How the Federal Competition and Consumer Protection Act Changes Business Regulation in Nigeria

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How the Federal Competition and Consumer Protection Act Changes Business Regulation in Nigeria

With President Muhammadu Buhari’s assent to the Federal Competition and Consumer Protection Act 2019 (FCCPA), Nigeria has finally reached a major milestone and can rightly be called an emerging jurisdiction among countries with comprehensive competition regulation. Regulation of market competition is designed to create dynamism in the conception, enhancement and supply of goods and services for the benefit of consumers, while propelling businesses to reinvent themselves and become increasingly valuable. It ensures that business practices and transaction that are aimed at getting consumers’ attention and increasing the bottom-line provide commensurate value to the consumer. It ensures that markets are not manipulated by anti-competitive practice, and that consumer welfare and safety is maximised.

The FCCPA has introduced a few layers onto the regulatory compliance obligations of businesses in Nigeria. For this reason, it is important that each business entity understands and designs compliance strategies in respect of the FCCPA. The specific compliance strategy for one entity would typically differ from another depending on the structure and conditions of the relevant market/industry as well as the scope and structure of the entity in question. The new law and regime requires experienced legal advice in competition law, expanded consumer protection issues and general government and regulatory relations.

Compliance is critical because the FCCPA establishes severe sanctions for non-compliance or violation of its provisions. These sanctions range from corporate fines running into tens of millions of naira and percentages of business turnover, to criminal prosecution and imprisonment of directors of incorporated entities.

Anti-Competitive Practices Proscribed under the FCCPA

In a bid to ensure fair, efficient and competitive markets in the Nigerian economy, the FCCPA prohibits and punishes specific practices and transactions that are considered anti-competitive, establishes the Federal Competition and Consumer Protection Commission to enforce its provisions to ensure that markets work, and the Competition and Consumer Protection Tribunal empowered to adjudicate and hear appeals on competition and consumer protection matters.

Although it is nearly impossible, in the context of this note due to catch-all clauses in the FCCPA, to list all the various manifestations of anti-competitiveness in business transactions and practices that are considered anti-competitive under the Act, two hard-core conduct are glaring and worthy of note.

  • Cartel Behaviour: This refers to any direct or indirect cooperation among two or more producers to protect their interest with respect to certain aspects of the market in which they operate. Such agreements could be express or implied by conduct and is effective in restraining competition. Cartel behaviour is the most serious form of anti-competitive conduct with severe consequences under the Act. Examples of cartel conduct include:
    • Fixing purchase, sale or resale price of goods or services,
    • Conspiracy to limit supply or manufacture of goods to unreasonably enhance price,
    • Allocating customers, suppliers, territories or specific type of goods and services,
    • Limiting or controlling the production or distribution of goods, services, markets, technical development or investments, and
    • Rigging bids or collusive tendering of bids.

To avoid cartel-like behaviour in all its forms, it is important for businesses to seek legal advice before entering into any agreement with a competitor, keep proper records of contacts and discussions with competitors, and determine product/service price independently of competitors.

  • Abuse of Dominant Position: Holding a dominant position in any market is not illegal but smothering competition by abusing a dominant position is illegal. An entity is considered dominant if it can act without considering the reaction of customers, suppliers or competitors. The FCCPA specifies the criteria in identifying the relevant market in each instance as well as the parameters for determining dominance.
    • An entity may be considered to have abused its dominant position if its activities has the effect of lessening competition or impede the transfer of technology. Abuse of dominant position is also severely punishable under the FCCPA.
    • Abuse of dominant position could manifest in threats on prices and supply, offering loyalty programs and exclusivity agreements, discriminating among consumers on price and sale conditions, selling products or services below cost price, unreasonable refusal to supply certain goods or service, etc.

Merger Control

Another significant portion of the FCCPA is its merger control provisions. The FCCPA has effectively repealed certain sections of the Investment and Securities Act governing mergers and acquisition, and authorized the Federal Competition and Consumer Protection Commission to control mergers and acquisitions for competition purposes. Various types of transactions are likely to fall within the definition of mergers, acquisitions and joint ventures under the Act. Merger is defined very broadly in terms of acquisition of control, directly or indirectly. Consequently, there is a need to analyse business transactions to determine whether prior review and approval of the Commission is required.

Not all mergers and acquisitions need to be reported. The transaction value threshold for such notifications will be periodically determined by the Commission. After reviewing a proposed transaction, the Commission may disallow the transaction if in its opinion, the transaction is likely to substantially prevent or lessen competition. The Commission may also revoke a merger approval if its decision was based on incorrect information occasioned by deceit, or violation of a condition on which approval was issued. Failure to report a notifiable transaction is attended by grave consequences, and implementation of a deal prior to approval is illegal.

Conclusion

The FCCPA significantly modifies the regulatory environment for every industry and sector of the economy. It augments and complements sector-specific regulations, requiring businesses to understand the relevant market(s) and ensure that conduct and agreements are in line with the provisions of the Act.

 

Michelle Chikezie

Senior Associate, SimmonsCooper Partners

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