POTENTIAL PITFALLS IN THE ENFORCEMENT OF THE FCCPA
By: Salewa Saliu
Tags: Competition Law, Nigeria, Law, Competition, Business

The enactment of the Federal Competition and Consumer Protection Act (FCCPA) as the new framework for Competition law in Nigeria is a welcome development as it not only benefits competitors but also protects Nigerian consumers from unfair market practices that have continued to affect the country. Competition law is a key element in the preservation of economic freedoms and when markets are not subject to limitations on anticompetitive practices, companies might not be able to benefit from competitive opportunities and this might consequently affect social welfare.[1]

However, it is important to look through the law and the Nigerian climate to ascertain if there are any potential stumbling blocks which could impede the proper implementation of the law. Also, seeing as there have been no significant rulings and cases on the enforcement of the FCCPA, it has become necessary to analyse the provisions of the FCCPA in line with the regulations from which it was adopted i.e. the Treaty on the Functioning of the European Union (TFEU).

Perhaps the most crucial stumbling block, is the issue of legal certainty. This principle states that laws must be clear and predictable, so that the persons to whom they apply know which conduct is lawful and which is prohibited. Using this principle, the wording of the law does necessarily have to be so precise that it can be understood by a layman without legal guidance. However, it should be understandable with assistance of the courts’ jurisprudence or authorities’ decisions.[2]

However, on the issue of Competition Law, one criticism the TFEU has faced is the lack of legal certainty due to its broad and open-ended wording. This is to allow the law to keep up with innovations and changes in society and ensures it can adapt to any technological and social changes. However, it may not allow for much leniency, even when the “abuse” is novel and unintentional.[3]For example, the Competition Commission can only impose a fine upon undertakings who have intentionally or negligently infringed Article 101 & 102 of the TFEU but the Commission and Courts have interpreted the intent or negligence requirement so broadly, that it does not protect legal certainty to its fullest extent.[4] For example, Google was found to be guilty of anticompetitive practices for giving priority placement to its own comparison shopping service at the top of the search results, without subjecting it to Google’s generic search result algorithms compared to comparison shopping services of competitors, thus making the competitors appear much further below on search results pages.[5]

The provisions of the FCCPA contain similar open-ended wording and this could be potentially harmful. This is particularly troubling due to the fact that the provisions of the FCCPA does not include an intent or negligence requirement.[6]With the law prescribing fines beginning at 10% of the turnover of an undertaking, a novel abuse could which an undertaking had unknowingly committed could have far reaching consequences such as eventual bankruptcy if faced with exorbitant fines.

In addition, keeping in mind the political terrain of Nigeria as well as its position as the 144th most corrupt country in the world,[7] there is a distinct possibility that this law could be deliberately misused for financial or economic gain. It is regularly recognized that developing countries often face institutional difficulties in enforcing competition laws, usually involving inadequate judicial systems, excessive bureaucracy, corruption and a lack of transparency, a lack of resources and professional expertise within the competition authority, extensive capture by regulatory groups and weak professional and consumer groups.[8] In such a political system, even the most impartial person will have a very difficult, if not impossible task of disregarding political considerations especially if the agency has to rely on the government for financial resources in order to carry out its objectives.[9]

Another angle of looking at legal certainty is as an impediment to innovation. The EU has been criticised as hampering innovation and growth. This is because decisions on innovation and investment involve business risks and undertakings would be reluctant to take these risks if they cannot estimate the risk of future legal sanctions. Ensuring legal certainty reduces the legal risks, enabling innovation and growth.[10]It has been noted that competition law enforcement has a ‘chilling effect’ on the willingness to innovate.[11]

For example, in the earlier mentioned case, Google €2.42 billion for an offense which had not existed prior to that case. Companies such as Qualcomm, Microsoft, Intel etc. have also been fined such high sums. Large fines can make undertakings wary of innovation as the level of sanction ought to be dependent on the extent to which the law is clear. Where the legal principle is clear, the sanction can be higher than when there is some uncertainty in the legal provisions. This is because imposing high sanctions in instances in which laws do not clearly define legal conduct can prevent pro-competitive conduct.[12]With competition law, where the regulations are often open-ended, this might stifle innovations as companies become wary and unwilling to take chances.

A developing country like Nigeria, need to be very careful in order to avoid stifling innovation. With the socio-economic and political climate of the country making it extremely difficult to do business in Nigeria, as shown by the drop in Nigeria’s ranking from i 145 in 2019 from 146 in 2018 on the ease of doing business index,[13]it is very important that legislation should not increase the difficulties and frustrations of businesses.

Also, another aspect that needs to be considered is the enforcement framework of competition law. The TFEU framework in which sets the maximum penalty as 10% of the turnover of the preceding business year.[14]The 10% maximum penalty prescribed in the EU ensures that the penalty would have similar effect in its application of all undertakings.[15] However, having a fixed maximum penalty does not have the same effect on all undertakings, and some undertakings may take the risk of partaking in abusive practices if they are of the view reward of the abuse outweighs the punishment.[16]

On the flip side, the FCCPA imposes penalties starting from a minimum of 10% of the company’s turnover of the previous year.[17]This excessive fine is worsened by the fact that there is no limit in the FCCPA to how much can be imposed as fines. Consequently, this may have harmful repercussions as an undertaking which has been panelised may decide to push the loss to consumers, resulting in higher prices.[18]This defeats the ultimate goal of consumer welfare as the consumer may end up bearing the brunt of the penalty.

Also, the usage of turnover in the calculation of fines may not be ideal. The turnover of an undertaking, though readily available and difficult to manipulate, may not be a true indication of the ability of an undertaking to pay the fine.[19]The profit margin of a company also matters as an undertaking with a low profit margin will experience difficulty compared to an undertaking with high profit margin.[20] Imposing fines based on turnover may have a crippling on the finances of a company.

It is important for the regulators to be aware of the potential pitfalls they may face and find the best solutions to these problems in order to ensure the effective administration of the FCCPA. Usually. the passing of a competition law is treated as one of the cornerstones of the liberalization and pro-market reforms do and it is necessary to address the preconditions affect the ability to apply a competition law effectively.[21]The Nigerian framework should put the foregoing into consideration in implementing and enforcing the FCCPA.

[1] UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT Geneva COMPETITION, COMPETITIVENESS AND DEVELOPMENT: LESSONS FROM DEVELOPING COUNTRIES Page 23

[2] 10Degussa v Commission (n 9) [69]; Amann & Söhne (n 9) [127]; Coëme and Others v Belgium, ECtHR, Judgment of 22 June 2000, Reports of Judgments and Decisions 2000-VII, 1, § 145.

[3] Magali Eben (2018) Fining Google: a missed opportunity for legal certainty? European Competition Journal, 14:1, 129–151, DOI: 10.1080/17441056.2018.1460973 Page 135

[4] Magali Eben (2018) Fining Google: a missed opportunity for legal certainty?, European Competition Journal, 14:1, 129–151, DOI: 10.1080/17441056.2018.1460973Page 136

[5] European Commission — Press release Antitrust: Commission fines Google €2.42 billion for abusing dominance as search engine by giving illegal advantage to own comparison shopping service Brussels, 27 June 2017 http://europa.eu/rapid/press-release_IP-17-1784_en.htm

[6] Part IX of the FCCPA

[7] https://www.transparency.org/cpi2018

[8] UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT Geneva COMPETITION, COMPETITIVENESS AND DEVELOPMENT: LESSONS FROM DEVELOPING COUNTRIES Page 36

[9] Ibid at 48

[10] Liza Lovdahl Page 154

[11] David Wood Panel Discussion on Non-Pricing Abuses EUROPEAN COMPETITION LAW ANNUAL 2003:

What Is an Abuse of a Dominant Position? Page 478

[12] UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT Geneva COMPETITION, COMPETITIVENESS AND DEVELOPMENT: LESSONS FROM DEVELOPING COUNTRIES Page 40

[13] 2018 World Bank Ease of Doing Business Report

[14] Article 23(2) Regulation 1/2003

[15] Sandra Marco Colino Page 108

[16] 11 Sandra Marco Colino, Competition Law of the EU and the UK, 8th edn (2018, Oxford University Press, Oxford), Chapter 6.

[17] Section 73(3) FCCPA

[18] Cosmo Graham 220

[19] Sandra Marco Colino Page 108

[20] Ibid

[21] UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT Geneva COMPETITION, COMPETITIVENESS AND DEVELOPMENT: LESSONS FROM DEVELOPING COUNTRIES Page 1