Imperatives of the Anti-trust Law

Eromosele Abiodun reasons that if the Anti-trust bill currently before the National Assembly is signed into law, it will not only infuse a level playing field, but will also enhance predictability and certainty in the market place, thereby simulating entrepreneurship and economic growth

On July 5, 2013, the European Union fined Microsoft $732 million for failing to respect an anti-trust settlement with regulators. The company was accused of failing to include the ballot system in certain products starting in May 2011, affecting more than 15 million European users. The lapse came to light after rival companies reported its absence.

Something similar to this happened on August 1, 2007, when British Airways was fined £270 million in a dual action by the United Kingdome and United State competition authorities, after admitting price fixing on fuel surcharges on its long-haul flights. The US Department of Justice imposed a penalty of $300 million (£148 million) on the group, after a £121.5 million fine was levied on the airline by the Office of Fair Trading (OFT). At the time, the OFT fine was the biggest-ever penalty imposed on a company for infringements of competition law.

The airline had admitted that, between August 2004 and January 2006, it colluded with Virgin Atlantic over the surcharges added to ticket prices in response to rising oil prices. During that period, the extra charges soared from £5 to £60 a ticket on long-haul return flights. That opened the way for passengers who believe they have been ripped off by BA to launch civil claims against the airline.

Nigeria Lost Out
While the American and the British authorities were able to get BA and Virgin Atlantic to pay for their wrong doing, Nigeria failed to do so. Why? Relying on the American example, the Nigerian authorities had imposed a fine of £280 million on BA and Virgin Atlantic for the same offence. However, the two firms refused to pay the fine stating that they have not breached Nigerian laws.

The firms successfully argued their case and got away with murder because there was no anti-competition law in Nigeria at the time-there is still no such laws today. Previous efforts made by the Ministry of Industry, Trade and Investment and other interested parties to get the Competition Bill passed into law did not succeed.

All that may change soon because there is already an anti-trust bill before the National Assembly. A public hearing on the bill has already been held in Abuja, Nigeria’s seat of power. It is called the Federal Competition and Consumer Protection Bill, 2015. If the bill is passed, the Consumer Protection Act will be repealed.

The Federal Competition and Consumer Protection Commission (FCCPC) will be established. The Competition and Consumer Protection Tribunal (CCPT) will be set up and the Consumer Protection Council (CPC) will be abolished. The aim of the bill, THISDAY findings revealed, is to, “prohibit restrictive business practices which prevent, restrict or distort competition or constitute an abuse of a dominant position of market power in Nigeria.”

Nigeria needs it
Nigeria needs anti-trust law because it promotes and protects competition. As widely believe, the laws are not intended to punish big companies merely on account of their size, or to serve as surrogate “consumer protection” laws. Most importantly, they have never been anti-market or anti-business in their underlying conception or in their implementation. On the contrary, the anti-trust laws are intended to promote market economics and healthy competition in every market, while checking the abuses that sometimes arise in different markets.

The idea behind these laws, experts said, is that in every market there should be robust competition.
“If in each market there are many sellers busily competing against one another to sell a particular kind of product or service to paying customers, no one seller will be able to take unfair advantage of the buyers, but rather each seller will be obliged to offer its good or service on attractive terms, and each seller will be responsive and efficient in its dealings with buyers, who otherwise will simply turn to another, better seller. In other words, vigorous competition in any given market keeps the sellers honest, forcing them to strive continually both to improve their goods and services and to offer them on favourable terms.

“Customers benefit from this competition. Poorly run companies are run out of business, as they deserve to be. The better run companies and the most honest ones too, tend to prosper. Society as a whole will benefit. This is nothing other than the glory of marketplace economics working properly and rewarding each of us for our efforts, our talent, and our perseverance. The antitrust laws exist to help marketplace economics to work better,” said an analyst, who do not want his name in print.

The anti-trust laws, he said, exist not to help populist business-bashers dismantle successful, prosperous companies, even the most dominant global monopolies of the era.
Rather, he said, these laws are meant to redress or temper the fundamental flaw that seems inherent to unbridled competition.

“A word of explanation is in order. Competition is the best market system for human beings, so the theory goes, because each of us goes to market to do selfish bidding for ourselves and our families. We will produce the best goods and services, doing so at the best prices, only because if we fail to do so our customers will abandon us and buy from another; and when we ourselves buy goods or services, we will look to the seller who can provide them on the most favourable terms, taking into account considerations of quality, price, and delivery, etc.

“Thus antitrust laws promote market economics and are never to be confused with anti-market economics. Antitrust laws do not punish big businesses merely because they are big and successful. Success rather is the proper reward to those who labour well or who provide excellent goods and services to their customers. This is what motivates us in the first place to do well. Success must be encouraged, not envied or resented, much less punished by government confiscation (that is taxation and redistributive policies), “he stated.

Coalition wants bill passed
Meanwhile, a private sector coalition, comprising the Nigerian Employers Consultative Association (NECA) and other business membership organisations have called for the immediate passage of the Competition Bill currently before the national assembly.
The coalition stated this when they paid a courtesy visit to the Corporate Head Office of THISDAY Newspaper Group in Lagos.

Leader of the coalition, Leonard Ugboaja stated that a country like Nigeria that is transiting from public sector domination to a private sector driven one, needs such law to stop abuses.
The bill, he stated, will among other things, promote job creation and attract foreign and local investors to invest in the country.

According to him, “Competition policy sets out the broad vision of measures aimed at promoting and regulating competition in the economy. Competition is good for every economy and is mainly the logic behind private sector led market economic model. In an economy like Nigeria that is transiting from public sector domination to a private sector driven one, competition does not just happen. There must be some policy measures to promote competition. Such measures include privatisation of state owned enterprises, deregulation of otherwise regulated monopolies and progressive liberalisation of trade.”

He added, “Competition policy sets out the goal of promoting competition in the economy. It can be contained in a distinct policy document or runs through several sector specific policy documents. Broadly speaking, competition policy runs through such policy areas as trade and industrial policy, investment policy, privatisation and deregulation policy, consumer protection policy. Competition law sets out the rules that regulate that regulate the operation of commercial entities within the economy so as to ensure that virtues of competition are not impeded.”
Nigeria, he added, has gone through the first stages of enthroning a competition culture but stopped the journey half way.

This, he stated, has caused all manner of distortions in different sectors of the economy adding that this is why the private sector needs to advocate for the necessary regulatory framework to ensure that competition is promoted and properly regulated in the different sectors of the nation’s economy.

He said: “Competition law and policy is about applying rules to make sure businesses and companies compete fairly with each other and that while markets work fairly well much of the time, effective competition is not automatic, and can be harmed by inappropriate government policies and legislation, and by the anti-competitive conduct of firms. Competition facilitates greater equality of opportunity by breaking down the barriers to fair competition that often help to protect incumbent elites.

“Competition also encourages enterprise and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality. And like in all market economies, the Nigerian economy needs competition law and policy to ensure a proper functioning of the market in the interest of consumers and businesses. As a key ingredient for an inclusive growth, Nigeria requires a robust competition law to regulate the market to ensure a win-win for both consumers and producers in the country.”

Economic benefits
One of the many benefits of the law, he said, would be low prices for all, more choice, innovation and better quality.

“The simplest way for a company to gain a high market share is to offer a better price. In a competitive market, prices are pushed down. Not only is this good for consumers – when more people can afford to buy products, it encourages businesses to produce and boost the economy in general. Competition also encourages businesses to improve the quality of goods and services they sell – attract more customers and expand market share. Quality can mean various things: products that last longer or work better, better after-sales or technical support or friendlier and better service.

“In a competitive market, businesses will try to make their products different from the rest. This results in greater choice – so consumers can select the product that offers the right balance between price and quality. To deliver this choice, and produce better products, businesses need to be innovative – in their product concepts, design, production techniques, services etc. Better competitors in global markets: Competition within Nigeria helps make Nigerian companies stronger and help hold their own against global competitors,” he said.

Competition policy, he said, sets out the goal of promoting competition in the economy adding that, “It can be contained in a distinct policy document or runs through several sector specific policy documents. Broadly speaking, competition policy runs through such policy areas as trade and industrial policy, investment policy, privatization and deregulation policy, consumer protection policy among others.”

He added, “Competition law sets out the rules that regulate the operation of commercial entities within the economy so as to ensure that virtues of competition are not impeded. A competition law would usually include the following broad category of provisions: Prohibition of agreements or contracts between or among firms aimed at restricting or eliminating competition, prohibition of abuse of dominant position or market power (using a dominant position to unfairly restrict or eliminate competition especially from smaller players) and regulation of mergers and acquisitions (to ensure that competition in the relevant market in not eliminated by the merging of two or more firms).”

Scrutiny of competition
He said specific practices that come under the scrutiny of competition law include: Price fixing by a dominant firm or by a number of firms in concert, allocation of markets along geographical or product lines, refusal to deal with a particular supplier or distributor collusive tendering or bid rigging, forming and operating cartels or using other antics to keep new entrants away from the market, resale price maintenance and refusal to grant a potential competitor access to shared or network facility.”

Nigeria, he stated, had gone through the first stages of enthroning a competition culture (privatization, deregulation, liberalization) but stopped the journey half way.

He added, “This has caused all manner of distortions in different sectors of the economy. That is why the private sector (demand-side of reform) needs to advocate for the necessary regulatory framework (Policy, Law and Enforcement Institution) to ensure that competition is promoted and properly regulated in the different sectors of the economy.

“The Federal Competition and Consumer Protection Policy is government’s response to addressing anti-competitive concerns and consumer rights issues in the Nigerian economy. The document spells out the focus of the policy goals, the legal and institutional framework for promoting competition in Nigeria.”
Ugboaja had at a press briefing on the need for early passage of the Competition Bill in Nigeria early this month,solicited for cooperation and partnership in creating the required awareness on the proposed Bill so that the National Assembly will pass this Bill in good time and help the nation derive the enormous benefits of having the Competition Bill in place.

“Certainly, doing business in Nigeria in these financially harrowing and uncertain times is no mean task and since this bill will among other things, promote job creation and attract foreign and local investors to invest in the country; it is, therefore, imperative that this Bill should be given priority attention by the lawmakers. Although the Bill has passed the second reading in the House of Representatives, it does not give any room for cheers as some previous attempts to pass this Bill even surpassed this stage before it was ‘abandoned’, so to speak.

“It would be recalled that Nigeria began the process of instituting a competition regime over 16 years ago with. A draft policy was produced by the Bureau of Public Enterprise (BPE) and two separate Bills were drafted by BPE and the then Ministry of commerce and Industry. However, none of these saw the light of day. Successive administrations and sessions of the National Assembly have taken steps to enact a competition law but the effort was never seen to completion. The immediate past administration drafted a Policy Document and a Bill on Competition and Consumer Protection.

“While the Policy Document was never presented to the Federal Executive Council (FEC) for consideration, the Bill was approved by FEC and transmitted to the National Assembly for enactment. However, the Bill could not make any progress in the 7th National Assembly as it was transmitted just three months before the elections. At the moment, about four Bills on the subject have been sponsored by different concerned Lawmakers in both Chambers of the National Assembly as private Member Bills. Moreover, the National Assembly has identified this Bill as one of the priority Bills for passage,” he said.

Matching words with action
We therefore, urge the lawmakers to match words with action and give Nigeria a competition law before the end of this year. We also call on the federal government to revisit the draft competition and consumer protection policy document and approve it as a matter of urgency. It is this policy that sets out the goal of promoting competition in the economy. We further call on the federal government to mainstream competition in broader areas of economic development such as trade and industrial policy, investment policy, privatization and deregulation policy, etc.

With the ongoing reforms in the economy and the privatisation and liberalisation programmes that have been pursued over the past few years, he said it is important that these programmes are supported with the appropriate regulatory measures and laws to ensure that they deliver real benefits to the citizens.

One of such measures, he stated, is the adoption of a competition regime, “It is important to note that if Nigeria, which has committed itself to market liberalisation, through privatisation and deregulation of various sectors of the economy, does not have a competition law, it may unwittingly end up creating new economic dangers. Indeed these are already manifesting in some sectors and industries.

“When vital sectors of the economy are deregulated, replacing government monopolies with private players who are not constrained by social interests and whose overriding drive is profit, there is nothing to prevent the new undertakings from engaging in cartel and abusive behaviour such as price fixing, market division, and excessive pricing. Yet, in what would appear to be a bitter irony, in the absence of a competition law, such practices would not be illegal, no matter how much they hurt the economy and the consumers.

“The point is that poorly planned and executed liberalisation may be worse than no liberalisation at all, since it ends up creating distortions in the market. It is therefore certain that any market liberalisation programme like Nigeria’s that is designed in such a way as to lack an essential component like a legal regime to regulate competition in the market would be fundamentally flawed.”

The bill, he added, also proposes to subsume the existing CPC into the proposed CCPC, with enhanced capacity to implement the competition law and a more refined and comprehensive consumer protection law enacted as part of the Bill.
The Bill, Ugboaja stressed, has clearly spelt out the powers of the proposed Commission and how such powers would be exercised.

“As part of the activities to ensure that the Competition Bill is passed by the lawmakers within the next few months, NECA and other key business membership organisations in Nigeria have lined up other advocacy programmes in Lagos and Abuja. The programmes include a national conference and courtesy call on the Speaker of the House of Representatives in June in Abuja, media tour and roadwork in Lagos. Today, we have chosen to appeal to the National Assembly to urgently work on this Bill and pass it without further delay. With your support, this Bill will certainly be passed for the good of all Nigerians,” he stated.