ECONOMIC GROWTH AND ENTERPRISE IN NIGERIA: EXAMINING THE FEDERAL COMPETITION AND CONSUMER PROTECTION ACT
On February 6, 2019, the Federal Competition and Consumer Protection bill passed by the senate in December 2017, was signed into law by President Muhammadu Buhari. The Federal Competition and Consumer Protection Act (the “Act”) is intended to promote economic efficiency, maintain competitiveness in the Nigerian market and protect the welfare of consumers.
Although business and consumer friendly legislation in Nigeria is always a welcome development, there are several reasons why the Act is especially important.
Competition law is essentially law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies.
In market economies like Nigeria, competition law is vital. It compels businesses to be innovative in their operations and products in a bid to keep prices low. Put simply, competition strengthens the market and benefits the consumer.
Before now, the legal framework around competition practice and policy in Nigeria has been relatively inadequate, with regulatory provisions typically embedded in various legislation regulating different sectors of the economy such as the Electric Power Sector Reform Act 2005 and the Nigerian Communications Act 2003 amongst others. The Act pushes Nigeria towards a codified set of laws governing competition in the marketplace.
THE ACT
Key objectives and applicability
The Act repeals the Consumer Protection Act, CAP C25, LFN 2004 and establishes the Federal Competition and Consumer Protection Commission for the development and promotion of fair, efficient and competitive markets in the Nigerian economy, facilitates access by all citizens to safe products, secures the protection of rights for all consumers in Nigeria and other related matters.[1]
The objectives of the Act include the promotion and maintenance of competitive markets in the Nigerian economy, promotion of economic efficiency, protection and promotion of the interests and welfare of consumers by providing consumers with a wider variety of quality products at competitive prices and also includes the prohibition of restrictive or unfair business practices which prevent, restrict or distort competition or constitute an abuse of a dominant position of market power in Nigeria. The Act further intends to contribute to the sustainable development of the Nigerian economy[2].
The Act is applicable to all undertakings and all commercial activities within or having effect within Nigeria[3].
The Act is also binding on body corporates or agencies of the federal government or body corporates or agencies of a subdivision of the Federation, if the body corporate or agency engages in commercial activities, as well as on body corporates in which a government of the Federation or a government of a state or a body corporate or agency of government of the Federation or any state or local government has a controlling interest where such a body corporate engages in economic activities, and all commercial activities aimed at making profit and geared towards the satisfaction of demand from the public[4].
Key Establishments
The Act establishes the Federal Competition and Consumer Protection Commission (The “Commission”), an independent body corporate intended to carryout the functions, duties, powers and responsibilities conferred on it by the provisions of the Act[5]. The Commission is headquartered in Abuja and is empowered to establish other offices across the country as required, while there is a governing board to administer the affairs of the Commission. The Commission may set up committees to execute its functions, although no decisions of the committees shall be effective until confirmed by the Commission[6].
Also established is a Competition and Consumer Protection Tribunal (the “Tribunal”) which adjudicates over conduct prohibited under the Act[7].
The Tribunal has jurisdiction throughout the Federation and hears appeals from or reviews decisions of the Commission taken in the course of the implementation of the provisions of the Act as referred to it.
Prohibitions/Restrictions
Prohibition of agreements in restraint of trade
The Act voids and prohibits agreements among undertakings or decisions of associations of undertakings that actually or likely prevent, restrict or distort competition in the market[8].
The Act also prohibits minimum resale price maintenance[9], withholding of products from a supplier by a dealer[10], price fixing[11] and bid rigging[12].
Restrictions against the abuse of a dominant position
An undertaking is considered to be in a dominant position if it is able to act without taking into account the reaction of its customers, consumers or competitors[13], and a dominant position exists where an undertaking enjoys a position of economic strength enabling it to prevent effective competition being maintained in the relevant market and having the power to behave to an appreciable extent independently of its competitors, customers and ultimately consumers[14]. Market dominance is determined with due consideration to factors like market share, financial power, access to markets or supply links to other undertakings and legal or factual barriers to market entry by other undertakings.
Importantly, the Commission shall publish the size of market share that may constitute a dominant position in particular markets.
The Act specifically prohibits the abuse of a dominant market position[15], and abuse includes charging excessive prices to the detriment of consumers, refusal of access to competitors’ facilities when it is economically feasible to do so, engaging in exclusionary acts other than those listed in the Act, refusal to supply scarce goods to competitors or buying up a scarce supply of intermediate goods or resources required by a competitor[16]. Stiff penalties are provided for non-compliance and include fines of up to 10% of annual turnover in the preceding business year, or such a higher percentage as the court might determine under the circumstances of a particular case. Prison terms of up to three years and/or fines not exceeding N50,000,000.00 are also provided for[17].
Monopolies
The Commission is empowered to investigate, across particular sectors or agreements, where it appears that a monopoly might exist in relation to the production/distribution of goods or services of any description or in relation to exports of goods or services of any description from Nigeria to determine the extent of the monopoly situation in relation to the market[18].
Penalties are provided for refusal to furnish the Commission with information needed for its investigations, with fines of up to N10,000,000.00 for non-compliance.
Requests for monopoly investigations can also be made by any person or body corporate, and findings of the Commission are referred to the Tribunal who can then make such orders as considered necessary for remedying or preventing adverse effects on the market.
Price Regulation
Periodically, the President may by an order published in the Federal Gazette for purposes of regulating and facilitating competition, declare that prices for goods and services specified in the order shall be controlled under the Act[19]. However, such an order cannot be made prior to the submission to the President of a report by the Commission assessing the state of competition in the relevant market and providing recommendations on the desirability or likely effects of implementing price regulation or other remedies[20]. The Commission is also required to publish an authorized price of the regulated goods or services subject to the order[21].
Mergers
The Act defines a merger to occur 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.
Crucially, the Act allows the Commission to determine thresholds for small and intermediate mergers[22], meaning that this power has been taken away from the Securities and Exchange Commission (SEC) and vested in the Commission. Proposed mergers will also not be implemented unless first notified to and approved by the Commission[23], which is also a transfer of SEC functions to the Commission.
In keeping with the spirit of the promotion of a competition friendly business environment, the Act mandates the Commission to consider the effects of mergers on competition by determining if mergers are likely to substantially prevent or lessen competition in line with assessed factors[24].
Regulated Industries
The Act overrides the provisions of all other laws in matters relating to competition and consumer protection except for the Constitution[25].
The Act also establishes a concurrent jurisdiction between the Commission and relevant government agencies, with the Commission having precedence over and above the relevant government agencies in matters affecting competition and consumer protection so far as it applies to an industry or sector of an industry subject to the jurisdiction of another government agency[26]. These sweeping powers of regulatory oversight serve the purpose of streamlining competition regulation in Nigeria.
It is also worth noting that the Act allows a one-year period for negotiations with other regulatory agencies whose mandates include the enforcement of competition and consumer protection for the coordination and harmonization of jurisdiction over competition and consumer protection matters[27].
RECOMMENDATIONS
It is imperative that the Commission is adequately resourced to perform its extensive duties. The Commission must adopt the latest technologies, be financially independent, headed by business-minded Commissioners and staffed by competent individuals with a strong knowledge of economics and business law and policy across the various sectors of the economy.
The Commission is empowered to issue regulations and guidelines to further regulate competition and consumer protection in Nigeria. The Act does not however provide specific timeframes within which such regulations and guidelines may be issued.
There has been a history in Nigeria of regulators not adhering to obligations to issue regulations and guidelines, creating uncertainty in the market. We would recommend, that the Commission address this matter by providing a list of regulations and guidelines it proposes to issue in the short to medium term, and provides a timetable within which it will do so.
Further, such regulations and guidelines must be tailored to the realities of the Nigerian market and take the input of businesses and consumers within the market.
Flexibility and openness are the essential to competition in any market, and the Commission in its bid to actualize its objectives should be wary of the temptation of over-regulation.
An unduly stifled market environment will negate any gains brought by the Act and the Commission should be reminded that the overarching objective should be the establishment of a level playing field that drives innovation beneficial to the consumer, not a walled garden that ends up keeping investors out of Nigeria.
CONCLUSION
Based on recent events, the Nigerian business market space is at a crossroads. The African Continental Free Trade Agreement is a radically new transactional instrument which seeks to open up markets across Africa to free movement of goods and services. Now, more than ever, robust, far reaching laws are required to ensure the best possible outcomes for the consumer regarding the quality of goods and services on the market.
Foreign investors seeking to penetrate the market will also be greatly helped by adequate legal mechanisms to ensure they are not crowded out of the market by already established players.
The Act meets these challenges robustly and it is pertinent that efforts are made to ensure its implementation to further broaden the inroads for investment and consumer protection in Nigeria.
A major concern of the current administration is the insufficient infrastructural and regulatory framework in Nigeria to mitigate the adverse effects of the free movement of goods and services across Africa. The Act is therefore a step in the right direction and is vital for a developing economy like ours.
[1] See Preamble.
[2] Section 1 (a — e) Federal Competition and Consumer Protection Act.
[3] S. 2(1).
[4] S. 2(2).
[5] S. 3(1 -2)
[6] S. 15
[7] S. 39
[8] S. 59
[9] S. 63(1)
[10] S. 66(1)
[11] S. 107(1)
[12] S. 109
[13] S. 70(1)
[14] S. 70(2)
[15] S. 72(1)
[16] S. 72(2)(a — d)
[17] S. 74
[18] S. 76
[19] S. 88(1)
[20] S. 88(3)
[21] S. 90(2)
[22] S. 92(4)
[23] S. 93(1)
[24] S. 94(1)
[25] S. 104
[26] S. 105(2)
[27] S. 105(4&5)
