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Challenges to the Implementation of Competition Law in Nigeria: Lessons from South Africa

Authors:
1
Challenges to the Implementation of Competition Law in Nigeria: Lessons from South
Africa.
By
Enyinnaya C. Uwadi is an LLM Candidate in International Commercial Law with
Competition Law and Regulation at the University of Reading, United Kingdom.
The Nigerian Federal Competition and Consumer Protection Act (FCCPA), enacted on
January 30, 2019 heralded a new dawn in the Nigerian legal sphere. The FCCPA, modelled
after the South African Competition Act, established two institutions for the purposes of
enforcing its provisions. These are the Federal Competition and Consumer Protection
Commission (FCCPC) and the Competition and Consumer Protection Tribunal (CCPT). It
saddled them with the responsibility of promoting competition in the Nigerian market by
eliminating monopolies, prohibiting abuse of a dominant position and penalizing other
restrictive trade and business practices.
1
The FCCPA repealed the Consumer Protection Council Act,
2
and established the FCCPC
3
in
the place of the Consumer Protection Council (CPC). It also repealed Sections 118 to 127 of
the Investments and Securities Act (ISA) 2007 which hitherto empowered the Securities and
Exchange Commission (SEC) to regulate and approve mergers, and assigned this role to the
FCCPC.
4
The FCCPA is applicable to all commercial activities within, or having effect in
Nigeria.
5
Its provisions are also binding on all government departments and state owned
corporations, and indeed all commercial activities aimed at making profit and targeted at
satisfying demand from the public.
6
It equally applies extraterritorially to any prohibited
conduct by a Nigerian citizen or a person ordinarily resident in Nigeria; a corporate body
registered in Nigeria or carrying out business within Nigeria; any person supplying or
acquiring goods or services into or within Nigeria; any person in relation to the acquisition of
shares or assets outside Nigeria which results in the change of control of the business, part of
the business or any asset of the business in Nigeria.
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1
Explanatory Memorandum, FCCPA.
2
Cap C25 LFN 2004; See Section 165, FCCPA.
3
Section 3, FCCPA.
4
Section 93 of the FCCPA
5
Section 2.
6
ibid.
7
Section 3.
2
The FCCPC is composed of a Board made up of a Chairman, the Chief Executive of FCCPC
(Vice-Chairman of the Boards), two Executive Commissioners and four non-executive
Commissioners.
8
These Board members are to be appointed by the President subject to
confirmation by Senate.
9
Likewise, the CCPT is composed of a Chairman who shall be a
lawyer with 10 years post-qualification, and experienced in competition law, consumer
protection or commercial and industrial law; six other members with 10 years professional
experience in either of competition and consumer protection law, commerce and industry,
public affairs, economics, finance, or business administration.
10
The tenure of office of the
members of the CCPT is 5 years from the date of confirmation or upon the attainment of 70
years, whichever comes first.
11
The procedure for appointment of the members of CCPT is
the same with the FCCPC. The CCPT adjudicates over conduct prohibited by the FCCPA,
entertain appeals from and reviews any decision of the FCCPC,
12
hear appeals on the
decisions of sector-specific regulators on competition and consumer protection matters, after
the FCCPC had first considered the appeal.
13
The decision of the Tribunal is to be registered
at the Federal High Court for enforcement purposes only,
14
while appeals on the Tribunal’s
decision goes to the Nigerian Court of Appeal.
15
In the context of existing legal framework, the provisions of the FCCPA override that of any
other law in all matters relating to competition and consumer protection. This implies that the
FCCPC has precedence over and above any other sector-specific regulator in matters or
conducts which affect competition and consumer protection.
16
To ensure a cordial
relationship and guard against power tussle between sector-specific regulators and the
FCCPC, the FCCPC is mandated to negotiate agreements with sector specific regulators
having competition and consumer protection competence to co-ordinate and harmonize the
exercise of jurisdiction over competition and consumer protection matters within the relevant
industry or sector.
17
The above presents a fair representation of the institutional structures and their
responsibilities under the FCCPA. As I noted earlier, the Nigerian competition law is
8
Section 4.
9
Section 5.
10
Section 40.
11
Section 41.
12
Section 47 (1)(a).
13
Section 47 (2).
14
Section 54.
15
Section 55 (1).
16
Section 104.
17
Section 105 (4) (5) (6).
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modelled after that of South Africa with some variations here and there, as some of the
provisions therein are replicas of that which is obtainable in the South African regime. My
thinking is that South Africa was adopted as a reference because its competition regime
stands out as a model of competition law implementation for developing countries.
18
It
equally appeals to them due to the fact that the general philosophy which guides the South
African Competition regime is the idea of using the law as a vehicle for the attainment of
national economic and social objectives. Eleanor Fox and Mor Bakhoum in their book
Making Markets Work for Africa (OUP, 2019) call this ‘harnessing markets to make them
work for the people’.
19
Furthermore, its impact is felt regionally within Africa through
emulation and diffusion by learning, as well as internationally via its synergy with other
developing countries on the platform of BRICS.
20
However, notwithstanding the sophistry of the regime in South Africa when compared to
Nigeria, the former’s regime has not had an easy sail in its implementation of the competition
law due to some enforcement and sometimes procedural related challenges. The general
lesson here for new competition regimes in developing countries like Nigeria is that the
adoption of competition law is not an end itself, but a means to an end. To put in other words,
it is the first step in the unending journey of competition regulation. Some of the provisions
in the FCCPA which could be a clog in the wheels of enforcement and the lessons from
South Africa which could be adopted to address these challenges will be discussed as
follows:
a. Threat to the independence of the regulator via political control and regulatory
capture. For example, the provisions of Part XI of the FCCPA on price regulation is
made subject to an order of the President, a political actor. It is argued that the power
to make such an order ought to be vested in the FCCPC and not a political actor who
may prioritise political calculations over economic decisions. Most times,
governments in developing countries like Nigeria tend to backtrack from necessary
economic decisions with long term benefits, especially if unpalatable in the short
18
Azza Raslan, ‘Mixed Policy Objectives in Merger Control: What Can Developing Countries Learn from
South Africa?’ (2016) 4 World Competition 39, Kluwer Law International, 625.
19
Eleanor Fox and Mor Bakhoum, Making Markets Work for Africa: Markets, Development and Competition
Law in Sub-Saharan Africa (OUP 2019) 4.
20
Jim O’Neill, Dreaming with BRICs: The Path to 2050 (2005) Global Economics Paper no. 99
http://www.macropolis.org/oriente/BRICS.pd>f accessed 23 April, 2019; Natalya Mosunova, ‘Competition Law
Enforcement in the BRICS and in Developing Countries: Legal and Economic Aspects’ (2017) 4 BRICS L.J.
156.
4
term, for fear of an unfavourable reaction in the polity which could jeopardise their
political interests and popular support.
21
The lesson Nigeria needs to learn from South Africa is to insulate its competition
regime from any likelihood of undue political interference. This potential of political
interference may pose a great challenge to the enforcement of the provisions of
Section 2 (2) (a) (b) of the FCCPA where for instance, a state-owned institution
engages in anti-competitive conduct like abuse of dominance. Global best practices in
competition regulation is that the competition authority is established as an
independent, non-ministerial department, subject only to the law of the land, like the
South African Competition Commission and the UK’s Competition and Markets
Authority, in order to insulate it from external influence of political actors, as well as
powerful multinational firms, as the latter may threaten the independence of the
FCCPC via regulatory capture as is often the case of new competition authorities in
developing countries.
b. There is also the overzealous approach in the wording of some sections, for example
the extraterritorial provision which applies to a Nigerian carrying on business in any
part of the world in Section 2(3)(a). Inasmuch as the extraterritorial provisions under
Section 2(3) are commendable, one is left to wonder how this provision of subsection
3a whose basis of application is the mere fact that the conduct in question was
committed by a Nigerian citizen, will be successfully implemented.
22
A further
concern is the criminalisation of cartels which although is quite commendable may
prove to be an overzealous approach where the expertise and resources to successfully
investigate and prosecute cartels are not in place.
The lesson here is that the FCCPA needs to be amended to expunge this impracticable
overzealous provision to the extent that it relates to a conduct by a Nigerian in another
country, where the effect of the conduct has no bearing on Nigeria. On the
criminalisation of cartels, Nigeria can borrow a leaf from South Africa and introduce
21
For example, the reversal of the removal of subsidy on petroleum products by the administration of President
Jonathan in 2012 due to nationwide protests. This removal could have paved way for the deregulation of the
Nigerian petroleum sector and saved a lot of recurrent expenditure needed to fund capital projects.
Consequently, Nigeria pays over GBP 5 Million daily on subsidy. See The Guardian, ‘Nigeria restores fuel
subsidy to quell nationwide protests’ (16 January 2012)
< https://www.theguardian.com/world/2012/jan/16/nigeria-restores-fuel-subsidy-protests>
22
See Enyinnaya Uwadi., ‘Prospects and Challenges of Implementing Competition Law in Developing
Countries: A Review of the Nigerian Federal Competition and Consumer Protection Act 2019’ (LLM
Dissertation, University of Reading September 2019).
5
a leniency program for cartels, due to the difficulty in detecting, investigating and
prosecuting cartels. This will encourage firms engaging in cartels to take advantage of
the friendly gesture in return for a reduced penalty. Indeed, competition authorities
from developed countries with their expertise and funding still have some difficulties
in detecting cartels. This led to the adoption of the leniency programs in the fight
against cartels. South Africa recorded tremendous success in cartel prosecution
following the adoption of the leniency program in 2004,
23
but experienced a
downward trend upon the criminalization of cartel in 2016. This should be a lesson
for the FCCPC.
The FCCPC should adopt a one step at a time approach in implementing the FCCPA.
It should not succumb to the pressure of engaging in a wild goose chase by going after
big firms without investigation and gathering sufficient evidence, in order to gain
public acceptance and credibility. A single successful enforcement will send a strong
signal to the public, which is far better than hurriedly going after multiple firms at the
same time and failing to record a single success.
c. Another concern relates to some of the provisions of the FCCPA which appears to
clash with the statutory powers of other agencies like Standards Organisation of
Nigeria; the National Agency for Food and Drug Administration and Control and
Nigerian Customs Service. These agencies which also have consumer protection
powers under their respective enabling Acts may see FCCPC as a threat and consider
it to be encroaching into their statutory provinces, where they have developed
considerable expertise. This poses a question on whether these agencies will respond
favourably to any approaches made by the FCCPC to them pursuant to the provisions
of Section 105(4) Act.
There is also confusion on whether or not the FCCPC is actually a supreme
competition regulator under the FCCPA. This confusion arises when comparing
Section 104 which makes the FCCPA supreme to any other law on competition and
consumer protection, with Sections 47(2) and 105(4), (5) and (6) (a) (b) which
recognizes sector-specific regulators established under the relevant sectoral law.
Notwithstanding the fact that Sections 47(2) and 105(6) (c) acknowledge the
leadership position of the FCCPC when dealing with sector-specific regulators,
23
‘Cartels in South Africa’, Interview with Pieter Steyn (Getting the Deal Through July 2018)
<https://gettingthedealthrough.com/intelligence/172/article/6247/cartels-south-africa> accessed 25 July 2019.
6
recognizing these sector-specific regulators established by other laws and mandating
the FCCPC to negotiate agreements with them
24
is clearly in tension with Section 104
which starts with the supremacy phrase, ‘Notwithstanding the provision of any other
law but subject to the Constitution of the Federal Republic of Nigeria…..” The
problem here is whether these sectoral regulators will perform their duties pursuant to
their establishing Act, the FCCPA or the negotiated agreement.
25
The above dilemma shows that an amendment of the FCCPA is imminent in order to
avoid a situation of having the FCCPC inundated by jurisdictional tussle to the
detriment of competition regulation. Following the example of the South African
regime, institutional roles need to be clearly defined and streamlined in the FCCPA. It
is my view that sector-specific regulators ought not to interfere with competition
matters and should focus on their areas of core competence pursuant to the supremacy
clause. This would help to avoid jurisdictional clashes and more importantly, the
under-regulation of competition in those sectors, following from the experience
Nigeria had with the SEC when it was empowered with some competition law powers
under the ISA. According to Dimgba,
26
the SEC focused more on its traditional role
as a securities regulator to the detriment of competition law and regulation, as a result
of its lack of expertise in the field.
d. Another potential challenge is the associated and potential problem with the judicial
process under the FCCPA. Competition law cases are business related, and in
business, time management and efficient allocation of resources are very important. I
want to assume that the CCPT will be efficient and decide cases at a faster pace than
the regular Nigerian courts. However, the FCCPA ought to have considered the delays
in the Nigerian judiciary which can make a case linger for over 10 years, and imposed
timeframes for the hearing of appeals and delivering of judgement on competition
cases at the Appeal Court, in the same manner provided in the 2018 amendment to the
Nigerian Constitution for pre-electoral cases which are time bound.
27
Equally, it is
worth noting that the FCCPA is silent on whether the decision of the Appeal Court on
competition and consumer protection is final or can be further appealed to the
24
Section 105
25
See Uwadi n 22.
26
Nnamdi Dimgba, ‘The Changing Landscape: Federal Competition And Competition Protection Act’ (Keynote
Address Delivered at the Jackson, Etti & Edu in Partnership with Norton Rose Fulbright Conference On
Competition Law, 18 June 2019) 4.
27
Constitution of the Federal Republic of Nigeria 1999 (Fourth Alteration No 21) Act 2018.
7
Supreme Court. This creates another challenge of interpretation as some cases in
Nigeria terminate at the Court of Appeal while others at the Supreme Court.
Going further, notwithstanding my earlier position that sector-regulators should hand-
off competition matters, another concern with the FCCPA is the intermediate appeal
procedure where the decision of sector regulators are to be first reviewed on appeal by
the FCCPC before being appealed further to the CCPT. This procedure does not
resonate well with me because of the time constraints and financial implication it has
on the overall appeal process. Also, it is my view that the FCCPC ought not to be
overburdened with so many responsibilities at this early stage to the extent that it
loses focus of its core mandate of competition regulation.
28
I believe that the CCPT
will be a proper forum for appeals from the decisions of a sector regulators, for
efficient management of time and allocation of scarce resources.
Following the competition regime in South Africa, strong and competent pro-
competition institutions should be established in order to safeguard the competition
process to ensure the attainment of the objectives of the FCCPA. There is therefore
the need to establish a specialised court to be called Competition and Consumer
Appeal Court (CCAC) in the place of the Court of Appeal as the appellate and final
court in competition and consumer protection matters. The importance of having a
specialized court in competition matters is that the expertise of judges in both legal
and economic concepts enables them to hear and understand expert evidence and
argument, and make decisions that are legally and economically sound, having regard
to the impact upon the system as a whole. Any further appeal on the decision of the
CCPT should be to the Supreme Court only on point of law, and subject to the leave
of the Supreme Court. Timeframes on the duration of appeal should equally be
imposed in order to ensure speedy dispensation of justice.
Conclusion
In conclusion, while this write-up is not advocating for a slavish adoption of the South
African competition regime, it is making a case for Nigeria to not only adopt the relevant
provisions of the South African Competition Act, but also for it to pick a few lessons in the
28
William E. Kovacic & Marianela Lopez-Galdos, ‘The Lifecycles of Competition Systems: Observations on
the Evolutionary Paths’(2016) 1 CPI Antitrust Chronicle 1, <
https://www.competitionpolicyinternational.com/wp-content/uploads/2016/04/Kovacic-Lopez.pdf> accessed 23
September 2019.
8
implementation and enforcement of its new competition legislation from the experiences of
an older regime from a developing African country. This is to ensure that the Nigeria avoids
the obstacles and overcomes the likely challenges in the implementation of the new
competition regime, in order to ensure the attainment of the objectives of the FCCPA, and
also ensure the attainment of pro-competitive national markets for the good and betterment of
its citizens, which is in line with the idea of Fox and Bakhoum in ‘Making Markets Work for
Africa’.
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