AN ANALYSIS OF THE FEDERAL COMPETITION AND CONSUMER PROTECTION ACT 2019
The Federal Competition and Consumer Protection Act (FCCPA or “the Act”) was signed into law by President Muhammadu Buhari in January 2019. The Act repeals the Consumer Protection Council Act and establishes both the Federal Competition and Consumer Protection Commission (“the Commission” or “FCCPC”) and the Competition and Consumer Protection Tribunal (“the Tribunal”).
The Act seeks to promote competition in the Nigerian market at all levels by eliminating monopolies, prohibiting abuse of a dominant market position and penalising other restrictive trade and business practices. This article examines some key features of the Act and the practicability or otherwise of the powers vested on the Commission and Tribunal.
Competition and Consumer Protection Tribunal
The Act establishes the Competition and Consumer Protection Tribunal which is vested with the powers to adjudicate over matters arising from conducts prohibited under the Act. The Act empowers the Tribunal to hear appeals from or review the decisions of the FCCPC and any other sector-specific regulatory authority in a regulated industry, in respect of competition and consumer protection matters. However, before any appeals or requests for review of the exercise of the power of any sector-specific regulatory authority in a regulated industry can lie before or be determined by the Tribunal, such appeals or requests shall first be heard and determined by the Commission. Interestingly, unlike the Investments and Securities Tribunal of the Securities and Exchange Commission, decisions of the Tribunal are required to be registered at the Federal High Court for enforcement purposes. This requirement raises questions as to the authority and independence of the Tribunal as enforcement of its decisions is subject to registration at the Federal High Court.
Any appeals against the decision of the Tribunal goes to the Court of Appeal.
Anti-Competition Provisions
One of the key features of the Act is that it contains several provisions which seek to prohibit the restriction of competition in any form.
The Act prohibits agreements made to restrain competition such as agreements for price fixing, limiting distribution of goods, collusive tendering, agreements containing exclusionary provisions etc. but exempts collective bargaining agreements, contracts of service (containing restrictions as to the work an individual can engage in upon termination of that contract), partnership agreements relating to terms of the partnership etc. It further goes ahead to make any such agreement between businesses void.
However, the Commission may authorise performance of some of the prohibited acts where they are satisfied that such an act does not eliminate competition and will contribute to the improvement of production or distribution of goods.
The Act also prohibits businesses from fixing minimum resale prices for their goods even where such goods are patented or made through a patented process and voids any agreement containing such provisions.
Any business that enters any of the prohibited agreements shall be liable where it is a natural person to a term of imprisonment not exceeding 5 years or a fine of Five Million Naira (₦5, 000, 000) or both, where it is a body corporate, to a fine not exceeding 10% of its turnover the previous year and every director of such company will be liable upon conviction to a term of imprisonment not exceeding 5 years or a fine exceeding Five Million Naira (₦5, 000, 000) or both.
The Act further vests the power of price regulation on the President. The President therefore has the power to regulate and control prices of goods and services for the purpose of regulating and facilitating competition only.
The Act prohibits undertakings from abusing their dominant positions by charging excessively, refusing to give competitors access to essential facilities, engaging in some exclusionary acts, etc. The Act further explains that an undertaking would be considered to be in a dominant position if it enjoys enough economic strength to allow it prevent maintenance of effective competition and can act independently without considering the effect of its actions on customers, consumers or competitors. The Act however exempts exclusive dealing arrangements or market restrictions between interconnected or affiliated undertakings.
The Act sets out a standard for assessing the market dominance of an undertaking by taking account of their market share, financial power, access to supplies, their links with other undertakings, amongst other things. However, where the act of an undertaking contributes to the improvement of production or the distribution of goods, promotion of technology and does not eliminate competition, the Act does not consider it an abuse of dominant position.
It appears that a number of the prohibitions listed in the Act are hinged upon the outcome of the actions taken by these undertakings. Therefore, a company can perform a “prohibited act” without being penalised as long as such an act yields a positive outcome. This is quite a subjective approach.
What then happens in a situation where an undertaking performs an exclusionary act or any other act considered to be an abuse of dominant position in an attempt to promote technological or economic progress but fails to gain its desired result and instead eliminates competition or affects its customers detrimentally. Will the Commission consider the intention of such an undertaking before penalising them?
It seems that a better option would be for the Commission to set up an internal team to oversee applications from these industries who have intentions to perform any of the prohibited acts for positive and economically feasible purposes. This team would critically consider the application and weigh the possible outcomes of the undertaking’s proposed action before deciding whether to grant its approval or not.
Another feature of the FCCPA is its prohibition on monopoly. The Commission is vested with the power to conduct an investigation where there are grounds for it to believe that there is a monopoly situation in existence relating to the production or distribution of goods or services.
Upon conclusion of their investigation, the Commission is expected to furnish the Tribunal with a report of its investigation and the Tribunal will, based on the findings of the Commission, make orders which it considers necessary to contain or prevent the adverse effects stated in the report.
Mergers
One of the most significant features of the FCCPA is the introduction of the change in the regulatory framework for Mergers in Nigeria, as it repeals the provisions of the Investments and Securities Act (ISA) on mergers thereby stripping Securities and Exchange Commission of its powers to approve mergers and in turn vests those powers upon the Commission.
However, the vesting of these powers on a newly established Commission such as the FCCPC raises some concerns, one of which is the ability of the Commission to effectively carry out the above-mentioned function.
The lack of experience and expertise on the part of the Commission is undeniably concerning and understandably so. Are members constituting the FCCPC qualified enough to take up and regulate such a delicate and significant role? How is a Commission with no prior experience in Mergers & Acquisitions expected to regulate these transactions? What standards will be set in place for the staffing of the Commission? How is the Commission expected to hire staff with adequate experience and expertise when those trained to perform these functions already work at the SEC?
It would be interesting to see how the Commission would tackle these set hurdles to effectively perform in its new role.
An advisable option would be for the Commission and the SEC to enter into a form of “Secondment arrangement” where some staff of the SEC will be seconded or outrightly transferred to the Commission for a period of time. This encourages a smooth transition of power and enables the Commission to have experienced staff on hand who possess the required knowledge and expertise to perform these functions and handle transactions.
It is also advisable that the Commission in conjunction with SEC and other experts in merger transactions set up training sessions where incoming FCCPC staff will be trained and garner adequate knowledge required for effective performance of this function.
The Act further categorises mergers into either small mergers or large mergers depending on the threshold determined by the Commission. A commendable feature of the Act is that it encourages suggestion and public opinion in decision making regarding thresholds. It requires the Commission to publish the proposed threshold in the Federal gazette and invite written submissions on that proposal.
The Act also increases the period of consideration of a large merger from 40 working days to 60 working days and vests the Commission with the power to extend the period of consideration to 120 business days.
One irksome feature of the provisions of the FCCPA on Mergers is that it unknowingly creates a lacuna by relieving the SEC of their powers in regulating Mergers and immediately vesting that power on a Commission which is yet to be operational without providing a definite period for transition of that power from the SEC to the Commission. What this simply means is that until the Commission is fully set up, there is no organisation/body responsible for regulating Mergers. What then happens to existing merger transactions? How does the Commission intend to bridge this gap?
On the other hand, an interesting feature of the FCCPA is that it defines a merger to include joint ventures thereby giving the Commission the power to regulate joint venture agreements. One drawback of this provision is that it fails to specify the extent of the application of this provision. Does the provision apply to all joint venture agreements or does it apply only where one undertaking has more control than the other?
It is our hope that this complex requirement does not discourage potential investors from investing in Nigerian businesses.
Regulated Industries
The Act gives the Commission powers over every sector in the Country. It also establishes a concurrent jurisdiction between the Commission and any government agency having jurisdiction over any sector or industry.
This provision vests very wide powers upon the Commission. It does not seem reasonable that the Commission shall have powers over every sector in Nigeria. The scope of power of the Commission needs to be defined. There should be a threshold to define which sectors or industries will fall within the jurisdiction of the Commission.
The Act vests more power than required on the Commission. The provisions suggest that the Commission has the power to regulate even professional bodies. It vests the Commission with the power to issue guidelines for the application of certain provisions of the Act to the conduct of business of professional associations thereby creating the possibility of an interference with the conduct of the business independent professional regulatory bodies set up to administer such guidelines or policies. Hopefully, this provision does not bring about conflicts between the Commission and other professional/regulatory bodies
Conclusion
There is no doubt that the Act will bring about some welcome changes in the relevant sector as it introduces stricter provisions that protect the interest of consumers and increase the quality and standards of goods and services in Nigeria. We however hope that the possible complications that could arise as a result of some of these provisions and powers vested on the Commission will address adequately.
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This document is intended only as a general discussion on the subject of this article. Please do not regard it as legal advice. We would be delighted to provide additional details or advice about specific queries, if required.
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