A reign of cartels
The Guardian, Nigeria, April 28, 2010

Nigeria needs competition law
Next, Nigeria, April 15, 2010

A reign of cartels
The Guardian, Nigeria, April 28, 2010

The Nigerian economy is one of the few in the world that encourages cartels to hold the consumers and even regulators hostage. Six times in the last eight years, the nation has attempted to enact bills to free the market of cartels but six times the efforts failed. The economy and the consumers are the worse for it, reports EMEKA ANUFORO of our Abuja Bureau

THE United Nations Conference on Trade and Development (UNCTAD) maintains that competition is the main driver for building competitiveness, innovation, technological advancement and economic development in the long-run and that the promotion of competition should remain as a policy tool, irrespective of a country's position in the business cycle.

In Nigeria, the Federal Government is yet to adopt a competition law for the country. Efforts have been made on several occasions to adopt legislation with the development of six versions of draft competition bills, but such have never been successful.

Six times the country tried, six times the efforts failed for reasons no one can put a finger to. Experts reason that the sooner Nigeria understands the importance and benefit of a good competition regime, the better it would be for us all: Business entities and everybody else in society.

Currently, there seems to be lack of consensus among different segments within the government about the need for a competition law for the country, and the situation of the competition commission.

Experts list some of the existing anti-competitive practices in the Nigeria economy as:

• Allegation of cartel in the cement industry;

• Tariff fixing and other charges;

• Cartel in the mobile telecommunications industry;

• Possible cartel in the downstream petroleum sector;

• Price fixing and entry barrier by trade associations;

• Opportunity for bid rigging in government procurement system; and

• Tied selling in soft drink industry.

Globally, the enactment of competition law and policies has become a major development tool, which is used by countries regardless of their level of development.

The International Network of Civil Society Organisations on Competition (INCSOC) is one of the international groups in the forefront of the advocacy for an effective regulatory body for competition in countries.

A recent publication from the body notes that independent regulatory bodies are essential to breaking the activities of cartels in the larger interest of the citizenry.

The publication notes: "In the absence of any international enforcement in the field of competition law, states need to cooperate in order to adequately respond to the most egregious international anti-competitive practices. The establishment of an international competition fund would fill the current legal and institutional vacuum and become an elegant means to redress the adverse effects of cartels.

"Cartels harm consumers in both developing and developed countries because of their upward impact on prices and they also provide the luxury of being inefficient. Thus cartel-busting is often the most important activity of competition authorities around the world, because of resource constraints and lack of experience.

"Although no calculation of the harm of all cartels is possible given their secret nature, a fraction of exposed international cartels running into billions makes it clear that cartels are a major and invisible drain on world's economy. Nevertheless, the impact on developing countries of cartels can be easily illustrated by data obtained from only six cartels. They generated to developing countries the overcharges of $1.71 billion, $67 million, $8 million, $1.19 billion, $975 million and $43 million from collusions in the vitamins, citric acid, bromine, seamless steel tubes, graphite electrodes and lysine industries, respectively."

According to the document, "in recent times, record fines of more than $500 million have been levied by the UK and U.S. competition authorities on British Airways (BA) for cartelization with Virgin on its transatlantic flights. The fines levied on the airlines will be credited to the treasuries in the U.S. and UK and only affected citizens who have filed private action suits against the said airlines will be compensated through damages. However, affected consumers from developing world will not be able to claim any compensation. Given the global impact of such cartels, it is surely only fair and fitting that a portion of these fines be used for strengthening institutions that enforce competition and deter cartels in the developing world".

In setting up a relationship between consumer protection, competition and competitiveness and development, India-based Cuts International's Centre for Competition, Investment and Economic Regulation (CUTS C-CIER) notes that, "competition policy promotes efficient allocation and utilisation of resources, which are usually scarce in developing countries. This also means more output, lower prices and consumer welfare. It does not stop there, only as more output is also likely to lead to more employment in the economy."

A good competition policy and law lower the entry barriers in he market and make the environment conducive to promoting entrepreneurship and growth of small and medium enterprises. This has positive implications for development as small business and entrepreneurial activities promote employment growth.

Consumer protection policy is part of the strategy that emanates from fulfilling the minimum basic needs of the people, removing the sources of poverty and marginalisation, focusing on problems like unemployment, basic health services and so on, while competition law policy is an integral part of the latest technologies, exports, industrialisation, more competition to provide choice and so on. At the core of this lies enhancement and maintenance of competitiveness.

Competition policy has a significant role to play in promoting competitiveness and growth. Experts are increasingly concerned that besides seemingly weak sector-specific laws on competition in Nigeria, efforts to have a competition law for Nigeria has failed.

Previous efforts are chronicled below. None has been given a serious attention.

Draft Bill 1:

Federal Competition Bill 2002 - A bill for an Act to set-up federal competition. To provide the necessary conditions for market competition and to stimulate creative business activities, protect consumers, and promote the balanced development of the national economy by prohibiting restrictive contracts and business practices that substantially lessen competition and regulating the abuse of dominant positions of market power and anticompetitive business combines, and to establish the Federal Competition Commission for the effective implementation and enforcement of this bill and for matters connected therewith. This is in an Executive Bill sponsored by the Federal Government through the Bureau of Public Enterprises (BPE). This draft bill was presented as an executive bill to the Senate in 2002.

Draft Bill 2:

National Anti-trust (Prohibitions, enforcement, etc) Bill 2004: An act to regulate and prohibit unfair competition and unreasonable combinations in restraint of commerce, industry and trade, including monopolies, trusts and interlocking directorates, for the purposes of maintaining and strengthening the free enterprise system, ensuring unrestrained competition, and establishing a level playing field, in business in the federation, and to make provision for other matters relating thereto. This bill was sponsored by Hon. Halims Agoda and others and presented to the House of Representatives in 2004.

Draft Bill 3:

Competition (Anti-trust) Bill 2007-sponosred by Hon. C. I. D Maduabum. Presented to the House of Representatives in 2007. First reading was on September 5, 2007. No second reading till date.

Draft Bill 4:

Nigerian Trade and Competition Commission Bill 2008 - The bill was sponsored by Senator Joel Ikenya. First read on November 6, 2008. Referred to Joint Committee on establishment and Public Service matters, Judiciary, Human Rights and Legal matters, and Commerce.

Draft Bill 5:

Nigerian Anti-trust (enforcement, miscellaneous provisions, etc), 2008 - A bill for an Act to prohibit monopolies to trade, commerce or industry, to regulate the business activities of companies and trust with regard to restraints in trade or commerce, to establish the anti-trust division for the purposes of enforcing the provisions thereof and to foster the sustenance and development of a free market system, and secure the practice of a fair and open market system, etc. The bill was sponsored by senators Heineken Lokpobiri and F. K. Bajomo and was first read on April 23, 2008. It was never read a second time.

Draft Bill 6:

Competition and Consumer Protection Bill 2009. On April 22, 2009, President Umaru Musa Yar'Adua presented before the Federal Executive Council (FEC) a bill that seeks to promote the welfare and interests of consumers and provide them with competitive prices and choices. It also seeks to regulate monopolies, merger and acquisitions and all forms of business combinations and prohibit restrictive business practices, which prevent, restrict or distort competition or constitute the abuse of a dominant player in the market.

pproval of the bill was differed till another date to enable council members sort-out grey areas in the bill and for proper harmonisation with the existing sector-specific regulatory laws.

At a national training workshop on competition policy in Abuja penultimate week, the general Coordinator of Consumers Empowerment Organisation of Nigerian (CEON), Mr. Adedeji Babatunde identified political economy constraints in implementing competition regimes. Some of these, he listed as lack f consensus amongst the relevant government ministries, departments and agencies on the competition commission; low awareness of benefit of competition law for the country in the political circle; possible hostility from large business (state monopolies that were privatised, at the beginning of the privatisation process, which are weary that the competition law is designed to weaken their position in the sectoral markets.

On the interface between competition and sector regulation, he added: "The interface issue has not been adequately treated in the draft competition and consumers protection bill 2009.When the Act comes into force, it should enable proper consultation and cooperation between the competition agency and the sectoral regulators for the promotion of competition in specific sectors.

"The need for cooperation between these sectoral regulators and the competition commission is particularly necessary, given that most of the sector regulators have also been entrusted (as par provisions in their respective sectoral legislations), with the function of promoting competition in the sectoral markets) especially in securities, telecoms and electricity sectors)."

According to him, "confusion and inter-agency turf issues may emerge, if the modus operandi of such cooperation /coordination is not addressed in the real final version of the competition law."

Programme officer, Trade and Competition at the Economic Community of West African States, Dr. Sacko Seydou is of the view that for Nigeria to attain its target of becoming one of the 20 industrialised nations of the world by the year 2020, (Vision 20:2020) the country needs to create confidence in the minds of local and foreign investors by passing its competition law.

Speaking recently, Seydou observed that where there is no competition law, it is difficult to have functional investments and good consumer protection.

According to him, there is no way the nation could achieve Vision 20:2020 without attracting investors into its economy.

He said: "Competition policy and competition laws are generally conducive to both foreign direct investment and local investment, given their role in improving transparency in the regulatory system.

"Investment is generally a gamble about future outcomes. Hence investors would prefer to have an opportunity to predict the future outcome of their investment. Transparency in the implementation of regulations having an impact on investment is a critical determinant in investment decision-making."

He stressed that competition laws that are transparent and characterized by predictable implementation and consistent rulings on competition cases on the basis of non-discriminatory, could remove the uncertainty surrounding investment decisions.

Babatunde regretted that the consumer bill at the National Assembly has not been passed mostly because the lawmakers do not understand the issues around competition laws.

As a result, he added, consumers suffer harsh treatment in the hands of producers and providers of goods and services.

Experts who attended the national training regretted that there is lack of understanding and awareness in the political circle on the benefit for the economy from a competition law.

They, therefore, urged that advocacy efforts towards adoption of a competition law should articulate the pro-poor objectives of competition legislation upfront, especially for sensitizing policymakers.

Unfortunately, in all the countries were the regional training on competition policy and law was held, it is only in Nigeria that the organisers had challenges getting members of the National Assembly to participate.

• Cartels have free reign in the production and distribution chain of consumer goods in the country

• Commerce and Industry Minister, Senator Jubril Martins Kuye

• Senate President David Mark

• House of Representative Speaker Dimeji Bankole