The presence of a strict, vibrant and adequately enforced legal and regulatory regime for trade competitions is essential to the progress of any economy and growth of any market at whatever developmental stage. Sadly, the competition law regime in Nigeria has been grossly inadequate compared with the size and complexity of the country’s economy. Save for provisions touching on competition issues in various legislations, like the Investments and Securities Act 2007; and the Nigerian Communications Act 2003; amongst other laws, there was no comprehensive law or any coordinated effort towards addressing monopoly, price regulation, abuse of dominant position, and other anti-competition trade practices. This, however, is not for lack of trying. Indeed, there has been a previous attempt at enacting a national competition law. However, that Bill, the 2017 Bill, did not see the light of day, due majorly to objections to some of its provisions by various stakeholders, including the Nigeria Employer’s Consultative Association.
This newly enacted Competition and Consumer Protection Act (the “Act”), amongst other things, seeks to promote and maintain competitive markets in the Nigerian economy, protect and maintain the interests and welfare of consumers by providing competitive prices and product choices and prohibiting restrictive business practices that prevent competition or result in the abuse of a dominant position or market power.
This report seeks to highlight the salient provisions of the Act and its potential impact on creating a healthy and competitive business environment in Nigeria.
Administration and Enforcement
The Act creates the Federal Competition and Consumer Protection Commission, which shall be the body responsible for the implementation of the provisions of the Act. It is saddled with the responsibility to both administer and enforce the provisions of the Act. From time to time, the Commission shall develop rules, guidelines and regulations that would ensure its effective implementation.
By the provisions of the Act, the Commission has the authority to make regulations: prohibit anti-competitive agreements, misleading, unfair, deceptive or unconscionable marketing, trading and business practices; authorizing, with or without conditions, prohibiting or approving of mergers of which notice is received. Other powers conferred upon the commission include; the power to make regulations relating to the charging and collection of fees, levies, fines and the imposition of administrative penalties; as well as the power to nullify agreements which is unfair to the general public.
The Act also establishes a Tribunal to adjudicate on matters arising from the implementation of the Act. The Tribunal has the power to hear appeals or review decisions of the Commission throughout the Federation. However, section 47(2) provides that all appeals or requests for review of a sector specific authority shall first be heard and determined by the Commission before such appeals can be filed with the Tribunal. The Act further states that an order, ruling, award or judgment of the Tribunal shall be binding on parties and shall be registered with the Federal High Court for enforcement purposes only. If a party to a proceeding is displeased with a ruling, award or judgment of the Tribunal, then the party may apply to the Court of Appeal for judicial review, upon giving notice in writing to the secretary of the Tribunal and within thirty (30) days of the ruling, award or judgement of the Tribunal.
Anti-competition prohibition provisions
The Act, in Part VIII, makes provisions prohibiting any agreement amongst undertakings or decisions of an association of undertakings that has the actual or likely effect of preventing, restricting or distorting competition in the market. The Act declares such agreements null and of no legal effect. According to the Act, such restrictive agreements and practices include market division by allocating customers and making the conclusion of any agreement subject to the acceptance by the other party, of some extraneous supplementary obligations. It further clarifies that where the offensive provision is just a term or a condition in an agreement, only such term or condition shall be nullified, not the entire agreement. The Act also prohibits setting minimum prices on the resale of goods or services in Nigeria.
Abuse of Dominant Position
Section 70 of the Act explains what is considered a dominant position to be the ability of a Company/Individual to act without considering the reaction of its customers, consumers or competitors. The Act prohibits the abuse of a dominant position and lists factors that are considered in assessing market dominance. These factors include: the market share of the undertaking or undertakings concerned; financial power; access to supplies or markets; linkages with other undertakings; legal or factual barriers to market entry by other undertakings; actual or potential competition; ability to shift supply or demand to other goods or services; and the ability of the opposite market side to resort to other undertakings.
As part of its goal to foster healthy competition, the Commission is empowered to investigate any Company/Individual/Association where it suspects that there are grounds for a monopolistic situation in relation to the production or distribution of goods or services, or in relation to the export of goods or services of any description from Nigeria. The Act further deals with how the Commission determines what constitutes a monopoly. It gives the Commission the power to obtain information on monopolies, order investigations into monopoly situations and outlines the Tribunal’s role in relation to the investigation of a monopoly situation. A request for investigation for purposes of determining monopoly can emanate from an individual, the court, an agency of the Government of the Federation or any state or local government of the federation. Where following an investigation, the Commission determines that the subject of the investigation does occupy a monopolistic position, it can take any one or combination of an array of decisions stipulated under the Act for the purpose of weakening/eliminating the monopoly.
The President of the Commission is empowered to order by gazette, that the price of specific goods and services be set in compliance with the Act. The President of the Commission can do this upon satisfactory consideration that goods and services will be supplied or acquired in markets where competition is limited, thus necessitating that such goods or services be controlled in accordance with the Act.
According to the Act, all mergers regardless of the sector/industry in which they take place, will be regulated by the Commission. Section 92 of 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. Subject to a notification threshold, a proposed merger shall not be implemented unless notice of it has first been given to and approved by the Commission. In determining whether to approve a merger, the Commission will decide whether such proposed merger will substantially prevent or reduce competition.
The approval/conditional approval/rejection of a merger is solely at the discretion of the Commission, but an aggrieved party can appeal to the Tribunal and subsequently to the Court of Appeal for the decision of the Commission to be reconsidered.
The provisions of the Act concerning approval of mergers and its supremacy over other laws, save the constitution, declared in section 104 of the Act raises the important question of what becomes of the other laws and powers of other regulatory authorities having the power to approve mergers. This is especially so in the case of the Securities and Exchange Commission which is empowered under the Investments and Securities Act to approve mergers. While there have been various debates concerning this, with some to the effect that the Act has abolished the powers of SEC to approve mergers and others to the effect that the abrogation of the merger approval powers of SEC is only as it relates to private companies, the answer to this question seems to be embedded in section 104 of the Act itself. The said section declares the supremacy of the Act over every other law, save the Constitution “in all matters relating to competition and consumer protection”.
In other words, the powers of SEC and other regulatory agencies, like the CBN to approve mergers of regulated companies is not affected by this Act where such approval is necessitated by the need to ensure compliance on an issue other than competition and consumer protection. For instance, while competition and consumer protection concerns are a major consideration for the SEC in approving a merger, this is not the only consideration. In approving a merger, the SEC also considers the fairness of the transaction amongst the shareholders of the merging parties, and this is resolved before granting approval, even if no competition issues arise from the merger. Hence, while the SEC may no longer be able to examine a merger transaction for competition and consumer protection concerns (and this is without any dichotomy between public and private companies), the SEC is still required to approve mergers falling within the required threshold on the basis of fairness to the shareholders, these are not ‘consumers’ in this context and such consideration falls outside the ambit of the Act.
The enactment of the Act is a step in the right direction towards ensuring a conducive business environment that would encourage healthy competition among companies and protect the interests and safety of consumers.
Nonetheless, only time will tell the extent of the effectiveness of mechanisms established under it for the purpose of tackling urgent competition issues in Nigeria. A particularly interesting point is what will become of certain state created monopolies (like that relating to waste disposal in Lagos), especially in light of the provision of Section 2 of the Act which extols the bindingness of the Act on all businesses and all commercial activities including those in which the Federal, State or Local Government or any of their agencies have controlling interests.