In very welcome news this past week, the National Assembly passed the harmonised version of the Federal Competition and Consumer Protection Bill. When it receives the President’s assent and becomes law, it will repeal the Consumer Protection Act and transfer all the staff and assets of the Consumer Protection Council to the newly created Federal Competition and Consumer Protection Commission.
Competition law is important, especially in deregulated economies, like Nigeria is ostensibly, to discourage anti-competitive behaviour by companies. The underlying theory is that if market forces determine the prices for goods and services, businesses will be forced to innovate and customers will receive quality at the best prices. Competition regulation has the potential to completely revolutionalise how business is done, if implemented properly and impartially. This law is long overdue in Nigeria and was initially proposed during the Yar’Adua administration but rejected by the National Assembly at the time.
While there has been sector-specific competition regulation in the telecommunications and electricity industries, for example, the new law signals the commencement of a regime that will apply to “all undertakings [i.e. companies and business ventures] and all commercial activities within, or having effect within, Nigeria.” To avoid confusion with the likes of the National Communications Commission, the National Electrical Regulatory Commission, the Security & Exchanges Commission or the Corporate Affairs Commission in matters affecting competition, the Federal Competition Commission is given supremacy over the existing government agencies. However, it may designate certain sectors as “regulated industries” and cede regulation to their supervising government agencies.
The FCCP law will affect everyday businesses as well. Under the law, restrictive agreements are prohibited. Restrictive agreements include agreements between undertakings or associations of undertakings – beware all ye national associations of barbers, video clubs, printers, etc. – to fix the prices at which goods and services will be provided, agreements to divide markets by allocating customers or suppliers or territory, collusive tendering/bid-rigging or making the sale of goods or services conditional on the purchase of an additional product that isn’t essential to the use of that which the customer seeks. A great example of that final one would be petrol stations refusing to sell you petrol unless you also buy engine oil. Furthermore, any agreement purporting to set minimum prices for goods or services is void.
The new FCC will also have the power to investigate the abuse, by any undertaking, of its position of dominance in the market. The Commission has the power to direct any such undertaking to immediately cease the abusive practice. If the undertaking does not comply with the Commission’s directive, it is liable to a fine of at least 10% of turnover in the preceding year or such higher percentage as the court may determine. Indeed, the bill contains various fines and, in the case of natural persons (i.e. human beings), possible imprisonment.
Mergers must now receive FCC approval before they can go ahead, with the FCC needing to be satisfied that the merger will not reduce competition in the market. Anti-competitive behaviour (e.g. predatory pricing, artificial barriers to market entry, etc.) by monopoly holders will be subject to the FCC’s investigation and, where applicable, sanctions.
The bill reserves one power for the President and it may be worrying, depending on how socialist the occupier of the office is. The President may by order declare that prices for specified goods or services will be controlled. The law says that the President can only do so if the Commission submits a report advising him, and if he is satisfied that the market is one in which competition is likely to be lessened, it is in the consumers’ interest if the consumers or suppliers (hmmm) and the order is narrowly designed in terms of duration and the list of goods and services affected. The process is not entirely arbitrary but given how beholden some Commissions are to the Presidency and the Presidency to some business interests, it’s easy to see how we might miss the concrete for the cement if the FCC’s work were to be politicised.
This is only a very brief overview of the bill and one only focused on competition, the reason being that competition law is new to the Nigerian regulatory sphere and there’s the matter of my personal enthralment with the topic. Businesses might find it hard to adapt at first, as many of the rules might seem counterintuitive and perhaps restrictive, even. However, if the global experience of competition regulation is anything to go by, the benefits are immeasurable and the new commission should be given all support it will need to hit the ground running.
By Rotimi Fawole,
Competition law is important, especially in deregulated economies, like Nigeria is ostensibly, to discourage anti-competitive behaviour by companies. The underlying theory is that if market forces determine the prices for goods and services, businesses will be forced to innovate and customers will receive quality at the best prices. Competition regulation has the potential to completely revolutionalise how business is done, if implemented properly and impartially. This law is long overdue in Nigeria and was initially proposed during the Yar’Adua administration but rejected by the National Assembly at the time.
While there has been sector-specific competition regulation in the telecommunications and electricity industries, for example, the new law signals the commencement of a regime that will apply to “all undertakings [i.e. companies and business ventures] and all commercial activities within, or having effect within, Nigeria.” To avoid confusion with the likes of the National Communications Commission, the National Electrical Regulatory Commission, the Security & Exchanges Commission or the Corporate Affairs Commission in matters affecting competition, the Federal Competition Commission is given supremacy over the existing government agencies. However, it may designate certain sectors as “regulated industries” and cede regulation to their supervising government agencies.
The FCCP law will affect everyday businesses as well. Under the law, restrictive agreements are prohibited. Restrictive agreements include agreements between undertakings or associations of undertakings – beware all ye national associations of barbers, video clubs, printers, etc. – to fix the prices at which goods and services will be provided, agreements to divide markets by allocating customers or suppliers or territory, collusive tendering/bid-rigging or making the sale of goods or services conditional on the purchase of an additional product that isn’t essential to the use of that which the customer seeks. A great example of that final one would be petrol stations refusing to sell you petrol unless you also buy engine oil. Furthermore, any agreement purporting to set minimum prices for goods or services is void.
The new FCC will also have the power to investigate the abuse, by any undertaking, of its position of dominance in the market. The Commission has the power to direct any such undertaking to immediately cease the abusive practice. If the undertaking does not comply with the Commission’s directive, it is liable to a fine of at least 10% of turnover in the preceding year or such higher percentage as the court may determine. Indeed, the bill contains various fines and, in the case of natural persons (i.e. human beings), possible imprisonment.
Mergers must now receive FCC approval before they can go ahead, with the FCC needing to be satisfied that the merger will not reduce competition in the market. Anti-competitive behaviour (e.g. predatory pricing, artificial barriers to market entry, etc.) by monopoly holders will be subject to the FCC’s investigation and, where applicable, sanctions.
The bill reserves one power for the President and it may be worrying, depending on how socialist the occupier of the office is. The President may by order declare that prices for specified goods or services will be controlled. The law says that the President can only do so if the Commission submits a report advising him, and if he is satisfied that the market is one in which competition is likely to be lessened, it is in the consumers’ interest if the consumers or suppliers (hmmm) and the order is narrowly designed in terms of duration and the list of goods and services affected. The process is not entirely arbitrary but given how beholden some Commissions are to the Presidency and the Presidency to some business interests, it’s easy to see how we might miss the concrete for the cement if the FCC’s work were to be politicised.
This is only a very brief overview of the bill and one only focused on competition, the reason being that competition law is new to the Nigerian regulatory sphere and there’s the matter of my personal enthralment with the topic. Businesses might find it hard to adapt at first, as many of the rules might seem counterintuitive and perhaps restrictive, even. However, if the global experience of competition regulation is anything to go by, the benefits are immeasurable and the new commission should be given all support it will need to hit the ground running.
By Rotimi Fawole,
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