The New Anti-trust Act in Nigeria -By Adedoyin Adeniran

President Muhammadu Buhari signs the Federal Competition and Consumer Protection Act, strip the Securities and Exchange Commission off its powers

It is indeed a great move in our country Nigeria as President Muhammadu Buhari signs the antitrust bill into law after several backs and forth. The law was proposed by a senator representing Yobe north at the senate. The Act repeals the Consumer Protection Act, Cap. 25, laws of the Federation of Nigeria, 2014 to establish the Federal Competition and Consumer Protection Commission and the Competition and Consumer Protection Tribunal.

What is competition in business?

Competition in business means Rivalry in which every seller tries to get what other sellers are seeking at the same time: sales, profit, and market share by offering the best practicable combination of price, quality, and service. Where the market information flows freely, competition plays a regulatory function in balancing demand and supply.

What is an anti-competition law?

Anti-competition law are laws developed to protect consumers from predatory business practices. It ensures that fair competition exists in an open-market economy. The law has evolved along with the market, vigilantly guarding against would-be monopolies and disruptions to the productive ebb and flow of competition. This law guides against monopolistic behaviours such as exclusive supply agreements, tying the sale of two products, predatory pricing, refusal to deal etc.

Functions and powers of the Commission

• establish specialized departments and units as they considered necessary for the effective and efficient discharge of its functions under this Act;
• prevent the circulation of goods or services which constitute a public hazard or an imminent public hazard;
• undertake studies and publish reports or provide information on matters that affect the interest of consumers and cooperate with or assist any association or body of persons in developing and promoting the observance of standards of product for the purpose of ensuring compliance with the provisions of this Act;
• The Commission shall make general information available to persons engaged in economic activities and for the guidance of consumers with respect to their rights and obligations under this Act;
• initiate broad based policies and review economic activities in Nigeria identified as anti-competitive, anti-consumer protection restrictive practices which may adversely affect the economic interest of consumers and make rules and regulations under this Act and any other enactment with regards to competitions and protection of consumers;
• annually on market practices and the implications for Consumer choice and competition in the consumer market;
• eliminate anti-competitive agreements, misleading. unfair, deceptive or unconscionable marketing, trading and business practices.

What is the aim of the Federal Competition and Consumer Protection Act?

We understand that various sections of the Act deal with the establishment, powers and functions of the commission established under the Act which could be inquisitorial, investigative and regulatory as well as discharge of adjudicatory functions by the tribunal. Keeping in view the nature of the controversies arising under the provisions of this Act and public interest at large.

Majorly, there are three main elements intended to be controlled by the implementation of the provisions of this new Act and they have been specifically dealt with under part VIII, IX and X of the Act. They are:

1. Restrictive Agreement which are also known as anti-competitive agreements
2. Abuse of Dominant Position
3. Monopoly

Assessment of the chapters and their effect on business

Restrictive Agreements

Section 57 of this Act provides as follows;

1. (I) Any agreement among undertakings or a decision of an association of undertakings that has the purpose of actual or likely effect of preventing, restricting or distorting competition in any market is unlawful and, subject to section 61 of this Act, void and of no legal effect………

Competition laws all over the world usually place anti-competitive agreements i.e. restrictive agreement into two categories namely- horizontal agreements and vertical agreements. Horizontal agreements are generally viewed more seriously than vertical agreements for example: Collusive practices in the mobile phone sector in Azerbaijan[1]. The horizontal agreements are those among competitors such as research and development agreements, production agreements including subcontracting and specialization agreements, purchasing agreements, commercialization agreements, standardization agreements including standard contracts, and information exchange while vertical agreements relate to an actual and potential relationship of purchasing or selling to each other.[2]

Most competition laws view vertical agreements generally more leniently than horizontal agreements, as, prima facie, horizontal agreements are more likely to reduce competition than agreements between firms in a purchaser seller relationship and in certain cases, companies are encouraged by government authorities to enter into horizontal co-operation agreements in order to attain a public policy objective by way of self-regulation.

The Act have not used the term horizontal agreements and vertical agreements, however the language used in the Act suggests that agreements referred to in section 59(1), section 108 (1) and (2) and Section 109(1) and (2) are horizontal and vertical agreements respectively. It is to be noted that section 59, 61, 62 and 63 are the main provisions which are mainly attracted to prove the existence of any anti-competitive agreements but the fact that government authorities encourage, endorse or sponsor a horizontal co-operation agreement does not mean that it is permissible under Act. However, agreements do not restrict competition if legislation creates a legal framework which has precluded all scope for any competitive conduct by the parties.

Section 59 simply declares agreement/actions under section 107,108 and 109 void. Section 107 deals with certain specific anti-competitive agreements, practices and decisions of those supplying identical or similar goods or services, acting in concert for example agreement between manufacturer and manufacturer or supplier and supplier. Section 108 deal with restraints imposed through agreements among enterprises in different stages of production or supply etc. for example agreement amongst manufacturer and supplier.

Section 109 specifically deals with bid rigging, now what is bid rigging? Bid rigging is an agreement among some or all the bidders, which predetermines the winning bidder and limits or eliminates competition among the conspiring vendors, this Act specifically makes bid rigging an offence and anyone guilty is liable to a penalty of 2,000,000.00 (Two Million Naira) or not less than two years imprisonment. For example, the fine to Sindiposto[3] an association of petrol stations and its President[4]

Abuse of Dominant Position

Generally, there are primarily three stages in determining whether an enterprise has abused its dominant position. The first stage is defining the relevant market. The second is determining whether the concerned undertaking/enterprise/firm is in a dominant position/ has a substantial degree of market power/ has monopoly power in that relevant market. The third stage is the determination of whether the undertaking in a dominant position/ having substantial market power/monopoly power has engaged in conducts specifically prohibited by the statute or amounting to abuse of dominant position/monopoly or attempt to monopolize under the applicable law.

Section 70 provides for the meaning of an undertaking being in a dominant position to mean

“if it is able to act without taking account of the reaction of its customers, consumers or competitors.” And by the provision of section 70(2) a dominant position in a relevant market exits where an undertaking enjoys a position of economic strength enabling it to effective competition being maintained on the relevant market and having the power to behave to an appreciable extent independently of its competitors, customers and ultimately consumers. ^[5]

By the provision of section 71 of the Competition Act the criteria for delineating a relevant market are: geographical boundaries that identify groups of sellers and buyers of goods or services within which competition is likely to be restrained; goods or services which are regarded as interchangeable or substitute by the consumer by reason of their characteristics, prices and the intended use; and suppliers to which consumers may turn to in the short term, if the abuse of dominance leads to a significant increase in price or to other detrimental effect upon the consumer.

For the purpose of assessing market dominance the following shall be considered: the market share of the undertaking or undertakings concerned in the relevant market; (b) its or their financial power; its or their access to supplies or market; its or their links with other undertakings; legal or factual barriers ta market entry by other undertakings; actual or potential competition by undertakings established within or outside the scope of application of this Act;

Therefore, by the provision of section 70(2) abuse of dominant position occurs where an undertaking:

1. charges an excessive price to the detriment of consumers;
2. refuse to give a competitor access to an essential facility when it is economically feasible to do so;
3. engage in un exclusionary act, other than an act listed in paragraph (d), if the anti-competitive effect of that act outweighs its technological efficiency and Other pro-competitive gains which outweighs the anti-competitive effect of its act; etc.

Considering the guide by the Competition and Market Authority (CMA) examples of abuse of dominant position which are similar to the provisions of the Act are:

1. charging prices so low that they do not cover the costs of the product or service sold
2. offering different prices or terms to similar customers without objective justification, or
3. refusing to supply an existing or long-standing customer without objective justification.

In line with the universal interpretation of dominant position the major thing to consider is the effect of the act on the consumer for example:

TRUST is the leading supplier of detergent in the Nigeria It has a stable 80 per cent market share. The total cost to TRUST of producing a detergent is N4. TRUST sells detergent for N5 each. A competitor, TRANS, has just entered the market, selling detergent for N4.50. TRUST decides to drive TRANS out of the market. The plan is to sell detergent for N 3.50 until Newco goes out of business, and then raise prices again.

Monopoly

For the purpose of this Part, a monopoly situation shall be taken to exist in relation to the supply of goods and services of any description or import and export of goods of any description from Nigeria to the extent that has effect on competition in the Nigeria as may be prescribed in regulations made by the commission.[6]

The major discussion here under the Act is on investigation and prosecution by the tribunal any act that constitute monopoly in the market. [7]

Issues that may arise from the competition Act considering competition law from other countries

Considering the different competition laws of different countries, there are issues attached to every enactment of competition law and the problem always appear similar because competition laws are made to perform almost the same function which is to avoid abuse of dominance and monopoly in the economy.

In accordance with the Act a mere possession of a dominant position is no infringement[8]; a dominant enterprise must take the next step to abuse it e.g. Alleged collusion in the soft drink market in Venezuela.[9] In contrast with the exemption procedure for anticompetition agreements[10], there is the possibility of advancing defence or a justification for an otherwise abuse of a dominant position: a dominant enterprise can take any step that has a reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor. On the determination of a dominant position, the Act states that a particular market share is not conclusive on the issue of whether an enterprise occupies a dominant position.[11]

According to the OECD report of 2014 in relation to competition law and major challenge it states that “in the years to come, “policymakers will have to deal with two intertwined developments: rising global interdependence and an increasingly multipolar world as emerging economies will form a growing share of the world economy. The former will have several implications. First, the effects of economic shocks will in many cases be shared with trading partners to a larger extent, reducing volatility and risks for individual countries. In the same vein, international spill over effects from policies are likely to increase too, in some cases pointing to benefits from further international policy coordination. The latter will make such coordination more complex as the number of key stakeholders often with different perspectives and policy priorities will increase.”

The report further stated that “the extent of economic interconnectedness between economies has increased in recent decades and is expected to continue increasing in the foreseeable future. Since 1990, a growing number of M&A transactions and agreements between competitors have had a cross-border (and sometimes global) dimension as well. This illustrates how the increasing international content of value chains has been accompanied by an increase in connected business activities, such as M&As, and a coincident increase in the need for cross-border competition law enforcement. This section of the paper applies various measures of economic interconnectedness to illustrate the fundamental economic forces that drive the need for co-operation among competition authorities. For example, the charge against charged the Zisco Medical Benefit Society (ZMBS), a domestic company, with restrictive practices in the retail pharmaceutical services sector^[12]

How to be law abiding under the competition Act

The most import thing to a business owner is ensure business growth and be law abiding so he doesn’t get his business into the trouble of disobedience, commitment to compliance is key that is the board and senior management must take overall responsibility for instilling this commitment to compliance. This can be done by ensuring that the following risk test are put in place:

1. Risk identification- this entails looking carefully at your business and identify areas where you might risk breaking competition law e.g. having staff who has information about competitors’ prices and business plan etc.
2. Risk assessment- this involves working out how serious the identified risks are, and they can be classified as low, medium or high.
3. Risk mitigation- this involves setting up policies, procedures and training to reduce the likelihood of the risks you have identified occurring.
4. Review-this a general review either annually or frequently the above risk tests.

Conclusion

The promulgation of this competition law is a good idea and a form of growth in our economy, but we need to know that generally the proliferation of national competition laws however has not necessarily helped to address the challenge that is increasingly affecting competition authorities.

In ensuring compliance every director or business owner must constantly ask the following questions as they proceed and continue to grow in business:

1. What are our competition law risks at present?
2. Which are the high, medium and low risks?
3. What measures are we taking to mitigate these risks?
4. When are we next reviewing the risks to check they have not changed?
5. When are we next reviewing the effectiveness of our risk mitigation activities?

Written by

Adedoyin Adeniran

adeniranadedoyin1@gmail.com

[1] Press Release (27 August 2001) (available online at http://economy.gov.az/HTML/press_release250802_1.html) and on the Operating Statement of 2001 (available online at http://economy.gov.az/HTML/Departments/AP/portfolio.htm) from the Department of Antimonopoly Policy of the Ministry of Economic Development, Republic of Azerbaijan.

[2] Section 57(2) (a-e)

[3]OECD Annual Report on Competition Policy Developments in Brazil 2002, DAFFE/COMP (2003)10 (18 April 2003) and various press reports.

[4] was found to have engaged in price-fixing by having advised its members to set prices and profit margin for fuel sales, as well as concerted price increases

[5] Section 70(2) of the Competition and Consumer protection law 2018

[6] Section 77

[7] Section 76 to 86 of the Act

[8] Section 72(3) of the Competition Act 2018

[9] Global Competition Review (21 March 2003), available online at www.globalcompetitionreview.com.

[10] Section 60 opcit

[11] Section 70(3)

[12] Evidence gathered during the investigation showed that ZMBS entered into anti-competitive agreements, in addition to violating merger control regulations.