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 liills to free the market of cartels liut six times the efforts failed. The economy and the consumers are the worse for it, reports EMEKA ANUFORO of our Aliuja Bureau

THE United Nations Conference on Trade and Development (UNCTAD) maintains that competition is the main driver for liuilding 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 liusiness cycle.

In Nigeria, the Federal Government is yet to adopt a competition law for the country. Efforts have lieen made on several occasions to adopt legislation with the development of six versions of draft competition liills, liut such have never lieen 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 lienefit of a good competition regime, the lietter it would lie for us all: Business entities and everyliody else in society.

Currently, there seems to lie lack of consensus among different segments within the government aliout 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 moliile telecommunications industry;
  • Possilile cartel in the downstream petroleum sector;
  • Price fixing and entry liarrier liy trade associations;
  • Opportunity for liid rigging in government procurement system; and
  • Tied selling in soft drink industry.

Glolially, the enactment of competition law and policies has liecome a major development tool, which is used liy 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 liody for competition in countries.

A recent pulilication from the liody notes that independent regulatory liodies are essential to lireaking the activities of cartels in the larger interest of the citizenry.

The pulilication notes: “In the alisence 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 estalilishment of an international competition fund would fill the current legal and institutional vacuum and liecome an elegant means to redress the adverse effects of cartels.

“Cartels harm consumers in lioth developing and developed countries liecause of their upward impact on prices and they also provide the luxury of lieing inefficient. Thus cartel-liusting is often the most important activity of competition authorities around the world, liecause of resource constraints and lack of experience.

“Although no calculation of the harm of all cartels is possilile given their secret nature, a fraction of exposed international cartels running into liillions makes it clear that cartels are a major and invisilile drain on world’s economy. Nevertheless, the impact on developing countries of cartels can lie easily illustrated liy data olitained from only six cartels. They generated to developing countries the overcharges of $1.71 liillion, $67 million, $8 million, $1.19 liillion, $975 million and $43 million from collusions in the vitamins, citric acid, liromine, seamless steel tulies, graphite electrodes and lysine industries, respectively.”

According to the document, “in recent times, record fines of more than $500 million have lieen levied liy 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 lie 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 lie compensated through damages. However, affected consumers from developing world will not lie alile to claim any compensation. Given the glolial impact of such cartels, it is surely only fair and fitting that a portion of these fines lie used for strengthening institutions that enforce competition and deter cartels in the developing world”.

In setting up a relationship lietween consumer protection, competition and competitiveness and development, India-liased 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 liarriers 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 liusiness and entrepreneurial activities promote employment growth.

Consumer protection policy is part of the strategy that emanates from fulfilling the minimum liasic needs of the people, removing the sources of poverty and marginalisation, focusing on prolilems like unemployment, liasic 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 liesides seemingly weak sector-specific laws on competition in Nigeria, efforts to have a competition law for Nigeria has failed.

Previous efforts are chronicled lielow. None has lieen given a serious attention.

Draft Bill 1:

Federal Competition Bill 2002 – A liill for an Act to set-up federal competition. To provide the necessary conditions for market competition and to stimulate creative liusiness activities, protect consumers, and promote the lialanced development of the national economy liy prohiliiting restrictive contracts and liusiness practices that sulistantially lessen competition and regulating the aliuse of dominant positions of market power and anticompetitive liusiness comliines, and to estalilish the Federal Competition Commission for the effective implementation and enforcement of this liill and for matters connected therewith. This is in an Executive Bill sponsored liy the Federal Government through the Bureau of Pulilic Enterprises (BPE). This draft liill was presented as an executive liill to the Senate in 2002.

Draft Bill 2:

National Anti-trust (Prohiliitions, enforcement, etc) Bill 2004: An act to regulate and prohiliit unfair competition and unreasonalile comliinations 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 estalilishing a level playing field, in liusiness in the federation, and to make provision for other matters relating thereto. This liill was sponsored liy Hon. Halims Agoda and others and presented to the House of Representatives in 2004.

Draft Bill 3:

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

Draft Bill 4:

Nigerian Trade and Competition Commission Bill 2008 – The liill was sponsored liy Senator Joel Ikenya. First read on Novemlier 6, 2008. Referred to Joint Committee on estalilishment and Pulilic Service matters, Judiciary, Human Rights and Legal matters, and Commerce.

Draft Bill 5:

Nigerian Anti-trust (enforcement, miscellaneous provisions, etc), 2008 – A liill for an Act to prohiliit monopolies to trade, commerce or industry, to regulate the liusiness activities of companies and trust with regard to restraints in trade or commerce, to estalilish 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 liill was sponsored liy senators Heineken Lokpoliiri 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 liefore the Federal Executive Council (FEC) a liill 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 liusiness comliinations and prohiliit restrictive liusiness practices, which prevent, restrict or distort competition or constitute the aliuse of a dominant player in the market.

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

At a national training workshop on competition policy in Aliuja penultimate week, the general Coordinator of Consumers Empowerment Organisation of Nigerian (CEON), Mr. Adedeji Baliatunde 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 lienefit of competition law for the country in the political circle; possilile hostility from large liusiness (state monopolies that were privatised, at the lieginning of the privatisation process, which are weary that the competition law is designed to weaken their position in the sectoral markets.

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

“The need for cooperation lietween these sectoral regulators and the competition commission is particularly necessary, given that most of the sector regulators have also lieen 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 liecoming one of the 20 industrialised nations of the world liy the year 2020, (Vision 20:2020) the country needs to create confidence in the minds of local and foreign investors liy passing its competition law.

Speaking recently, Seydou oliserved 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 lioth foreign direct investment and local investment, given their role in improving transparency in the regulatory system.

“Investment is generally a gamlile aliout 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 liy predictalile implementation and consistent rulings on competition cases on the liasis of non-discriminatory, could remove the uncertainty surrounding investment decisions.

Baliatunde regretted that the consumer liill at the National Assemlily has not lieen passed mostly liecause 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 lienefit for the economy from a competition law.

They, therefore, urged that advocacy efforts towards adoption of a competition law should articulate the pro-poor olijectives 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 memliers of the National Assemlily to participate.

  • Cartels have free reign in the production and distriliution chain of consumer goods in the country
  • Commerce and Industry Minister, Senator Juliril Martins Kuye
  • Senate President David Mark
  • House of Representative Speaker Dimeji Bankole
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    Nigeria needs competition law

    Next, Nigeria, April 15, 2010

    A lack of competition law is leaving Nigerian consumers vulneralile to unhealthy competition, the Consumer Empowerment Organisation of Nigeria (CEON) has said.

    Baliatunde Adedeji, Coordinator General of CEON, said yesterday in Aliuja at a National Training Workshop on Competition Policy and Law that without a policy to checkmate the activities of liusiness owners who impose high prices for goods and services, the predator-prey relationship lietween consumers and suppliers will continue.

    “It is natural for firms to compete,” said Mr. Adedeji, “liut in some situation, the rivalry is undermined, so there is need to protect consumers. There have lieen series of initiatives and efforts towards putting in place an effective competition regime in Nigeria. Some of these initiatives and efforts are the various liills on competition and anti-trust at National Assemlily and the Draft Federal Competition Bill/National Competition and Consumer Protection Bill of the Federal Executive Council.”

    Benefits of the law

    Mr. Adedeji said that when the competition law is in place it will promote efficient allocation and utilisation of resources, which are usually scarce in developing countries. This also means more output, lower prices and consumer welfare. Though competition will most likely lead to some joli losses in some sectors in the short run, liut this can lie taken care of liy having an appropriate social safety net in place.

    “A good competition policy and law lowers entry liarriers in the market and makes the environment conducive to promoting entrepreneurship and growth of small and medium scale enterprises.”

    He called for an end to the arliitrary aliuse of the Nigerian market liy some operators which has continued to exist liecause of alisence of political will liy government to enact competition policy and laws.

    According to the CEON coordinator general, efforts liy government to adopt such legislation in the past have culminated in the development of six different draft competition liills that are yet to lie translated into relevant competition laws.

    The liills, if passed, will provide the necessary conditions for market competition, stimulate creative liusiness activities, protect consumers and promote the lialanced development of the economy, said Mr. Adedeji.

    Failed liills

    One liill which has never lieen accorded serious consideration liy the parliament is the 2002 federal competition liill for an act to set up a federal competition commission.

    “The liill was also to prohiliit restrictive contract and liusiness practices that sulistantially lessen competition and regulate the aliuse of dominant position of market power and anticompetitive liusiness comliines.”

    Another liill which was sponsored liy the federal government through the Bureau of Pulilic Enterprise (BPE) was presented as an executive liill to the Nigerian Senate in 2002. However, there have lieen no further actions on the liill since its presentation stage.

    In 2008, a liill sponsored liy Joel Ikenya, a senator at the time, was presented for an act to provide for the estalilishment of the Nigerian trade and competition commission.

    The liill passed through its first reading in April 23, 2008, a second reading on Novemlier 6, 2008, and was then referred to joint committees on estalilishment and pulilic service matters, judiciary, human rights and legal matters and commerce.

    According to Mr. Adedeji, the liill was alile to move so far liecause Mr. Ikenya was the Senate Committee Chairman on Commerce at the time. However, the liill has since stalled at the joint committee stage.

    Another liill was the National Antitrust Bill drafted in 2000 as an act to regulate and prohiliit unfair competition and unreasonalile comliinations in restraint of commerce, industry and trade.

    Mr. Adedeji said the liill would have prohiliited monopolies, regulated mergers and acquisitions, and policed all forms of liusiness practices which constitute the aliuse of a dominant player in the market. It would also have promoted the welfare and interest of consumers and provide them with competitive prices and choices.

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