Presentation on theme: "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."— Presentation transcript:
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
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
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
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
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
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)
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*
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
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)
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?
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)
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)
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.)
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
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
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)
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
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!)
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
Current state of the Competition Bill 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 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 + BPE’s Federal Competition and Consumer Protection Bill National Competition and Consumer Protection Policy
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 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 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!
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!