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

2014 G.O. SODIPO MEMORIAL LECTURELagos, Nigeria

1 December, 2014

Dr. Nnamdi DimgbaOlaniwun Ajayi LP, Lagos

ContentsContents

The Nature and Essence of Competition LawThe Need for Competition Law in NigeriaThe Current state of the Competition BillThe Challenges to the Establishment of a

Competition Law for NigeriaConclusion

The Nature and Essence of Competition The Nature and Essence of Competition LawLaw

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

The Nature and Essence of Competition The Nature and Essence of Competition LawLaw

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

The Nature and Essence of Competition The Nature and Essence of Competition LawLaw

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

The Nature and Essence of Competition The Nature and Essence of Competition LawLaw

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)

Goals of competition lawGoals of competition law

Generally: market contestabilityEconomic 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*

Goals of competition lawGoals 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

Competition Law vs. Consumer Competition Law vs. Consumer Protection LawProtection 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)

Relationship b/w competition law & consumer Relationship b/w competition law & consumer protection lawprotection 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?

The development of competition lawThe 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)

Facets of competition lawFacets 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)

Facets of competition lawFacets 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.)

The development of competition lawThe 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

The Need for Competition Law The Need for Competition Law in Nigeriain 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

The Need for Competition Law The Need for Competition Law in Nigeriain 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)

The Need for Competition The Need for Competition Law in NigeriaLaw 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

The Need for Competition The Need for Competition Law in NigeriaLaw 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!)

The Need for Competition Law The Need for Competition Law in Nigeriain 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

Current state of the Competition Current state of the Competition BillBill

A journey into history! Dec. 2002: “El-Rufai’s Declaration” March 2003: ECU Associates’ draft competition

bill– pretty good document, but for the merger provisions

Early 2005: FMoJ’s (Bayo Ojo’s) draft bill– Fair document, but:

Overbearing political control! Anachronistic merger provisions!

Current state of the Competition Current state of the Competition BillBill

A journey into history!24 Aug. 2005: FEC adoption of FMoJ draft billSept 2006: presentation and rejection of FMoJ bill

by the SenateSept 2006 – March 2007: redraft of the bill by my

team + BPE’sFederal Competition and Consumer Protection

BillNational Competition and Consumer Protection

Policy

Current state of the Competition Current state of the Competition BillBill

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 Oni’s 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!

Current state of the Competition Current state of the Competition BillBill

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!

ConclusionConclusion 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!