OMATSEYIN FREDRICK Esq. LLM (Investment Law and Policy), MSCGN, MCILRM, PMP
After years of going around in a circle in a bid to enact a codified Competition Law for Nigeria, Nigeria finally had a breakthrough with the enactment of the Federal Competition and Consumer Protection Act (FCCPA) by the National Assembly in December 2018 and subsequently signed into law by President Muhammadu Buhari in January 2019. However, before the Act’s enactment, the confusion generated by the multiplicity of Bills reflected the multitude of efforts put into the process by various stakeholders, mainly from the public sector. Therefore, the latest child in the family of Bills in this regard is the Federal Competition and Consumer Protection Bill. This Bill is from the stables of the Bureau of Public Enterprises (BPE), the operative arm of the National Council on Privatisation (NCP).
The BPE started drafting a Competition Bill for Nigeria sometime in 2002, leading to the first version of the Federal Competition Bill sometime in 2003. But for some reason, another Bill emanating from the office of the Attorney General and Minister of Justice gained the favour of the Federal Executive Council and was presented to the National Assembly in 2006. This Bill suffered ‘legislative hostility’- it was thrown out by the Senate on its first reading. One of the reasons cited for the rejection of the Bill is that the Senators felt that there were already too many Commissions in the country. It was reported that some of the Senators queried establishing a Competition Commission when there is already the Consumer Protection Council in Nigeria. This betrayed many stakeholders’ lack of proper appreciation of the subject matter¹.
Competition law is a legal framework to promote or maintain market competition by regulating anti-competitive conduct by companies. It is otherwise known as anti-trust law and anti-monopoly law in other jurisdictions. Competition law aims to ensure a deep supply market for consumer goods and services, not just to ensure that there are many suppliers in the market for particular goods and services but to ensure that such suppliers play according to a set of rules that would make it difficult for any of them, individually or as a group, to lessen or eliminate competition in the market. Competition policy addresses the structures and conducts of firms in the marketplace to ensure that resources are efficiently allocated in such a manner as to achieve optimum utilisation of resources in the economy, which in turn results in the best possible price for the consumer².
On July 5th, 2013, the European Union fined Microsoft $732 million for failing to respect an anti-trust settlement with regulators. The company was accused of failing to include the ballot system in certain products starting in May 2011, affecting more than 15 million European users. The lapse came to light after rival companies reported its absence. Something similar happened on August 1st, 2007, when British Airways was fined £270 million in a dual action by the United Kingdom and United State Competition authorities after admitting price fixing on fuel surcharges on its long-haul flights. The US Department of Justice imposed a penalty of $300 million (£148 million) on the group after a £121.5 million fine was levied on the airline by the Office of Fair Trading (OFT). At the time, the OFT fine was the biggest-ever penalty imposed on a company for Competition law infringements. The airline had admitted that, between August 2004 and January 2006, it colluded with Virgin Atlantic over the surcharges added to ticket prices in response to rising oil prices. During that period, the extra charges soared from £5 to £60 a ticket on long-haul return flights. That opened the way for passengers who believed BA had ripped them off to launch civil claims against the airline. While the American and British authorities were able to get BA and Virgin Atlantic to pay for their wrongdoing, Nigeria failed to do so. Why? Relying on the American example, the Nigerian authorities had imposed a fine of £280 million on BA and Virgin Atlantic for the same offence. However, the two firms refused to pay the fine, stating they had not breached Nigerian laws. The firms successfully argued their case and got away with murder because there was no anti-competition law in Nigeria at the time³ until most recently.
Before the turn of the millennium, the absence of a specific legal framework could be justified by the hitherto status of government monopoly over certain commercial enterprises, e.g. telecommunications, electricity etc. Arguably, there was little or no need to regulate competition since the government had no rivals. Whereas, in industries where competitive commercial activity existed, industry-specific regulatory bodies were set up to encourage healthy competition. Owing to the privatisation phase of certain aspects of the economy by the federal government, there is now a dire need for general Competition law. This is because, as many rightly argue, privatisation in the country has resulted in the concentration of economic power in a few private entities instead of improving market competition and bringing down the prices of goods and services⁴.
Before the enactment of the FCCPA, what was obtainable was the regulation of competition in different industries by dedicated industry regulators. For example, Nigerian Communications Act 2004 and the Electricity Power Sector Reform Act 2005 regulate, among other things, competition in the communications sector and the power sector, respectively⁵.
One of Nigeria’s most essential and pervasive competition-specific regulators in Nigeria is the Securities and Exchange Commission (SEC). This is the body empowered by the Investment and Securities Act 2007 to regulate the securities market. Part XII, in particular, provides the rules guiding mergers, acquisitions and takeovers and strictly curtails adjustments which might substantially prevent or lessen competition in the relevant market⁶.
In the face of the recent economic slide in the country, there is a dire need for a system to galvanise the economy; therefore, putting a Competition law in place is the way to go. A Competition law regime in the country will create a level playing field for businesses to thrive, better companies will survive, and consumer interests will be secured. The extent to which this lofty purpose can be achieved in Nigeria with the emergence of the Federal Competition and Consumer Protection Act (FCCPA) 2018 is the subject of interest of Bimak Competition Law Series.
An Overview of the New Regime under the FCCPA 2018.
The FCCPA created two institutions for the sole purpose of enforcing its provisions. They are; the Federal Competition and Consumer Protection Commission (FCCPC) and the Competition and Consumer Protection Tribunal (CCPT). It confers on them the responsibility of promoting competition in the Nigerian market by eliminating monopolies, prohibiting abuse of a dominant position and penalising other restrictive trade and business practices⁷.
The FCCPA repealed the Consumer Protection Council Act,⁸ and established the FCCPC⁹ in the place of the Consumer Protection Council (CPC). It also repealed Sections 118 to 127 of the Investments and Securities Act 2007, which hitherto empowered the SEC to regulate and approve mergers, and assigned this role to the FCCPC.¹⁰
The FCCPA applies to all commercial activities within or affecting Nigeria.¹¹ Its provisions are also binding on all government departments and stateowned corporations and all commercial activities aimed at making a profit and satisfying demand from the public.¹² It equally applies extraterritorially to any prohibited conduct by a Nigerian citizen or a person ordinarily resident in Nigeria; a corporate body registered in Nigeria or carrying out business within Nigeria; any person supplying or acquiring goods or services into or within Nigeria; any person about the acquisition of shares or assets outside Nigeria which results in the change of control of the business, part of the business or any asset of the business in Nigeria.¹³
The FCCPC is composed of a Board consisting of a Chairman and the Chief Executive of the FCCPC.
(Vice-Chairman of the Board), two Executive Commissioners and four nonexecutive Commissioners.¹⁴ These Board members are to be appointed by the President subject to confirmation by Senate.¹⁵ Likewise, the Competition and Consumer Protection Tribunal (CCPT) is composed of a Chairman who shall be a lawyer with ten years post-qualification and experience in competition law, consumer protection or commercial and industrial law; six other members with ten years of professional experience in either of competition and consumer protection law, commerce and industry, public affairs, economics, finance, or business administration.¹⁶ The tenure of office of the members of the CCPT is five years from the date of confirmation or upon the attainment of 70 years, whichever comes first.¹⁷
The procedure for appointing members of CCPT is the same as the FCCPC. The CCPT adjudicates over conducts prohibited by the FCCPA, entertains appeals from and reviews any decision of the FCCPC,¹⁸ and hears appeals on the findings of sector-specific regulators on competition and consumer protection matters after the FCCPC had first considered the appeal.¹⁹ The decision of the Tribunal is to be registered at the Federal High Court for enforcement purposes only,²⁰ while appeals on the Tribunal’s decision goes to the Nigerian Court of Appeal.²¹
In light of the existing legal framework, the provisions of the FCCPA override any other law in all matters relating to competition and consumer protection in Nigeria.
This implies that the FCCPC has superiority over and above any other sector specific regulator in cases or conducts that affect competition and consumer protection.²² To ensure a cordial relationship and guard against power tussles between sector-specific regulators and the FCCPC, the FCCPC is mandated to negotiate agreements with sector-specific regulators having competition and consumer protection competence to coordinate and harmonise the exercise of jurisdiction over competition and consumer protection matters within the relevant industry or sector.²³
Under the FCCPA, a merger occurs when a firm directly or indirectly takes control over another business in part or whole through purchasing shares, amalgamation or joint venture.²⁴ Authority is established when a firm owns more than half of the shares or assets of the undertaking; o, is entitled to cast a majority of votes or can control the voting pattern; or can appoint or veto the appointment of the majority of the directors/trustees; or is a holding company and the other firm is the subsidiary.²⁵
The Act classifies mergers into small and large mergers. Section 93(1) of the FCCPA provides that subject to the notification threshold guideline, the FCCPC must be notified of every large merger for consideration and subsequent approval, failure of which the merger is deemed void.²⁶ On the other hand, parties to small mergers are not required to notify the FCCPC unless they choose to.²⁷
When considering a proposed merger, the FCCPC has first to determine if the merger is likely to substantially lessen competition by assessing the level of import competition, ease of entry and doing business,²⁸ concentration trends, level and the history of collusion, among other related factors in the relevant market.²⁹ suppose the FCCPC comes to the finding that the merger is likely to lessen competition substantially; it will block the merger unless a greater technological, efficiency, pro-competitive or Public Interest Consideration (PIC) benefit can be derived from such a merger.³⁰ A position which is similar to that of South Africa. The PIC in the Nigerian merger review considers the impact of the merger on a particular industrial sector, employment, the ability of national firms to compete in the global market, and the ability of small and medium firms to become competitive.³¹
Since the first introduction of merger regulation in the Nigerian legal system in 2007 under the supervision of the SEC till 2019, when the FCCPC took over the mandate from the SEC, there was no reported case of a merger prohibition by the SEC. The reason for this, according to Dimgba, ³² is because SEC being a traditional securities regulator struggled with competition law competence and tended to focus more on its area of expertise in merger regulation (which is to ensure that the shareholders were treated fairly) to the extent that some mergers which appeared to have lessened competition were approved as long as the undertakings paid the requisite application fees. It is therefore hoped that the same story will not be told of the FCCPC in the near future.
Cartel activities proscribed under the FCCPA includes price-fixing, conspiracy and bid rigging.³³ An undertaken is prohibited from conspiring directly or indirectly by agreement, threat, promise or any other means to influence upwards or discourage the reduction of the retail price of other undertakings, unless the undertakings are interconnected undertakings as defined under the Act.³⁴ An interesting and important provision to note is that of sub-section 3 of the above section 107 which provides that a notice of advertisement by an undertaking other than a retailer which mentions the resale price of any product constitutes an attempt to upwardly influence the product’s price, unless the advert makes it clear to a reasonable person that the product may be sold at a lower price. Furthermore, refusal to supply goods or discriminating against another undertaking due to its pricing policy is equally caught up by the above section.
Similarly, an undertaking is prohibited from conspiring with another undertaking to limit, prevent or unduly reduce competition in the production, purchase, sale, supply, rent or transportation of any product, except where such was made in relation to the provision of a service via the practice of a profession, where the maintenance of standards of competence are necessary in the protection of the public.³⁵
Likewise, where more than one undertaking agrees not to compete against each other in response to a bid, or make a bid submission based on agreement with one another, except where one of the undertakings is an affiliate or agent of the other, a case of bid-rigging will be established.³⁶
Cartel activities are criminalised by the FCCPA, and the penalty upon conviction is a fine not exceeding 10% of the annual turnover in the preceding business year for a corporate body. Where the violator is a natural person, the penalty upon conviction is a prison term not exceeding 3 years and/or a fine not exceeding 10 million Naira.³⁷
Also, each director of the violating corporate body is liable to be proceeded against in person, and upon conviction, be dealt with in accordance with the above penalty prescribed for a natural person.
The above provisions show that the FCCPA holds a very strong anti-cartel position and criminalizes cartel activities. Only time will tell if and how effective this will be on implementation, having regards to the capacity of the FCCPC and the absence of a leniency regime under the Act.
Under the FCCPA, a firm is considered to hold a dominant position if it holds a vantage economic position and can act without taking into account the reaction of its consumers, customers and competitors.³⁸ The FCCPA did not specify the percentage of market shareholding that characterizes a dominant position; rather it delegated this responsibility to the FCCPC in Section 70(3). The Act does not forbid a dominant position but the abuse of such a position by charging excessive prices to the detriment of consumers; denying access of an essential facility to a competitor when it is economically feasible to do so; engaging in any exclusionary conducts³⁹ whose anti-competitive effect outweighs technological efficiency or pro-competitive gains.⁴⁰ The exception to the above provision which may also be a form of defense for the undertaking concerned is if it can show any technology efficiency or pro competitive gain to be enjoyed by the consumers, which outweighs the anti-competitive effect of the abuse.⁴¹
A related provision is one which empowers the FCCPC to investigate monopolies.
Where an abuse of monopoly position is established in accordance with the regulations made by the FCCPC,⁴² it refers its report to the CCPT which has a wide variety of powers to exercise, including the power to order a breaking-up or winding up of the undertaking.⁴³
In our subsequent series on Competition law in Nigeria, we will consider other aspect of the FCCPA, 2018, and pry into the activities of some Organizations in Nigeria to see if their operations are anti-competitive and negates the provisions of the FCCPA, 2018.
This article is for information purposes and is not intended as a legal opinion or advise on any issue. Therefore, any usage of this article must be with the proper legal guidance as the position of the law may have changed.
- B.Adedeji, ‘Towards a Competition Law in Nigeria: Why the new Federal Competition and Consumer Protection Bill may not fly!’(2009)<www.cuts-ccier.org/7up4/pdf/Article…. > Accesses 20 October 2022
- Ibid p1
- E.Abiodun, ’Imperatives of the Anti-trust Law’ http://www.thisdaylive.com/index.php/2016/06/01/imperatives-ofthe-anti-trust-law/ Accessed on the 20 October 2022.
- T. Osinowo ‘Competition Law in Nigeria’ (2014) http://www.vitaveritasllp.com/competition-law-in-nigeria Accessed on the 20 October 2022.
- ibid p3
- ibid p3
- Explanatory Memorandum, FCCPA.
- Cap C25 LFN 2004; See Section 165, FCCPA.
- Section 3,FCCPA.
- Section 93 of the FCCPA
- Section 2 of the FCCPA
- Section 3 of the FCCPA
- Section 4 of the FCCPA
- Section 5 of the FCCPA
- Section 40 of the FCCPA
- Section 41 of the FCCPA
- Section 47 (1)(a) of the FCCPA
- Section 47 (2) of the FCCPA
- Section 54 of the FCCPA
- Section 55 (1) of the FCCPA
- Section 104 of the FCCPA
- Section 105 (4) (5) (6) of the FCCPA
- Section 92(1) of the FCCPA
- Section 92(2) of the FCCPA
- Section 96(5) of the FCCPA
- Section 95(1) of the FCCPA
- Ease of doing business refers to the conducive regulatory environment for starting and operating a local firm.
- Section 94(1)(a), and (2) of the FCCPA
- Section 94(4) of the FCCPA
- Nnamdi Dimgba, ‘The Changing Landscape: Federal Competition And Competition Protection Act’ (Keynote Address Delivered at the Jackson, Etti & Edu in Partnership with Norton Rose Fulbright Conference On Competition Law, 18 June 2019) 4.
- Part XIV of the FCCPA
- Section 107 of the FCCPA
- Section 108 of the FCCPA
- Sections 107-109 of the FCCPA
- Section 70 of the FCCPA
- For example, inducing a supplier not to deal with a competitor, tying, buying up scarce intermediate products to foreclose a competitor, selling products below their marginal cost, refusing to supply a competitor when economically feasible.
- Section 72(2) of the FCCPA
- Section 72(3) of the FCCPA
- Section 77 of the FCCPA
- Sections 84-85 of the FCCPA