Competition Law in Nigeria
Competition Law in Nigeria is governed by the Federal Competition and Consumer Protection Act (FCCPA) 2019. The Act unified the laws governing competition and consumer protection in Nigeria, and gave the Federal Competition and Consumer Protection Commission (FCCPC) regulatory powers over competition in Nigeria.
Prior to the presidential assent to the FCCPA in 2019, competition law in Nigeria existed in the provisions of a couple of legislations empowering sector-specific regulators, (especially regulators established post 2002), with the power to exercise competition regulatory functions in their specific sectors. A few of these agencies include the Nigerian Communications Commission (NCC), the Nigerian Civil Aviation Authority (NCAA), the National Insurance Commission (NAICOM) and the Securities and Exchange Commission (SEC) amongst others. Unfortunately, enforcement of the competition law aspect of the regulatory functions of these agencies was largely neglected.
The FCCPA placed the review of all mergers and other business combinations or arrangements under the regulatory powers of the FCCPC, thus repealing individual sections of the Investment and Securities Act, which initially vested regulatory powers over mergers and acquisitions in the Securities and Exchange Commission.
Following the commencement of the FCCPA, the FCCPC and SEC issued a joint advisory notice to the effect that both organizations will jointly review all notifications of mergers and other business combinations or arrangements until further notice. This was to ensure continuing and seamless commercial transactions and market operations during the transition period and prior to the FCCPC assuming its full mandate as prescribed by the FCCPA.
Competition law seeks to control mergers, prohibit cartels, and regulate unilateral conducts such as abuse of market dominance by firms or business players. It is important to note that the occupation of a dominant position does not constitute a violation of competition law. What the law prohibits is the abuse of that position, especially when used to weaken competition (monopolization).[1]
Monopolization occurs where there is the possession of market power in a relevant market, and the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of innovation, a superior product, business acumen, etc.
A firm’s ability to increase its prices is usually restricted by the presence of competition and the possibility that its customers may likely switch to an alternative source of supply. Where these restrictions are weak, a firm is said to have market power. Should the market power be greatly pronounced, the firm is considered to be in a dominant position (or a monopoly).
Market power is directly evident where a firm can profitably raise prices above the competitive level. Direct evidence of market power is not always obvious; for this reason, resort is usually given to the examination of market structure to obtain evidence of market power. Here, market power can be inferred from a firm’s possession of a dominant share of a relevant market protected by entry barriers.
Section 70 of the FCCPA gives insight to the definition of a “dominant position”. It provides:
“(1) For the purpose of this Act, an undertaking is considered to be in a dominant position if it is able to act without taking account of the reaction of its customers, consumers or competitors.
(2) A dominant position in a relevant market exists where an undertaking enjoys a position of economic strength enabling it to prevent effective competition being maintained on the relevant market and having the power to behave to an appreciable extent independently of its competitors, customers and ultimately consumers.”
Section 71 of the FCCPA states the criteria for identifying the relevant market. It includes the geographical boundaries that identify groups of sellers and buyers within which competition may likely be restrained, all products that can be reasonably interchanged or substituted for the same purpose, and suppliers to which consumers may turn to if the abuse of dominance leads to a significant increase in price or to other detrimental effect upon the consumer.
It is important to state that a dominant share of a relevant market does not by itself indicate market dominance or market power, especially against the backdrop of the possibility of competition from new entrants. For this reason Section 72(3) lists criteria to be considered in determining market dominance.
The law permits the maintenance of market dominance where such is a result of innovations or improvements to a firm’s products or services. This promotes competition and is encouraged. On the other hand, restrictive agreements (exclusionary contracts), predatory pricing, conspiracy, or other conducts that serve to limit the growth of competition in a relevant market, are prohibited.
The determination of when a firm’s behavior is an abuse of market power as opposed to a competitive action can be tricky. For this reason, the FCCPA in sections 72(2) lists instances in which an act of abuse of a dominant position will be deemed to have been carried out. These include charging an excessive price to the detriment of consumers, denying competition access to essential facilities when it is economically feasible to do so, etc.
It is important to note however that certain acts that may be classified as an abuse of a dominant position are allowed by the FCCPA, where their technological efficiency and other pro-competitive gains outweigh their anti-competitive effect.
[1] See section 72 of the FCCPA.