Competition Law As It Affects Restrictive Practices

Introduction

Competition Law proposes via institutionalized legal framework, a free market economy where prices are not fixed by the competitors in a bid to manipulate the final consumer, rather it ensures a free economy with lower prices and better services. Competition Law is the foundation upon which every reliable free market economy no matter its structure must rest. It supports fairness in economic activities. Competition Law is otherwise referred to as Antitrust Law in other jurisdictions.

Restrictive practices under the Federal Competition Commission Bill 2005

The Bill shall apply to public utilities (however in relation to such, the Commission, before it exercises any function shall consult with the body responsible for the regulation of the given utility), Governments (Federal, State and Local) as well as all conducts both within and outside Nigeria by persons either carrying on business or resident in Nigeria. The Bill stems to promote a balanced development of the Nigerian economy.

The Bill in a bid to promote healthy competition in the Nigerian economy protects the economy against competition distortion or restraint of trade which culminates in restrictive practice. Restrictive practice is any practice whereby either party owns a significant interest in the other or has at least one director or substantial shareholder in common and any combination of the parties.

In acquiring or holding significant interests, a party or parties may engage in activities which are restrictive in nature and capable of lessening competition by restricting inflow and outflow in the market through market restriction, restraint of trade, abuse of dominant position, any agreement for minimum sale and Monopoly.

Market Restrictions

This is any practice whereby supply is limited to a defined market or a supplier exacts a penalty of any kind from the customer, if the customer supplies any products outside a defined market. The supplier’s action stems to limit influx of supply by restricting it to only his products or associated brands designated by the Supplier or the nominee by inducing the customer with better bargains or favorable terms.

Such practice is restrictive in nature as it limits patronage to the benefiting Supplier by virtue of the inducement of favorable terms to the customer. This has its own effect on healthy competition in the market as each party seeks its own good at the risk of disrupting free flow of goods in the market.

Restraint of Trade

This is any arrangement between parties within or outside Nigeria with the primary intention of controlling commerce. This includes acts involving conspiracy whether directly or indirectly to fix prices or other trading conditions, market division, collusion tendering, production restriction, irregular trading conditions which places others at a competitive disadvantage and subjecting acceptance to a contract to certain conditions. This tends to reduce the volume of trade to a benefitting party’s advantage and restrict competition in the market. A practical example is  a thought as to what would have been the case had the Nigerian Communication Commission (NCC) not put in place measures to regulate pricing as well as interconnectivity between the various networks.

Abuse of dominant position or market power

A party enjoys a dominant position or market power either by virtue of its economic strength or reputation built over time. An enterprise enjoys a dominant position where it enjoys the control of more than forty percent of a market. This occurs where a party restricts entry, prevents and eliminates competition in the market; Imposes unfair pricing or anti- competitive practices which directly or indirectly limit production and includes irrelevant conditions to contracts.

Monopoly

It is trite that a monopolistic market does not encourage a free economy. It does not allow for equal bargaining power in the market, it is a restrictive practice and the Bill makes such practice unlawful. A monopoly exists where 51% of the goods are supplied by one and the same party. Similar to this was when some newspapers reported that a major player in the construction industry, Dangote Cements, threatened to temporarily shut down its Obajana plant if the government continued to allow the importation of cement into the country. The basis for the threat was that there was excess supply of cement in the market. This veiled threat was in a bid for the Company to continue to enjoy control as a major player in the market.