Like the dictionary definition of a hailstorm, the news of the signing into law of ‘The Federal Competition and Consumer Protection Act’ hit the ambient air. The Act, which was signed into law by President Muhammadu Buhari in February, 2019, and applauded by many, dissolved the Consumer Protection Council, CPC and sections 118-128 of the Investment and Securities Act 2007 while establishing the Federal Competition and Consumer Protection Commission (‘FCCPC’) in its place, including the Consumer Protection Tribunal (‘Tribunal’). Unlike the defunct CPC, the FCCPC’s oversight extends beyond just consumer protection issues, and covers all entities in Nigeria – whether they are engaged in commercial activities as bodies corporate, or as government agencies and regulatory bodies.

Written by Sophia Kolawole, Transactional Associate and Ayomide Akintayo, Legal Intern (500Level, Bowen University) as Co-Authors.

The now abrogated Consumer Protection Act, Cap 25, LFN, 2004 which established the Consumer Protection Council, was enacted for the purpose of addressing  Consumer’s complaints, eliminating from the market hazardous products, causing an offending company to adequately compensate an injured consumer as a result of products created by them, amongst a host of other functions. However, due to some lacunas embedded in this Act, there became a need to revise it  for the purpose of  sufficiently touching the focal point for which an Act such as ‘The Federal Competition and Consumer Protection Act] (FCCPA) was enacted by the National Assembly in December 2018.

The FCCPA is aimed at the fortification of the framework for encouraging and supporting small and medium scale businesses by ensuring a playing level ground that eliminates entry barriers and operational obstacles which prevent sustainability and profitability, with the result that consumer’s  confidence, choice and fair pricing would be restored and solidified. Also, the legislation will also assist in the  prohibition of restrictive and unfair business practices, promote competition, prevent monopoly or abuse of dominant market position by any company, protect employees, ensure that consumers are protected and have access to products made to the highest standards and compensation for faulty purchases or transactions. In a similar token, the establishment of the Tribunal will also concretize investors’ confidence which will foster a healthy business competition and strenghten consumer rights for the general improvement  and well-being of the commercial market in Nigeria. In capsule form, objectives of the FCCPA are:

  • Promotion and maintenance of competitive market in the Nigerian economy;
  • Promotion of economic efficiency;
  • Protection and promotion of the interest and welfare of Consumers by providing Consumers with wider variety of quality products at competitive prices;
  • Prohibition of restrictive or unfair business practices which prevent, restrict or distort competition or constitute an abuse of a dominant position of market power in Nigeria; and
  • Contribution to the sustainable development of the Nigerian economy.

It need be pointed out that the FCCPA is applicable to all undertakings and all commercial activities within Nigeria. It also also applies to conduct outside Nigeria by a citizen of Nigeria or a person resident in Nigeria in relation to the acquisition of shares or other assets outside Nigeria resulting in the change of control of a business, part of a business or any asset of a business in Nigeria. Some of the sweeping changes introduced by the FCCPA are discussed under the following heads:

Establishment of the Federal Competition and Consumer Protection Commission (the Commission):

Section 3 of the FCCPA establishes the Federal Competition and Consumer Protection Commission, referred to as ‘The Commission’ by the Act. The Commission takes over the activities of the Consumer Protection Council. Also, Section 17 of the FCCPA provides for the function and powers of the Commission giving them the authority to administer and enforce the provisions of the Act and other enactments relating to Consumer protection, possess the power to prevent the circulation of goods or services which constitute a public hazard or an imminent public hazard and cause quality tests to be conducted on consumer goods as it deems necessary. Some other functions of the Commission are the resolution of disputes or complaints, issuance of directives and the application of sanctions.

The Commission further has the responsibility of initiating broad based policies and review economic activities in Nigeria. It also identifies and deals with anti-competitive, anti-consumer protection and restrictive practices which may adversely affect the economic interest of consumers. In sum, below are the key roles of the Commission:

 (a) initiate broad based policies and review economic activities in Nigeria to identify anti-competitive, anti-consumer protection and restrictive practices which may adversely affect the economic interest of consumers and make rules and regulations under this Act and any other enactment with regards to competitions and protection of consumers;

(b) advise the Federal Government generally on national policies and matters pertaining to all goods and services and on the determination of national norms and standards relating to competition and consumer protection;

(c) report annually on market practices and the implications for consumer choice and competition in the consumer market;

(d) eliminate anti-competitive agreements, misleading, unfair, deceptive or unconscionable marketing, trading and business practices;

(e) resolve disputes or complaints, issue directives and apply sanctions where necessary;

(f) encourage trade, industry and professional associations to develop and enforce in their various fields quality standards designed to safeguard the interest of consumers;

(g) ensure that all service providers comply with local and international standards of quality and safe service delivery; and

(h) cause an offending company, firm, trade, association or individual to protect, compensate, provide relief and safeguards to injured consumers or communities from adverse effects of technologies that are inherently harmful, injurious, violent or highly hazardous. 

Establishment of the Consumer Protection Tribunal (the Tribunal):

Section 39 of the FCCPA also establishes the Federal Competition and Consumer Protection Tribunal (‘the Tribunal’) which shall adjudicate over conducts prohibited under this Act and exercise the jurisdiction, powers and authority conferred on it under this Act or any other enactment. The Tribunal shall also keep record of its proceedings and have jurisdiction throughout the federation.

 The Tribunal is also empowered to hear appeals from, or review any decision from the exercise of the powers of any sector specific regulatory authority in a regulated industry in respect of competition and consumer protection matters. This is the tenor of Section 47 (1) (a) of the FCCPA, which gives the Tribunal the power to hear appeals from or review any decision taken by the Commission made in the course of the implementation of any of the provisions of the Act. However, Section 47(2) provides that all appeals or requests for review of a sector specific authority shall first be heard and determined by the Commission before such appeals can be filed with the Tribunal.

Furthermore, the FCCPA provides, under Section 54, that decisions of the Tribunal are binding on the parties and must be registered at the Federal High Court prior to its enforcement, and any appeal on such decisions is to be made at the Court of Appeal. Section 55(1) of the FCCPA states that the award of the Tribunal is binding on the parties and it is registered by the High Court for enforcement. However, if a party is displeased by the decision of the tribunal, such a party may appeal to the Federal High Court, upon giving notice in writing to the Secretary of the Tribunal and this must be done within 30 days of receiving the award or judgment. Section 53 of the FCCPA gives room for the Tribunal to provide parties to the proceedings before it, and other members of the public reasonable access to its record of proceedings, subject to any requirement to protect confidential information, as required under the provisions of the Act and regulations made under the Act and any other enactment.

Merger Provisions Under the FCCPA:

As earlier keynoted, the FCCPA repealed the provisions of the Investment and Securities Act (ISA) relating to merger, effectively stripping the Securities and Exchange Commission (SEC) of its power  to approve mergers  and places  power on the Commission by virtue of Section 17(k) to prohibit or approve mergers. The implication of this is that the SEC no longer regulates mergers and acquisitions in Nigeria. The SEC has, however, indicated that it shall continue to regulate mergers and acquisitions effected by or involving public companies and transactions that involve the change of a shareholding of a capital market operator).

The FCCPA only prescribes two categories of Merger: Small Merger and Large Merger. It does not provide the threshold for merger, creating uncertainty as parties to proposed mergers will be unable to determine whether their transactions fall within the Commission’s purview for approval. Prior to making a determination on the thresholds for mergers, the Commission is required to invite the public to provide written submissions on the proposed threshold for mergers and method of calculation of such thresholds as provided for under Section 93(3) of the FCCPA. This will in effect delay the release of the thresholds for mergers, thus extending the period of uncertainty for proposed merger transactions.

It should be noted that, in contradistinction to what used to be the case, the participants to a small merger do not need to notify the Commission, unless the Commission specifically requests that they do so within six months of the close of the deal.

The Act also prescribes rules for large mergers as the only other type of mergers. The definition of mergers under the Act is all-encompassing, and includes acquisitions. The participants to a small merger however do not need to notify the Commission, unless the Commission specifically requests that they do so within six months of the close of the deal. It is also pertinent to note that section 99 of the FCCPA gives power to the Commission to revoke its decision to approve or conditionally approve a small or large merger if:

  1. the decision was based on incorrect information for which a party to the merger is responsible;
  2. the approval was obtained by deceit;
  3. the parties fail to implement the merger within twelve (12) months after the approval of the merger; and
  4. an undertaking concerned has breached an obligation attached to the decision of the commission approving the merger.

Restrictive Agreements:

Under Section 59(1) of the FCCPA,  agreements or undertakings having the purpose of actual or likely effect of preventing, restricting or distorting competition in any market is unlawful and by virtue of Section 61 of the FCCPA, is void and of no effect.

Restrictive agreements are wide-ranging. It involves any agreement that will prevent, restrict or distort trade, such as: minimum resale prices (even for patented goods), direct or indirect price fixing, collusive tendering, withholding supply of goods and services from a dealer, exclusionary contractual provisions, etc. However, restrictive agreements may be permitted when it is seen that the agreements are fair and do not in any way eliminate competition.

It is to be borne in mind that the new FCCPA overrides the provision of other laws, except the Constitution of the Federal Republic of Nigeria 1999 (as amended) in all matters relating to Competition and Consumer protection, as provided under Section 104 of the Act.

Price Regulations:

Section 88 of the FCCPA empowers the President of the Federal Republic of Nigeria to regulate the prices of goods and services by order published in the Federal Gazette on the recommendation of the Competition Commission. Such regulations are required to be for a stipulated period and narrowly designed. The Act directs that suppliers of regulated products are required to keep their accounting records for their supply for three years.

Prohibition of Abuse of Dominant Position:

The FCCPA prevents the abuse of dominant position. Dominant position, according to Section 70, is an undertaking done without taking account of the reaction of the consumers. The acts of abuse of dominance specified in the Act are unreasonably lessening competition and impeding the transfer or dissemination of technology. The penalty for an abuser prescribed under the FCCPA is not less than 10% of the previous year’s turnover upon conviction by a court, which may be suspended once the Commission is satisfied that the abuse would cease. Note that the Act mentions “court”, and not the Tribunal.

Offences and Sanctions:

The Act stipulates offences and stiff penalties against competition such as price-fixing, conspiracy, bid-rigging, obstruction of investigation or inquiry, offences against records, giving of false or misleading information, etc.

The Commission can prescribe fines and sanctions for non-compliance. A general fine imposed for offences committed by companies is an amount up to 10% of the company’s annual turnover in the preceding business.

Among other things, the law stipulates a five (5) year jail term for individuals and N50 million for entities who violate the competition law and a fine not exceeding ten percent (10%) turnover in the preceding business year of a defaulting company.

For those in breach of consumer rights, it provides for individuals, imprisonment for a term not exceeding five years, or to payment of fine not exceeding ten million naira (N10,000,000) or both; and in the case of a body corporate, liable on conviction to a fine of not less that one hundred million naira or ten percent (10%) of its turnover in the preceding year, whichever is higher.

Consumer Rights:

To speak of the FCCPA without a mention of Sections 114-133 which border on consumer rights, is like speaking of Hamlet without the Prince of Denmark! Section 115(2) states that prices in relation to any particular goods or services are adequately displayed to a consumer, with a written indication of the price expressed in the currency of the Federal Republic of Nigeria annexed or affixed to, written, printed, stamped or located upon or otherwise applied to the goods or services.

In contravention of any of the provisions of the FCCPA as regards consumer rights, Section 148(1) provides that a consumer shall file a complaint to the Commission in the prescribed manner and form, alleging that an undertaking has acted in a manner inconsistent with the provisions of the Act.

Oversight of Regulated Industries:

The FCCPA gives the Commission oversight powers in every sector, including presently regulated industries. It provides that in the event of any conflict, the Commission would share concurrent oversight with the industry specific regulator. It also makes it mandatory for industry regulators to negotiate agreements with the Commission on the specific ways of exercising the powers of competition and consumer protection within their sectors.

CONCLUDING:

In conclusion, the FCCPA can be described as an Act that has adequately taken into consideration major challenges plaguing the commercial market, providing stricter protection for consumers and producers, as well as elimination of tyrannical tendencies hitherto harbored by the leaders in the market, a trait lacking in the Consumer Protection Act, Cap 25, LFN 2004.

However, the FCCPA still leaves a void in the area of addressing the current gap in the Investments and Securities Act (ISA) and SEC Rules around de-mergers, spin-offs, de-consolidations.  The implication of this is that there are still no provisions governing such transactions and, therefore, it is unavoidable that the FCCPA will have to be subjected to future review and amendments for the sake of it becoming an efficient authority in the area it seeks to govern.

  • Contact Details:
  • Sophia Kolawole, Esq. (sophia.kolawole@harlemsolicitors.com) Phone: 09090041104
  • Ayomide Akintayo (ayomide.akintayo@harlemsolicitors.com)

 

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