Author; Jeremiah Aneji
Mergers & Acquisitions are corporate restructuring tools that enhances several interests which primarily centers on consolidating on the means of production, capturing larger market shares to increase competitiveness within a given market or sector of the economy. While this is admirable, public policy always takes into consideration the aftermath of these kinds of transaction on the end users, i.e the consumer. The tail end of market restructuring deals of this nature if not checked would lead to monopoly and the consumers including smaller businesses would bear the brunt for it. It would stiffen competition, limits consumers’ choices and leave them at the mercies of the producer. This is where the Nigerian Federal Competition and consumer protection Commission comes into play.
The Nigerian government passed the Federal Competition and Consumer Protection Act into law in 2018. This drew the applause of experts as it seeks to involve the erstwhile Consumer Protection Commission, now Federal Competition and Consumer Protection Commission (FCCPC) directly in the management of market forces that directly or indirectly stiffens competition or encourages market monopoly to wit: the merger and acquisition process.
Market monopoly and its other anti- open market associated trends often results from and uncheck corporate restructuring flowing from a merger and acquisition deal, this is what the FCCPC and relevant institutions are set up to check. In the course of this work, we would examine closely the role of the F.C.C.P.C in merger and acquisition transactions. We would examine this under the followings subheadings
- The Role of the FCCPC in merger processes.
- An appraisal of the guideline and regulations issued by the FCCPA for mergers in Nigeria (Notice of Threshold for Merger Notification, 2019 ETC,).
- The Role of The Federal Competition and Consumer Protection Commission Controlling The Merger Process
Upon the enacting of the Federal Competition and Consumer Protection Act (FCCPA),the Federal Competition and Consumer Protection Commission (“FCCPC”), now became the primary regulatory authority for mergers and acquisitions, a role previously assigned to the Securities and Exchange Commission (“SEC”). ¹ The key objectives of the FCCPC include promoting and maintaining a competitive market in Nigeria. This is the basis upon which it sanctions merger processes.
Generally, the FCCPC in carrying out its mandate in any a merger, plays the following all important role:
I. It determines the thresholds of annual turnover for the purpose of categorizing mergers as well as the method of calculating the annual turnover.
II. It issues guidelines on the procedure and timelines for merger approvals.²
III. It Investigates proposed merger.³
IV. It revokes merger approval where necessary.⁴
V. It provides a platform for members of the general public, experts and all other relevant stakeholders to make inputs on the thresholds/other requirement for certain categories of merger transactions.⁵
VI. It approves mergers after being satisfied that the interest of the particular industry or region, employment, the ability of the National Industries to compete internationally, the interest of the consumers and then to ensure other small and medium scale enterprises are not stiffened through unfair competition. Representations on these subjects (Public interest) are often made by the Minister for Trade.⁶
- The Guidelines And Regulations Issued By The FCCPC For Mergers In Nigeria.
Pursuant to Section 17, 18 and 163 the Federal Competition and Consumer Protection Commission hereby issues the Merger Review Regulations 2020 with ancillary instruments to govern the notification and review of mergers under Part XII of the Federal Competition and Consumer Protection Act 2018. Some of these instruments are:
A. Merger Review Regulation, 2020 – This Regulation comprehensively sets rules on⁷:
a) The substantive and procedural requirements for the implementation of Part XII of the Act
b) The jurisdictional limits of mergers under the Act;
c) The process for merger notification and efficient handling of notified merger cases
d) The regulatory review process to identify the substantial prevention or lessening of competition by mergers
e) The procedure for remediation and disposition of notified merger cases.
According to Dapo, in summary, the Regulation seeks to provide guidance on the regulatory review process for merger transactions while also prescribing the procedure for remediation and disposition of notified merger cases. It states the basis for determining whether a relevant merger situation has arisen and the criteria for satisfactory notification to the Commission.⁸
B. Merger Review Guideline, 2020 – These Guidelines provide an outline of the broad analytical framework applied by the Commission when assessing whether a merger is likely to substantially prevent or lessen competition under Part XII of the Act.
This Guideline had been developed by the Commission in relation to its functions under Part XII of the Act. – According to its preamble, it is to serve mainly as a guide to ensure the Consumers are not worse off from the back end of any merger. Accordingly, it provides that “In the vast majority of mergers, sufficient competitive tension remains after the merger to ensure that consumers and suppliers are no worse off. Indeed, in many cases, consumers or suppliers benefit from mergers. In some cases, however, mergers have anti-competitive effects. By altering the structure of markets and the incentives for firms to behave in a competitive manner, some mergers can result in significant consumer detriment.”⁹
This Guideline also provides directive to the Commission in the factors they need to consider in granting approvals for mergers or adjudicating on disputes arising therefrom. These Guidelines state the policy of the Commission with respect to merger review. By stating its general policy, merger parties, advisers, the business community and the public have certainty regarding the considerations that apply to merger review.¹⁰
C. Waiver Of Confidentiality For Merging Parties Guideline – This Guideline was made further to Section 1.4.1(d) and 1.8.2 of Form 1 (Merger Review Notification Form & Guidance Notes), undertakings are encouraged to submit waivers of confidentiality that would enable the Commission to share information (including confidential business information) with other competition authorities outside Nigeria reviewing the same merger. It applies mainly to mergers of transnational interest.
D. Notice of Merger Threshold Notification 2020 – This Regulation was made pursuant to sections 3, 92, and 93(4) of the FCCPA empowering the Commission to provide thresholds for when a merger becomes of interest to the Commission so as to warrant its approval. The conditions and methodology for arriving at these thresholds are also provided in the Regulation/Notice
E. The Federal Competition And Consumer Protection Act, 2018 Administrative Penalties, Regulations, 2020 – This provides the applicable principles relevant in the determination of administrative penalties pursuant to the Act, outline the methodology for calculation and determination of penalties in the process leading to the imposition of administrative penalties, clarify the process relating to administrative penalties including understanding mitigating and or aggravating factors considered in determining administrative penalties ; provide certainty and transparency in the method of determining¹¹
- While business owners and corporate interest advocate for ease in the merger and acquisition procedure for the benefit of the larger economy, the process still needs that should be regulated and effectively monitored so as not to defeat the interest of the general public and consumer. The role of the FCCPC in regulating the process with not just the shareholders but the general consumers’ interest at heart is highly commendable.
- The process of Mergers and acquisition should be regulated and effectively monitored so as to ensure that it is not done out of desperation but necessity.
- A strategically integrated mergers/acquisition programme aimed at educating corporations/organizations on the pros and cons of mergers and acquisition should be put in place to ensure that parties involved in mergers/ acquisition are duly informed of the possible effect of mergers and acquisition and to aid a successful merger/acquisition.
Although the legal provisions on mergers and acquisitions need reform in some aspects, they surely will serve the present needs of companies for mergers and acquisitions. The FCCPA , Guidelines and Regulations are efficient tools to prevent monopoly, protect the interest of the consumers and to ensure that other small and medium scale enterprises are not stiffened through unfair competition.
- Regulation 1 of the Federal Competition and Consumer Protection Act Merger Review Regulations, 2020
- Regulation 2 of The Federal Competition And Consumer Protection Act,2018 Administrative Penalties, Regulations, 2020
- Dapo Akinosun: https://www.mondaq.com/nigeria/securities/1033060/mergers-reviewregulations-2020-an-introduction-to-the-new-regulatory-landscape-for-mergers-in-nigeria- Accessed on the 7/03/23
- Section 97, FCCPA
- Section 98, FCCPA
- Section 99, FCCPA
- Section 93(3), FCCPA
- Section 100 of the FCCPA)
1 Section 165 of the FCCPA expressly repealed Sections 118 to 128 of the Investment and Securities Act, 2007.
2 See Section 97, FCCPA
3 See Section 98, FCCPA
4 See Section 99, FCCPA
5 See Section 93(3), FCCPA.
6 Section 100 of the FCCPA)
7 Regulation 1 of the Federal Competition and Consumer Protection Act Merger Review Regulations, 2020
8 Dapo Akinosun: https://www.mondaq.com/nigeria/securities/1033060/mergers-review-regulations-2020-anintroduction-to-the-new-regulatory-landscape-for-mergers-in-nigeria- Accessed on the 7/03/23
9 Part 1, Paragraph 2 of the Merger Review Guideline of the FCCPC
10 Ibid. Part 1.
11 Regulation 2 of The Federal Competition And Consumer Protection Act, 2018 Administrative Penalties, Regulations, 2020
This article is for information purpose, it may, or may not reflect the current position of the law and is therefore not intended to provide legal advice or guidance on litigation or provide commentary on any pending case or legislation.