Communique On The Roundtable On A Case For Competition Law In Nigeria 22nd March 2012


Competition law also known as antitrust law in the United States refers to those laws which promote   or   maintain   market   competition   by   regulating   anti-competitive   conduct   by companies. Antitrust results from the ‘trusts’ or cartels which existed in the United States in the 19th Century and which controlled the railroads, telephone and chemical industries.

The  main  objective  of  such  legislation  is  the  promotion  of  competition  as  a  means  of assisting the creation of market responsive to consumer signals, thus ensuring the efficient allocation of resources in the economy and efficient production with incentive for innovation. It is aimed at facilitating the provision of fair and equal competitive conditions for all market participants, promotion of allocative efficiency and the maximization of consumer welfare, amongst other goals.

Nigeria as a country needs competition, which has become unavoidable. This in view of the numerous anti-competitive activities that abound in the market place, some of these existing anti competitive practices in the Nigerian economy include cartels, price fixing, entry barriers by trade associations, bid rigging in government procurement systems and tied selling.

In view of the foregoing, and in furtherance of its determination to bring contemporary issues to public discourse and proffer practical recommendations that will move the nation forward, the Nigerian Institute of Advanced Legal Studies organised a one-day Roundtable aimed at drawing up a road map for the effe tive implementation of a competition policy.

Perspectives at the Roundtable included

  An overview of competition law
  Challenges of implementing competition law and policy
  Electricity and deregulation in the downstream oil and gas sector.
  Competition policy and intellectual property; balancing competition and their reward.
  Abuse in dominance in transition economic.
  The effect of competition law on economic growth.
  Competition ,Consumer Welfare and Social Consequences of monopoly
  Privatizing and Deregulation of the Downstream Oil and Gas Sector.


The Roundtable made the Following Observations

1. Nigeria is committed  to market liberalization  through its privatization  and commercialization  programme  which  will  end  government  monopolies  in  certain sectors of the economy and transfer ownership and control to private players. In this

regard, the government constantly touts the availability of choice and lower consumer prices accruing to Nigerians from the cancellation of natural monopolies.
2.  The main objective of competition law is the promotion of competition as a means of assisting in the creation of markets responsive to consumer signals, thus ensuring the efficient allocation of resources in the economy and efficient production with incentives for innovation.
3.   Competition law is aimed at facilitating the provisions of fair and equal competitive conditions for all market participants, promotion of efficiency and the maximization of consumer welfare, amongst other goals.
4.   There  is  limited  access  to  business  resources  such  as  business  intelligence  and financing  which  means  the  Nigerian  economy  is  currently  controlled  by  a  small minority   of   corporate   individuals.   This   has   resulted   in   the   economy   being characterised by weak competition and persistently high prices that impair industries and consumers alike.
5.  In the aviation sector, the recent feud between British Airways, Virgin Atlantic and the Nigerian Civil Aviation Authority over the airlines’ alleged abuse of dominance on the Lagos-London route by fixing prices, abusing fuel surcharges and generally taking advantage of passengers is another instance of seemingly anti-competitive behaviour.
6.  Though Nigeria has no Competition Law, it would be wrong to say that she does not operate a competition regime, or has no competition policy.
7. The Nigerian Communications Commission is constituted under the Nigerian communications Act 2003 and its functions include the promotion of fair competition in the communication industry and the enforcement of compliance with competition laws and regulations which relate to the Nigerian communications markets.
8.  The electricity sector is regulated by the Nigerian Electricity Regulatory Commission established under the Electricity Power Sector Reform Act 2005. The Commission is responsible  for the prevention  of the abuse of market power within the electricity sector and a merger and acquisition  or any other form of investment  in the sector requires the Commissions prior approval.
9.  In  the  air  transportation  sector  the  Nigerian  Civil  Aviation  Authority  established under the Civil Aviation Act 2006 has the power to investigate  unfair methods of competition and to make regulations prohibiting and or discouraging anticompetitive practices.
10. Currently, merger control, an important aspect of any competition policy, has been embodied in the investment and securities Act (ISA), which grants to the Securities and Exchange Commission (SEC) the power under the Act and General Rules and Regulation of SEC 2011 to order the breakup of a company, where it determines that the business practices of that company substantially lessens competition.
11. On the issue of merger control, the Investment and Securities Act 2007 in the absence of a competition law took it upon itself to regulate mergers along the lines of ensuring that a merger does not result in restriction of competition.

12. The law does not indicate whether parties to a larger merger should notify their respective trade unions or employees as in the case of an intermediate merger. This would appear to be an oversight on the part of the draftsman
13. it was also felt that Securities and Exchange Commission is adequately equipped to deal with mergers and the time has come for our courts not to be overburdened with small and intermediate mergers .However with large mergers, SEC is required to refer the notice of merger to the court and to indicate its approval or otherwise .This means that the court sanctions large mergers.
14. Although there are other legislations that may touch on competition law and policy, the Investment and Securities Act (ISA) is at the fore front by virtue of its extensive provisions on merger control.
15. However these provisions are not sufficient to cover all aspects of monopoly conduct and have not, been tested in practical application.
16. One argument against ‘monopolies and mergers’ commission is the alleged need for specialized knowledge of the workings of certain industry sectors. Industry specific regulation  of competition,  it is said, results in a focused response  to alleged anti- competitive behaviour, based on in depth industry knowledge.
17. Nigeria has engaged itself with the development of a competition policy since 2002 when the BPE engaged some consultants to draft the Federal Competition Bill 2003. A major feature of competition law is to protect the economic integrity of the nation and to protect the consumer from monopoly.
18. The Bill never became law and several bills have been prepared and presented to the
National Assembly since then, but no law has been passed till date.
19. The lack of a Competition Law is a missing aspect in Nigeria’s arsenal to attract direct foreign investment, as this is one part of a country’s legislative framework that foreign investors review carefully when investment decisions are being made.
20. There  is  the  danger  of  government  deregulation  exercise  without  a  functional competition law to support the system. A deregulated economy without Competition Law creates free jungles rather than free markets.
21. That Competition Law is advantageous does not mean that in free market economy every sector should be left open to competition .Some areas such as health services or basic amenities may be subject to government  control and different countries may have different views about how far the market should be tempered or supplemented by a social component.
22. That in the absence of a Competition Law establishing a Competition Commission and Tribunal, Securities and Exchange Commission (SEC) is the most appropriate body to undertake the responsibility particularly regarding mergers and acquisitions not just because of regulatory roles over mergers and acquisition in terms of granting approvals but also because certain mergers and acquisition may have negative impacts on the market where left uncontrolled.
23. It is widely accepted that there is a strong correlation between socio-economic development and the availability of electricity.
24. from  inception,  the  National  Electricity  Power  Authority  (NEPA)  operated  as  a wholly  and  vertically  integrated  monopolistic  entity  responsible  for  generation,

transmission and distribution of electric power in Nigeria .As is the case, these monopolies come with the usual baggage of inefficiency  and poor service delivery which  NEPA  was  no  exception  in  the  end,  NEPA  was  plagued  by  many  of the problems  which  afflict  state-run  facilities  all over  the world.  Resources  were  not utilised  efficiently  and  managers  not  accountable  to  either  the  government  or consumers.
25. Investment  was determined  by how much the Federal Government  could afford to invest in the sector in the midst of competing claims on its revenue rather than by a commercial rationale to satisfy demand profitably. Due to the combination of poor planning, inefficiency, waste and leakage, Nigeria’s available capacity stagnated at about 2,000 megawatts for 15 years prior to 1999. Nigeria has grossly underinvested in the power sector and its investment has underperformed due to poor management.
26. Nigeria’s power sector has been plagued with the challenges of inadequate power generation capacity ;insufficient and inefficient transmission and distribution infrastructure, lack of capital investment into the sector, low percentage of access, high incidence of power theft, absence of cost reflective tariffs, high technical losses, vandalization of transmission and distribution infrastructure and inadequate legal and regulatory framework.
27. The Electric Power Sector Reform Act (EPSRA) anticipated the introduction of private sector participation and the development of a competitive wholesale electricity market.
28. One of NERC’S major responsibilities, as it collaborates with the Bureau of Public Enterprise (BPE) and the Ministry of Power in implementing reform, is to ensure that a  competitive  market  develops  and  operates  in  the  public  interest.  The  expected outcome is an efficient and effective National Electricity Supply Industries (NESI), in which  costs  are  better  managed,   investment   is  increased   and  sustainable   and electricity supply is reliable
29. Competition is however a beneficial force in markets. It has benefits in terms of both promoting the efficiency of companies through better management and technologies and in guiding the deployment  of resources  towards the most efficient patterns of production and consumption .
30. Where competition in the market is still in the early stages of evolution or the market is structured such that certain players have geographical monopoly, as in the National Electricity Supply Industry (NESI), at these early stages of reform, then regulation must become a proxy for competition.
31. The expansion and strengthening of intellectual property at both national and global spheres, the interaction between the disciplines of Intellectual Property (IP) on one hand and competition  law and policy  on the other hand has become  a subject  of renewed   interest   and   importance   particularly   among   policy   makers,   lawyers, economists and development experts.
32. It   is   further   observed   that   in   today’s   knowledge   based   economy   a   better understanding  of intellectual  property  (IP) in the global,  political  economy  as the global currency is indispensable to informed law and policy making in all areas of development inclusive of competition law.

33. Competition law and policy has evolved to integrate economic thinking into the legal rules for business practices across all sectors of the economy it regulates.
34. Competition  law  enforces  a  system  of  pro-competitive  limits  on  the  bargaining powers or the monopolistic  tendencies of intellectual property rights   holders in at least     three   broad   areas   of   the   IP   system,   namely;   ownership    of   IPRs, Acquisition/Transfer of IPRs and enforcement of IPR.
35. The point of nexus and the impact of competition law and policy on the IP regime has reflected  clearly  on  the  object  of  IP  protection,  which  is  the  innovation  that  IP generally  protects  and  represented  by  all  its  branches  be  it  the  idea  in  patents, expression of ideas in copyright or the products of the idea in trademark.
36. It is also observed that the goals of intellectual Property (IP) and competition law and policy are not absolutely  irreconcilable  no matter how divergent they superficially appear to be.
37. It is observed significantly that intellectual Property (IP) has continued to define its own rules in the context of promoting innovation, to also eliminate monopoly and promote free competition in the market place which has been defined as the cardinal objective of competition law and policy in most jurisdictions.
38. Nigerian intellectual property based industries is rapidly growing in structure and size and invariably its contribution to the economy is getting more defined.
39. Nigeria   is   going   through   some   investment   liberalization,   privatization   and deregulation. These liberalization measures are established to remove many growth- retarding  characteristics  embedded  in  the  structure  of  the    economy  ,  which  has brought  long  period  of  dismal  economic  performance  and  has  meant  that  living standards  have  fallen    below  world  average  leading  to  widespread  poverty  and increased political agitation, the driving force is the need to restructure and reposition the economy for sustainable growth, which can only be achieved the establishment of a pro-competition regulatory and institutional framework.
40. The  political  and  economic  opening  of  high  potential  areas  in  the  oil  industry previously closed to western investment is creating immense demand on the sources of private western capital. Persistent how oil prices at the dawn of the present decade have also constrained industry funds available for investment in further exploration activities in the industry worldwide.
41. A review of the supply and distribution of petroleum product also reveals that the downstream sector has been operating sub- optimally as result of refineries been eroded; reliance on imported products; deterioration of the storage and pipeline capacity; prevailing cost and price structures that are badly distorted and the monopolistic position of a single player, NNPC.
42. it was the conclusion of the special committee on the review of petroleum supply and distribution  (2000)  that  the  sector  could  still  be  salvaged  by  the  corrilination  of policies which will generate the infusion of funding to restore domestic refining capacity, reduce reliance on import, repair the distribution network and encourage a competitive and efficient network hinged on minimum government control.
43. That Government infusion of fund in the downstream oil sector was desirable in order to restore a semblance of stability and that private investment will need to be attracted

not  only  to  augment  Government  resources,  but  also  to  fund  the  expansion  of capacities in refining, distribution and further downstream activities.
44. That over the years, the source of supply of petroleum product, mainly white product into the Nigerian market had been through NNPC/PPMC. NNPC’s source is through the refineries and import. As far back as 2009 the installed refining capacity in the country was 445,000 BPD, while the optimum refining capacity ever achieved was
360,000 BPD.
45. That the   committee  noted that while the Nigeria petrochemical  companies  (EPCL
&WPCL), the Natural Fertilizer Company of Nigeria (NAFCON),  The Aluminium Smelter  company  of  Nigeria  (ALSCON)  and  Nigeria  Liquefied  Gas  Company (NLNG) were established to take advantage of the gas opportunities, some of   this organisations had problems due to poor funding, bad management and government interference.


At the end of deliberations, the Roundtable made the following Recommendations:

1.  The existence of a competition law will provide guidelines for corporate behaviour and sanctions for breaches. An antitrust regime will also enhance the emergence of new competitors in the market that will threaten the current monopolistic structure. It is of major importance in the Nigerian context in the light of the current deregulation and liberalization drive by the government.
2.  A competition  regime  is required  to control  the urge to maximise  profits  through cartel like behaviour, and the overbearing influence of dominant market positions.
3.  The existence of Competition Law will provide guidelines for corporate behaviour, sanctions for breaches and will also enhance the emergence of new competitors in the market that will weaken the current monopolistic structure.
4.  Additional  reasons  for  a  competition  law  include  the  need  to  encourage  foreign investors as more investors would be willing to invest in an effective market. This supports  the saying  that vigorous  competition  between  firms  is the lifeblood  of a strong and effective market.
5.  Irrespective  of  the  fact  that  each  industry/sector  has  their  individual  Competition Laws,  a single  body  should  have jurisdiction  over all aspects  of anti competitive behaviour in the economy.
6.   Mergers and acquisition in any industry/sector should be submitted to “monopolies commission”  for final clearance  after having  been cleared  by its industry  specific regulatory authority. This will ensure that a few individuals or corporations will not dominate specific aspects of the Nigerian economy.
7.  Although Nigeria does have a competition policy, as the volume of international trade increases  with globalization  and the increasing  demands  for public accountability, there is a need for Nigeria’s competition policy to be located within an all embracing competition Law.

8.  A well designed and properly implemented competition legislation in Nigeria will aid in the delivery of the economic goals of the present administration by reducing the risks of trade disputes;  increase  productivity  and economic  growth  and ultimately raising the standard of living of the average Nigerian.
9.   There is need to have a legal regime to safeguard the market place, thereby creating unnecessary restraint to trade and competition to the  detriment of the masses.
10. Every competition Law should seek to prohibit contracts or agreements that restrict competition.
11. Given  the  state  of  the  power  sector  and  in  line  with  recent  global  realities  on competition and private sector investment, there is a realistic need to end the natural monopoly in the sector and open it up to competition. This understanding is behind the reform programme recently initiated by the Nigeria government with the goal of liberalising the Nigeria Electricity Supply Industry (NESI).
12. The Federal Government should provide the overall direction for the development of the  electricity  industry  in  Nigeria,  and  ensure  the  general  consistency  of  electric power policy with all other national policies and specifically with other aspects of energy policy and Federal Government policy on Foreign Investment and Borrowing. This  will  also  prompt  the  enactment  of  necessary  laws,  regulations  and  other measures required to support the federal policy on electricity.
13. The Ministry of power should have the overall responsibility for formulating electric power policy. The specific functions of the ministry will include to propose policy options and recommendations to government concerning legislation, policy on investment, etc. To monitor and evaluate the implemementation and performance of government  policy  in the industry.  Establishment,  monitoring    and evaluating  the performance of policies for increasing the access to electricity, particularly in rural and semi-urban areas .Representing  government on electricity matters pertaining to regional  and international  bodies and organisation,  and liaising with the   National Assembly on matters concerning the electricity industry.
14. State government should carry out their responsibilities for the development of off- grid electrification and their joint responsibilities with the federal government on the establishment of Electricity Power Stations as se out in the 1999 Constitution. The state roles also include  regulation  of off-grid  non –centrally  dispatched  electricity operations, which are wholly limited within the state boundaries.
15. There  is  no  doubt  that  the  Intellectual  Property  (IP)  competition  relationship,  a competition policy approach may be particularly useful to ensure a pro competitive exercise of IPR. For instance, in the global market for technologies this will be useful in  redefining  the  scope  of  patenting  regime  for  a  more  beneficial  transfer  of technology and foreign direct investment to a  developing country.
16. Effort must be made to ensure the proper environmental conditions are put in place to realise the full benefit of competition law. This may involve changes in other laws, education and training, measures to ensure independence of regulators, development of economic expertise and protection of regulators from rent seekers and lobbying by entrenched economic interest.

17.  Regulators  should not penalise firms merely for the possession  of market power, particularly  where  such  power  has  been  obtained  through  legitimate  competitive efforts.  Competition  law should focus on abuses  of market  power  that distort  the competitive process, not on punishing successful firms.
18. Administrative  and adjudicative functions within the competition regime should be separate   d  to  protect  the  neutrality   and  impartiality   of  the  investigative   and enforcement process.
19. Competition  law  should  establish  and  enforce  a  level  playing  field  across  an economy.  Where  exemptions  are required  to promote  other economic  policies  for example,  to encourage  investment  in specific  sectors,  such  exemptions  should  be clearly set out and subject to regular review to ensure that they are still necessary.
20. Competition  regimes should be regularly  reviewed  to ensure that it is functioning properly  and  to  determine  whether  modifications  are required  to  more  efficiently fulfil its stated goals and/or to reflect additional legislative goals.
21. An important principle governing competition law is that one size does not fit all, this mean that there is no universally applicable harmonised model, domestic competition law should  be designed  to suit a country’s  stage of economic  development,  legal system and enforcement capability.
22. That  all stakeholders  in the competition  process,  including  government,  business, consumers and academia , must understand and support the principles of competition and be actively involved during the process of adopting competition legislation
23. That government should adopt and implement a 10-year master plan which ensure : that gas development in the country and marketing locally and externally is boosted through a literal implementation of the current fiscal incentives, that the business of downstream   gas  distribution   should   be  separated   from  that  of  upstream   gas production  and  gathering  to  assure  greater  focus  and  accountability,  that  private venture capital should be encouraged to ease funding and thus assure rapid growth prospects,  That  there  should  be  rapid  implementation  of  natural  gas  distribution project  to  increase  the  confidence  of  potential  gas  to  consumers  as  well  as  to minimise the dependent of the industries on fuel oil, that the energy policy should be expanded to ensure that gas has its rightful place as the fuel of first choice in the country and That the current deregulation of the gas operations is sustained and expanded.