Published in This Day Newspaper October 21, 2014
TEMILOLUWA OSINOWO LL.B (HONS), B.L
Competition law is a legal framework put in place to promote or maintain market competition by regulating anti-competitive conduct by companies. (Taylor, Martin. 2006) It is otherwise known as anti-trust law and anti-monopoly law in other jurisdictions.
The major aim of competition law is to ensure a deep supply market for consumer goods and services, not just to ensure that there are many suppliers in the market for particular goods and services, but to ensure that such suppliers play according to a set of rules that would make it difficult for any of them, individually or as a group, to lessen or eliminate competition in the market.
The first jurisdiction to put in place a framework similar to the various forms of competition law in existence in recent times is the United States of America. The USA passed into law the Sherman Antitrust Act of 1890 on the understanding that markets needed some form of protection from the activities of large firms particularly as against small firms.
It became a common trend at that time for shareholders to transfer shares held in competing companies to trustees who then controlled the activities of those competitors as a result of which competition was lessened between them. Hence the name antitrust law in the United States.
The UK’s development of the area, in comparison to the US, was slow with no urgency for the need of black and white competition law. This was because the common law of restraint of trade (the predecessor to modern competition law) served its purpose for their economy at that time. After several legislative twists and turns, the UK finally settled on the Monopolies and Restrictive Trade Practices Act 1969.
The United Kingdom joined the European Community (now the European Union) with the European Community Act 1972, and through that became subject to EC competition law thus going on to pass the Competition Act 1988 in order to harmonise with the European policy.
THE WORKINGS OF MARKET COMPETITION
The underlying factor for competition law is consumer protection. According to Leonard Ugbajah, “in a free market economy (read: in a market where there is competition), the consumer is king”.
On this basis, most such laws surround the prohibition of individuals/businesses from agreeing with one or more other persons to engage in specified cartel arrangements such as price fixing, limiting production or supply, collusion to share markets and rigging bids.
Some industry watchers argue that competition laws can produce negative results, one of which is the protection of competitors who fall below industry standards. Yet some others argue that a particular company may dominate a certain industry because of the skill and innovativeness which it brings to the business. Eventually, no amount of competition law will be useful in such a scenario where no other company can match the skill level of the dominant player.
Where there are two or more suppliers of a particular good or services, the market responds to consumer needs in terms of lower prices, quality or variety of goods and services. Where there is only one entity which supplies a large market with new entities prevented from entering the business due to “high entry barriers”, the supplying entity becomes king and consumers are at its mercy.
It is the writer’s opinion that where market prices are kept at a fair level, better companies with higher standards will always win the market, ultimately forcing the incompetent ones to up their game.
Gleaning from the aforesaid, the three main issues competition law seeks to address are: market structure; collusion; and mergers and acquisitions.
THE NIGERIAN POSITION
Nigeria is yet to have a codified set of rules promoting competition in the marketplace. Before the turn of the millennium, the absence of a specific legal framework could be justified by the hitherto status of government monopoly over certain commercial enterprises e.g. telecommunications, electricity, etc. Arguably, there was little or no need to regulate competition since government no rivals. Whereas, in industries where competitive commercial activity existed, industry specific regulatory bodies were set up to encourage healthy competition.
Owing to the recent privatisation phase of certain aspects of the economy by the federal government, there is now a need for a general competition law. This is because, as many rightly argue, privatisation in the country has resulted in the concentration of economic power in the hands of a few private entities instead of improving the level of competition in the markets and bringing down prices of goods and services.
There have been nine bills so far presented at the National Assembly in a bid to create a legal framework for competition in Nigeria (www.nassnig.org), the most recent being “A Bill For An Act To Provide For The Establishment Of The Nigerian Trade And Competition Commission And For Other Matters Connected Therewith” (NTCC Bill) in 2012 at the upper legislative house (sponsored by Senator Magnus Odion Ugbesia). None of these bills have made any significant progress till date.
The delay in the passing of this bill, and its predecessors, seems to be due to an insufficient understanding of the nature and essence of the subject by our political leaders. In September 2006 the first bill during its first reading, met a hostile reception at the Senate for reasons which include the extensive powers given to the Minister, the fact that there were already too many Commissions in Nigeria dealing with various issues; and the belief that a similar law to the competition bill had been passed before. (Nnamdi Dimgba, 2008.)
Some of these sentiments seem to be shared by others outside the political class who believe that Nigeria has much more important problems that should be addressed.
We must not shut our minds also to the fact that the delay in passing the bill might also be as a result of the relationship between the political class and the ruling business class, wherein certain individuals even wear both caps. This can lead one to infer that the government has a hand in encouraging unfair market competition by offering tariff waivers and tax relieves to a select few, e.g. the alleged abuse of import waivers and tax concessions on rice importation between 2000 and 2007.
As it stands now, what is obtainable is the regulation of competition in different industries by dedicated industry regulators. For example, Nigerian Communications Act 2003 and the Electric Power Sector Reform Act 2005 which regulate amongst other things, competition in the communications sector, and in the power sector, respectively.
One of the most important and pervasive competition specific regulators in Nigeria is the Securities and Exchange Commission. This is the body empowered by the Investment and Securities Act 2007 to regulate the securities market. Part XII in particular, provides the rules guiding mergers, acquisitions and take-overs, and strictly curtails adjustments which might substantially prevent or lessen competition in the relevant market.
COMPETITION SPECIFIC LEGISLATION
The 2012 NTCC Bill serves to promote the efficiency, adaptability and development of the Nigerian economy, provide consumers with competitive prices and product choices, promote employment and advance the social and economic welfare of Nigerians, ensure that small and medium enterprises have an equitable opportunity to participate in the Nigerian economy; and protect Nigerian industries from unfair trade practices.
Where a competition law is eventually passed, what happens to government bodies such as the Consumer Protection Agency, Securities and Exchange Council, etc. already seized with the functions that ultimately lead to prohibiting restraint of trade?
Section 8 of the NTCC Bill attempts to address the possible conflict that may arise between these industry specific regulators and the Commission when in sub-section (f) it states that;
“the negotiation of agreements with any other regulatory authority for the purposes of coordinating and harmonising the exercise of mandate over consumer protection and competition matters within the relevant industry or sector”
This writer would suggest that rather than establish a competition agency, the responsibility of enforcement of the law when passed should be given to the consumer protection council. So far, the industry regulators have done a good job in ensuring that there is no monopoly of the market by any one entity. However, there are insinuations, that in certain industries, cartels hold sway. This is Nigeria’s biggest problem, which only a general competition law, properly enforced, can remedy.
Whether a specialised agency would be established or not, it is pertinent that we move forward in regulating market activities within the economy. This can only be done where the basic legal framework for competition is put in place, and upon which other sector regulations can build upon.
As is common in Nigeria, the major issue with most laws is in their enforcement. There is no point in passing a competition law that will not be adequately enforced. What should be done is to ensure that there are modalities in place to enforce the competition law once passed. This should be the focal point for government. Once this can be guaranteed, then efforts to pass the bill (whichever is chosen, or if harmonised) should be intensified.
Pending this, it is important to embark on consumer awareness and sensitisation. The consumer can only be king in a marketplace when they know their rights. In the absence of adequate knowledge, competition law or not, business entities will take advantage of consumer ignorance.