition Law and Policy:

It has become commonplace to use the language of economics in defining antitrust. Courts and scholars articulate economic goals for antitrust policy and use economic methodologies, both theoretical and empirical, in resolution of antitrust issues.[1]

The Supreme Court of India in the celebrated case TELCO v. Registrar of Restrictive Trade Agreements[2] observed that the question of competition cannot be considered in vacuum or in a doctrinaire spirit. The concept of competition is to be understood in a commercial sense. According to the Black’s Law Dictionary, competition is the struggle for commercial advantage; effort or action of two or more commercial interests to obtain same business from the third parties.[3]

The value of competition in any market can be illustrated with the following experience. At the University of Ife, one of the male hostels had only one buttery. Consequently, the sole vendor which enjoyed a monopoly sold its goods at unreasonably high prices with customer poor service. This state of things continued to the frustration of many students until the university decided to introduce two new vendors. The new vendors in order to gain market share sold the same goods at cheaper prices with excellent customer services. The former monopolist immediately rose to the competition, offering goods at even lower prices with a top-notch customer service including a viewing centre for Premier League Matches. Competition reminds the producer who is king. In a perfect market, the consumer, not the producer nor supplier, is king.

It is worthy of mention however that there can be monopoly even within a competitive market. This often takes the form of “abuse of market dominance.” For instance, Google was recently fined a record $5.1 billion by the EU authorities for abusing its power in the mobile phone industry. Google forces handset makers like Samsung, Huawei and HTC to make its Google Search and Chrome browser the default services on their devices before they can access the Android Operating System or gain access to other Google apps.[4] In other words, Google used Android as a vehicle to cement the dominance of its search engine; other search engines like Mozilla Firefox, Internet Explorer will eventually run into the ground if Google, the bully is allowed to continue. It is for the purpose of protecting consumers against companies like Google that competition law exists.

To bring the point home, the removal of NITEL monopoly in Nigeria and introduction of private investors into the telecommunications sector changed the industry radically. While MTN and ECONET started with prohibitive prices for handsets and phone lines, Globacom came into the market and introduced the “per second billing.” Consumers immediately rushed away to Glo for cheaper call rates. Etisalat introduced ridiculous data bonuses yet another strategy to steal the market share, forcing MTN, Airtel and Globacom to reduce their prices and offer more attractive services. Today, as more and more competition continues in the sector and more operators are welcome (possibly reducing the market share of existing operators), the one party that continues to benefit tremendously is the consumer.

In summary, competition puts producers or manufacturers under constant pressure to offer the best possible range of goods and the provisions of services at the best possible prices, because if they do not, consumers have the choice to shift to interchangeable or substitute goods.

What Is Competition Law?

Whereas competition without competition law is dead, competition law without competition is barren. As seen earlier, where bullies exist in a market, the smaller companies’ death is almost assured. Competition law is therefore the law enacted by parliament for regulation of business with the goal of preventing and prohibiting anti-competitive behaviour and unfair business practices.

“Whereas competition without competition law is dead, competition law without competition is barren” – Oluwaseun Ayansola

Competition law is necessitated by the anti-competitive behaviours of companies like Google. In Nigeria and Tanzania, Dangote Cement Plc. also engaged in this type of cut-throat competition, slashing the price of its cement to a ridiculously low amount with the object of running its competitors out of both markets.[5] When it has succeeded in eliminating competition, it will then hike the prices of its cement to the detriment of the consumers. This form of anti-competition is known as predatory pricing. Suppliers like Dangote and Google, on account of various factors, possess the power to manipulate the market. They can do everything in their power to prevent the development of a market that is free from interference.

One may wonder, why do companies engage in anti-competitive practices? The most probable reason will be to retain a fixed percentage of profits, which can only be achieved through restraining or eliminating competition entirely.[6]

There are three areas of enforcement that are provided for in most competition laws are: (i) anti-competitive agreements (ii) abuse of dominance, and (iii) mergers which have potential for anti-competitive effect. It should be noted that competition law exists to protect consumers. Where it appears to protect other producers, it does so ultimately for the benefit of the consumer.

Competition Law in Nigeria

The absence of a comprehensive competition law does not augur well for our emerging economy driven primarily by the private sector.[7] Nnamdi Dimgba (now Honourable Justice Dimgba) in his paper, “Is there a Need for Competition Law in the Interest of Nigerian Consumers?” made a case for competition law as sine qua non to economic reforms/liberalization. According to him, the legal gap exploited in key product markets such as cement, petroleum products (refineries privatisation saga), pay-television, telecommunications, aviation and others (bread, sachet water, sugar, fertilisers etc.) can only be filled by a comprehensive competition law.

It is worthy of note however that although there is no comprehensive competition law, there are some existing laws in Nigeria that contain specific Antitrust or Competition provisions with a view to protecting consumers within those specific sectors. These legislations include: the Electric Power Sector Reform Act, 2005,[8] the Civil Aviation Act, 2006,[9] the Investment and Securities Act, 2007[10], the National Broadcasting Commission Act, 1999,[11] the Price Control Act, Nigerian Communications Act, 2003[12] among others. Of the foregoing, the most important and pervasive competition specific regulator in Nigeria is the Securities and Exchange Commission. The SEC is established under the Investment and Securities Act 2007 to regulate the securities market. Part XII (Sections 117-151) in particular, provides the rules guiding mergers, acquisitions and take-overs, and strictly curtails adjustments which might substantially prevent or lessen competition in the relevant market.

The Federal Competition and Consumer Protection Bill when it becomes law will become the first codified comprehensive law on competition law and policy in Nigeria. The first draft of our competition bill was done by the ECU Associates in March, 2003 following the El-Rufai Declaration of December, 2002.[13] The draft was a pretty good document but for the merger provisions. This draft was followed by the Federal Ministry of Justice’s draft bill under the regime of Chief Bayo Ojo in early 2005. The draft bill was variously criticised for its overbearing political control and anachronistic merger provisions. Following the adoption of the draft bill buy the FEC on 24 August, 2005 and its subsequent rejection by the Senate in September 2006, the bill was tabled for a redraft by Dr Dimgba’s team and BPE. The redraft gave birth to the Federal Competition and Consumer Protection Bill and the National Competition and Consumer Protection Policy.

Overview of the Bill                

The bill applies to all businesses and all commercial activities within, or having effect within Nigeria and extends to undertakings in which the Federal, State or Local Government or any of their agencies have a controlling stake.

Section 3 of the Bill establishes a Federal Competition and Consumer Protection Commission (“the Commission”) to administer the Act. Section 3(2) of the Bill provides that the Commission shall be independent in the exercise of its functions, powers, duties and responsibilities as conferred upon it under the provisions of this Act. This feature of independence must be made sacrosanct and reiterated at ever chance by Commission. The government must ensure to equally desist from indiscriminate intervention with the commission.

The Bill in Section 39 establishes The Competition and Consumer Protection Tribunal (“The Tribunal”) to handle issues and disputes arising from the operations of the Act. Pursuant to Section 40 of the Bill, the Tribunal shall consist of a Chairman who shall be a legal practitioner with ten years post call and cognate experience in the field of competition, consumer protection and commercial and industrial law and six other members with not less than twelve years professional experience in no other fields except those listed in the Act. Both the Chairman and other members of the Tribunal shall be appointed by the President on the recommendation of the Minister subject to confirmation by the Senate.

The Bill prohibits agreements made to restrain competition such as agreements for price fixing, price rigging, collusive tendering etc. (with specific exemptions for collective bargaining agreements, employments, etc.) The Bill repeals the provisions of the Investment and Securities Act relating to mergers (effectively stripping the Securities and Exchanging Commission of its power to approve mergers) and places the responsibility of approving merger transactions on the Competition Commission.

If also passed into Law, the Competition Commission would be entitled to receive a percentage of all the fees chargeable by other regulators for license applications, processing and issuance. The Bill empowers Nigeria’s President to regulate the prices of certain goods and services on the recommendation of the Competition Commission.

The Bill prescribes very stringent fines for non-compliance. A general fine imposed by this Bill for offences committed by companies is an amount up to 10% of the Company’s annual turnover in the preceding business year. There are also indications that the updated version of the Bill imposes a tax of 0.5% of after-tax profits on all companies in Nigeria payable to the Competition Commission.

Setback

The 0.5% tax provision has been met with serious opposition from stakeholders particularly Nigeria Employers’ Consultative Association (NECA) which accused the National Assembly of surreptitiously inserting 0.5% tax on companies to fund the established of the Competition Commission.[14] According to NECA, the 0.5% tax on private companies was neither in the draft bill nor discussed during the public hearing on the bill. NECA poignantly maintains that not only is the act fraudulent it is also quite unfortunate. It has therefore urged the president to withhold assent on the bill. If their allegation is true, one cannot but question the motive of the National Assembly. The bold position of this paper is that such act of the National Assembly is tantamount to a legislative conspiracy to masterminded to frustrate the passage of the bill into law.

Conclusion

Initially, the delay in the passing of this bill, and its predecessors, was attributed to an insufficient understanding of the nature and essence of the subject by our political leaders. I beg to differ. The value of competition is a simple dictate of common sense. Therefore, if it is not the case that our political leaders lack the sufficient understanding of the nature and essence of competition law, then we must deliberately direct our minds to the fact that some of these political leaders who invariably form part of the business ruling class are benefiting and will continue to benefit from the absence of competition law. For this sole reason and more, our political leaders lack the motivation to expedite the passage of a bill which may adversely effect their interest in these businesses. As a matter of fact, the government has been accused in the past of encouraging unfair market competition by offering tariff waivers and tax relieves to a select few, e.g. the alleged abuse of import waivers and tax concessions on rice importation between 2000 and 2007. It is safe to say therefore that the delay in passing this Bill is a legislative conspiracy. To change the tides, ordinary consumers for whose benefit competition law exists must take to the streets, engage and demand the passage of this Bill into law. Barrack Obama captures it aptly, “if the People cannot trust their government to do the job for which it exists – to protect them and to promote their common welfare – all else is lost.”

[1] Dale Collins Wayne, ‘Issues in Competition Law and Policy’ (2008) 1 ABA Section of Antitrust Law 1

[2] (1977)2 SCC 55.

[3] Black’s Law Dictionary, Ninth Edition, 2004, pg. 322, 323

[4] https://www.nytimes.com/2018/07/18/technology/google-eu-android-fine.html (last accessed September 7, 2018)

[5] http://dailypost.ng/2015/09/10/manufacturers-brace-up-for-stiff-competition-after-dangote-cuts-cement-price/ (last accessed September 7, 2018)

[6] Pratima Singh, ‘Dissertation on Anti-Competitive Agreements Underlying Concepts & Principles under the Competition Act, 2002.’ (NLUJ Law Review)

[7] Dr Nnamdi Dimgba, Is there a Need for Competition Law in the Interest of Nigerian Consumers? (2014) G.O Sodipo Memorial Lecture

[8] Parts II, VI and VII, Sections 26, 80-82

[9] Section 30(4) (i)

[10] Section 121

[11] Section 2(1)

[12] Section 1(e)

[13] Ibid.

[14] https://www.vanguardngr.com/2018/02/ops-rejects-federal-competition-consumer-protection-bill-2016/ (last accessed September 7, 2017)

Previous ArticleNext Article

Leave a Reply

Your email address will not be published. Required fields are marked *

Send this to a friend