From the analysis we have seen in the first part of this article, it is really absurd that Nigeria does not yet have a competition law. Almost all the sectors of the economy are subject to one form of anti-competitive conduct or the other. Just think of cement. The backward integration policy of the government in this sector has led to massive investments but has also left the sector in the hands of few manufacturers. An anecdotal evidence of anticompetitive practice is in the fact that the price of cement in Nigeria today is said to be four times higher than the global price. It is a fact that one or two firms just set the price for cement in Nigeria. Some time ago, the market leader in this sector, Dangote Cements threatened to shut down its Obajana plant if the government continued to allow another competitor (Ibeto Group) to keep importing cement into the country because, according to the company, there was glut in the market.
From the analysis we have seen in the first part of this article, it is really absurd that Nigeria does not yet have a competition law. Almost all the sectors of the economy are subject to one form of anti-competitive conduct or the other. Just think of cement. The backward integration policy of the government in this sector has led to massive investments but has also left the sector in the hands of few manufacturers. An anecdotal evidence of anticompetitive practice is in the fact that the price of cement in Nigeria today is said to be four times higher than the global price. It is a fact that one or two firms just set the price for cement in Nigeria. Some time ago, the market leader in this sector, Dangote Cements threatened to shut down its Obajana plant if the government continued to allow another competitor (Ibeto Group) to keep importing cement into the country because, according to the company, there was glut in the market.
In a market where there is competition, a glut would result in a fall in prices. But in an oligopolistic or monopolistic market, the major supplier(s) would take measures to curb supply in other to maintain artificially high prices. This is what we have in the cement sector in Nigeria today. This goes to show the role government policy, especially trade and industrial policy play in creating distortions in the market and placing heavy burden on the consumers and the economy at large. Competition policy and law would operate to ensure that interventionist policies for industrial development do not place undue burden on the consumers and the economy. It would adopt an empirical approach to balance the industrial policy objectives with the need to maintain competition. In the absence of a competition policy and law, it is easy for vested interests to hijack legitimate policy objectives and distort it for the benefit of few individuals.
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Other sectors that would merit the scrutiny of a competition law in Nigeria today include the aviation sector (the power of one airline to fix prices because it is a dominant operator or the coming together of airlines to fix prices for their routes). Apart from the domestic airlines and their domestic routes, the international airlines also merit scrutiny. It is instructive to note that in 2011, British Airways paid at least 540 million US Dollars in the EU and US as fines and compensations to passengers in settlement deals for colluding with Virgin Atlantic Airlines to fix prices in long distance flights (which included Nigeria) and cargo charges between 2000 and 2006. The two airlines colluded to regularly increase passenger fuel surcharges, which was a disguise for increase in ticket prices. Virgin Atlantic escaped the heavy fine just because it blew the whistle hence it received immunity under the leniency rules.
Apparently taking a cue from these investigations and their outcomes, the NCAA initiated investigations against the airlines in 2011. The panel set up by the agency did what could be termed a thorough job as shown in their final report and recommended fines of 135 million US Dollars for BA and 100 million US Dollars for Virgin for colluding to fix prices, thereby ripping off the Nigerian consumers and denying the government of accruable taxes. In the absence of clear cut competition law proceeding, the whole issue turned diplomatic and political. Even the Senate Committee investigated the matter and recommended that the two airlines should pay the fines, having found them to be engaged in abusive pricing practices. The Senate Committee further affirmed that the Nigerian government was losing about N3.7 million every year to the abusive pricing practices of the two airlines. The last we heard of the matter was that a “judicial panel” set up to review the case overruled the decision of the NCAA. Wait for this – the reason the panel gave for setting aside the fines is that the NCAA Act of 1999 which was the operative law at the time the violation occurred (2004-2006) did not make provisions for fines but only empowered the NCAA to make “cease and desist orders”!
It did not help the case of NCAA that the extant act of 2006 empowers it to impose fines for violations of the Act. So, in the interplay of diplomacy (?), politics, weak legal and institutional framework, the nation lost a whooping 235 million dollars in fines plus potential refunds to individual consumers. Have the airlines abated these abusive practices? Your guess is as good as mine. I recommend that every concerned Nigeria read the Final Investigative Report available at www.cbinigeria.com/. It is instructive to note that Judicial Panel upheld the findings of the report but only frowned at the penalty imposed. Further note that the only defence which the airlines especially Virgin Atlantic kept repeating in the press is that they did not violate any “Nigerian Law”.
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Another sector that demands scrutiny is the pay TV market. Many Nigerians can only grumble about the kind of services or the pricing policy of the dominant player in this market, Multi-choice DSTV. A competition law would investigate if the firm has abused its dominant position in its pricing policies and mete out appropriate sanctions where violations have occurred. What of sugar, fertilizer, rice, cargo/freight services, etc. Same scrutiny would apply to sectors with trade associations who come together to fix prices for their services and even punish members who do not abide by these prices. It is important to note, however, that competition law would allow for some exemptions and justifications for certain ordinarily anticompetitive structures and conducts especially where the net economic welfare or public policy benefit outweighs the anticompetitive effect.
The relative competition we are seeing in the telecom sector is because the sector is regulated by the NCC and the Commission has the mandate to enforce competition rules in the sector. The Commission has taken measures in this regard as we have seen above in terms of having a guideline for interconnectivity, making a determination of dominance which led to the Commission issuing directives to MTN (the dominant operator in the voice call market) to eliminate disparate tariffs between calls within its network and those going outside its network. The mobile number portability scheme is another measure to promote competition. Similarly, the reform efforts in the power sector is geared at ensuring competition at the long run and the principles for achieving this are set out in the Electric Power Sector Reforms Act, 2005. Let me also mention that the Investment and Securities Act of 2007 has provisions on mergers and acquisition and vests the Securities and Exchanges Commission with powers akin to that exercised by a competition authority in merger regulation. One is yet to see a case in which the Commission applied these provisions.
The point here is that no successful economic reform agenda can be executed without accompanying regulatory framework that would support the smooth functioning of the reformed sectors. The result of privatising and liberalising some major sectors without a competition law is that the private investors are left to behave as they choose and the consumer and the economy is the worse off for it. Also, as the push for increase participation of the private sector in the economy in gaining momentum and start-ups are springing up here and there, there is the need to safeguard competition. This is more important in ensuring that the small and medium scale enterprises have a fair chance to compete without being overrun by some giants in the marketplace. It is true that market distortion or lack of competition does not only affect the consumer (consumer welfare loss), it also affects the firms and the sector in which the firms operate by stifling innovation, encouraging inefficiency, waste and low capacity utilisation (producer welfare loss). This in turn has a dead weight loss effect on the economy as resources are allocated to non-efficient sectors leaving the more efficient sectors to suffer. Overall, the absence of a competition law in Nigeria creates a big hole in or regulatory environment leading to high risk rating by genuine investors and contributing to our perennial below poor outing in global business environment and competitiveness rankings.
The lack of a competition law allows vested interests to thrive. Businessmen collude with politicians to design policy interventions like waivers, import bans or restrictions where they are not economically justifiable just so that there would be no competition in that particular sector. In return, the businessmen/women make hefty returns to the politicians in terms of private gifts or contributions to political campaigns. Competition law enforced by an independent authority would scrutinise these measures and discard those that do not meet the necessary tests. The relationship between economic power and political power is never a hidden one. If a country operates an economy where markets are deliberately distorted in other to enrich a few persons, those persons would continue to have leverage on political power. It is a complete circle, albeit, a vicious one!
This is therefore, a call to all well meaning Nigerians and civil society organisations to rise up to the challenge of holding government and businesses accountable. We need to come together to educate ourselves and to form a common front for advocacy on this issue. This would serve to hasten the process already initiated by the relevant government agencies and also ensure a speedy passage of the Bill when it eventually gets to the National Assembly. Sign up to act now!
The Author is an Abuja-based Legal Practitioner and Advocate for Regulatory Reforms. He also serves as the Nigerian Resident Representative of CUTS International (an International NGO involved in research, advocacy and capacity building on trade, competition and consumer protection laws and policies www.cuts-international.org).
E-mail him at [email protected]. Follow him on Twitter @lennyugb
The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of SaharaReporters
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