Is There a Need for Competition Law in the interest of Nigerian Consumers

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Is There a Need for Competition Law in the
interest of Nigerian Consumers

• 2014 G.O. SODIPO MEMORIAL LECTURE
• Lagos, Nigeria
• 1 December, 2014
• Dr. Nnamdi Dimgba
• Olaniwun Ajayi LP, Lagos

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Contents

• The Nature and Essence of Competition Law
• The Need for Competition Law in Nigeria
• The Current state of the Competition Bill
• The Challenges to the Establishment of a
  Competition Law for Nigeria
• Conclusion

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The Nature and Essence of Competition Law

• Standard definition
• A set of rules, disciplines and judicial
  decisions maintained by governments relating
  either to agreements between firms that restrict
  competition or to the concentration/abuse of
  market power on the part of private firms

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The Nature and Essence of Competition Law

• The definition the importance of the process of
  competition. Why?
• Competition is
• The lifeblood of strong/effective markets
• Useful to consumers
• downward pressure on prices
• generates innovation (new products/services)
• Useful to producers
• downward pressure on costs
• induces reliance on strengths

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The Nature and Essence of Competition Law

• Competition creates efficiencies in the market
  place
• Productive efficiency
• minimum resources to create maximum goods
• Allocative efficiency
• channelling resources to where they are needed
  most
• Dynamic efficiency
• adapting fast to changing economic circumstances
  innovativeness
• Inter-temporal efficiency
• using resources in a sustainable way

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The Nature and Essence of Competition Law

• Competition not an end in itself merely the
  means by which society can attain the above
  efficiencies
• Competition law exists to safeguard the free
  market system or to checkmate its breakdown
• Note the existence of special sectors e.g. health
  services, basic utilities, agriculture (EU - CAP)

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Goals of competition law

• Generally market contestability
• Economic Efficiency
• 3 efficiencies consumer welfare
• Wealth redistribution/preservation of liberty
• Promotion of economic equity rather than economic
  efficiency
• Preservation of the foundations of liberal
  democracy

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Goals of competition law

• Protection of competitors
• Process of competition protection of
  competitors
• the competition authority should hold the ring
  and ensure that the small guy is given a chance
  to succeed
• Ideological and practical problems
• consumer vs. competitor
• Chicago School
• A broader range of goals
• Market process
• Social, employment, industrial, environmental,
  regional, minority entrepreneurship, rural
  regions
• EU single market integration

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Competition Law vs. Consumer Protection Law

• Competition law and consumer protection law
• 2 sides of the same coin
• Common goal provision of consumers with access
  to an array of competitively priced goods and
  services in the market place
• One agency in some jurisdictions enforcing both
  e.g. FTC (US) and OFT (UK)

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Relationship b/w competition law consumer
protection law

• Competition law
• to preserve a range of options in the
  marketplace, undiminished by artificial
  constraints like price-fixing or anticompetitive
  mergers
• requires only a sufficient range of choice, such
  as a competitive market would have produced
• have options increased?

• Consumer protection
• to protect customers ability to choose among the
  options, unimpeded by artificial constraints like
  deception/withholding of material info.
• requires only a sufficient amount of information,
  not perfect information
• have actual purchasers been misled?

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The development of competition law

• Historical evolution
• this bill does not announce a new principle of
  law, but applies old and well recognised
  principles of the common law to the complicated
  jurisdiction of our State and Federal Govt
  (Senator Sherman)
• Common law
• Abolition of the practices of forestalling,
  ingrossing by Saxon kings
• Statute of Labourers (1349) on excessive pricing
  (precursor of treble damages in US antitrust law)
• Restraint of trade doctrine (John Dyers case,
  1414)
• Doctrine of conspiracy
• Statute of Monopolies (1623)

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Facets of competition law

• Control of cartels and restrictive agreements
• bilateral/multilateral conducts
• price fixing market division output
  restriction bid rigging and collusive tendering
• S. 1 (Sherman, US) Art. 81 (EU)
• Control of dominant positions
• unilateral conducts
• Antitrust law not against dominance but its abuse
• S. 2 (Sherman, US) Art. 82 (EU)

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Facets of competition law

• Merger control
• Regulation of market structure
• Recognition of efficiencies
• S. 7 (US, Clayton 1914) Reg. 139/2004 (EU) ISA
  2007, Nig.)
• Regulation of prices
• Contradictory? But
• Natural monopolies and Essential facilities
• Pt XI Sch. 3 (FCC Bill, Nig.)

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The development of competition law

• Modern evolution
• US Civil War industrial consolidations/trusts
  in key industries (hence, anti trust)
• USA
• Sherman Act 1890
• Sections 1 2
• Europe
• ECSC Treaty 1951
• Articles 65 66
• Treaty of Rome 1957
• Articles 85 86 (81 82)
• Note that the EU adopted a distinctly European
  approach and did not slavishly adopt the US

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The Need for Competition Law in Nigeria

• Case Against
• That competition is a good thing for a developing
  economy is ambiguous (Laffont, p. 8)
• Competition law would hamper economic
  development?
• No universal acceptance of the usefulness of
  competition law for developing countries

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The Need for Competition Law in Nigeria

• Case For
• Sine qua non to economic reforms/liberalisation
• private vs public monopoly
• Legal Gap exploited in key product markets
• Cement
• Petroleum Products (refineries privatisation
  saga)
• Pay-television
• Telecommunications
• Air Transport
• Others (bread, sachet water, sugar, fertilizer
  etc)

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The Need for Competition Law in Nigeria

• To encourage Nigerian corps. to acquire
  competition law awareness and capacity
• NLNG vs. EU Commission incident
• Expansion by Nigerian corps into African
  countries with Competition regime.
• ECOWAS Regional Competition Law

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The Need for Competition Law in Nigeria

• Economic equality/wealth redistribution
• concentration of political/economic power is a
  threat to budding democracy
• To strengthen the hands of the competition
  constituency by means of a legal framework
  (anti-dote to regulatory capture!)

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The Need for Competition Law in Nigeria

• Public accountability
• National pride leader, lead by example!
• International investor confidence (FDI)
• Cross-border anti-competitive behaviour by
  multinationals
• Anti-competitive alliance by domestic firms

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Current state of the Competition Bill

• A journey into history!
• Dec. 2002 El-Rufais Declaration
• March 2003 ECU Associates draft competition
  bill
• pretty good document, but for the merger
  provisions
• Early 2005 FMoJs (Bayo Ojos) draft bill
• Fair document, but
• Overbearing political control!
• Anachronistic merger provisions!

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Current state of the Competition Bill

• A journey into history!
• 24 Aug. 2005 FEC adoption of FMoJ draft bill
• Sept 2006 presentation and rejection of FMoJ
  bill by the Senate
• Sept 2006 March 2007 redraft of the bill by my
  team BPEs
• Federal Competition and Consumer Protection Bill
• National Competition and Consumer Protection
  Policy

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Current state of the Competition Bill

• Precis
• Lack of political will/commitment by the
  political arm of the executive
• Bureaucratic wing (BPE, SEC) okay
• An unwritten understanding b/w the economic and
  political emperors?
• Bunmi Onis Committee
• Note the new merger provisions in Part XII of the
  ISA 2007
• Halfway house not a house!
• Securities regulation does not go with antitrust
  enforcement!

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Current state of the Competition Bill

• Hope
• It is not how long but how well
• Thailand, Egypt, Pakistan, Sri Lanka, Malawi,
  Namibia etc
• But
• US, Europe, South Africa, Zambia etc
• Lesson
• While law can be passed overnight, an effective
  implementation will take much longer where local
  political, legal, institutional and social
  environments do not yet support it!

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Conclusion

• Law is needed, but the Political Economy
  Question
• No one size of shoes that fits all so beware
  of slavish adoption!
• Laws must reflect the socio-cultural, economic
  and political environment of the country
• Understand the challenges and model regime to
  overcome them
• Create a Competition Promotion Office (CPO) and
  take the battle to the camp of the enemy!