INTRODUCTION
The Federal Competition and Consumer Protection Act ("FCCPA"), 2018 is generally the primary legislation for the regulation of competition and protection of consumers in Nigeria. One of the salient objectives of the FCCPA is to prohibit restrictive or unfair business practices that prevent or restrict competition (as captured in Part VIII (Section 59-69) of the FCCPA).
In furtherance of the provisions of the FCCPA, the Federal Competition and Consumer Protection Commission ("FCCPC") released the Restrictive Agreement and Trade Practices Regulations, 2022 ("Regulations") which provides a framework for the implementation of the provisions of the FCCPA on restrictive agreements.
We have highlighted below some notable points regarding the regulation of restrictive agreements in Nigeria.
1. What are Restrictive Agreements?
Restrictive Agreements under the FCCPA are agreements that prevent, restrict or distort competition in any market. This can be done through price fixing, market allocation, limitation of production/ distribution of goods and services, collusive tendering, and tied selling. Agreements that involve any of the above activities are by virtue of the FCCPA, generally unlawful and have no legal effect.
2. What is the criteria for determining whether an agreement is restrictive?
An agreement would be deemed restrictive where the purpose of the agreement is to restrict competition (purpose-based restriction of competition) or where the effect of such agreement restricts competition (effect-based restriction of competition).
a) Purpose-based Restrictive Agreements
According to the Regulations, in determining whether an agreement is purpose-based restrictive, the FCCPC will consider: the content and objectives of the agreement; the actual conduct of the parties to the agreement; and the legal and economic context in which the agreement is applied. The FCCPC may also consider the subjective intention of a party to the agreement where the implementation of the agreement reveals a purpose-based restriction of competition.
b) Effect-based Restrictive Agreements
In determining whether the effects of an agreement is restrictive, the FCCPC will consider the actual and potential effects of the agreement. In identifying Effect- based restrictive agreements, the Regulation provides that such agreements:
i. should have or be likely to have an appreciable adverse effect on at least one parameter of competition in the market eg price, output, product quality, product variety or innovation;
ii. appreciably reduce competition between the parties to the agreement or between any of the parties and a third party, by reducing the party's decision-making independence;
iii) should enable the parties to profitably raise prices or reduce output, product quality, product variety or innovation.
The Regulations also provide that the FCCPC would consider: the nature and context of the agreement; the extent to which the parties to the agreement possess some degree of market power; the extent to which the agreement contributes to the creation, maintenance or strengthening of their market power e.t.c., in determining whether the effects of the agreement is restrictive.
3. What are the Criteria for Obtaining an Exemption to Execute Restrictive Agreements?
A restrictive agreement will not be deemed to be illegal and void where entry into such an agreement has been authorized by the FCCPC. According to the FCCPA and the Regulations, the FCCPC is only empowered to grant such authorisations where all the of conditions set out below are met.
- The agreement is required to contribute to the improvement of production or distribution of goods and services or the promotion of technical or economic progress;
- Consumers must receive a fair share of the resulting benefits of (a) above;
- The restrictions imposed in the agreement should be limited to those which are indispensable to the attainment of the objectives in (a) above; and
- The agreement should not permit the possibility of eliminating competition in respect of a substantial part of the goods and services concerned.
It is important to note that the burden of proving that the restrictive agreement complies with the a-d above rests on the party applying for the authorization of the restrictive agreement.
4. How Can a Party to a Contemplated Restrictive Agreement Obtain an Exemption?
Parties to a contemplated agreement can apply for an exemption by submitting an application to the FCCPC for its decision as to whether the agreement is restrictive and including a request for exemption. The applicant will also be required to file a copy of the contemplated agreement or a document that provides full details of the agreement.
5. How can Parties ensure that their Contemplated Agreements are not Restrictive?
Parties to an agreement that suspect, or are of the opinion that their contemplated agreement infringes on the provision of the FCCPA concerning restrictive agreements, are by the Regulations permitted to apply to the FCCPC for an assessment of the contemplated agreement. This can be done by submitting a notification to the FCCPC in respect of the agreement in addition to a copy of the agreement or a document containing full details of the agreement and supporting information on the agreement. The FCCPC is required to provide guidance to the applicant as to whether the agreement is a restrictive agreement and prohibited within 40 days of the application.
CONCLUSION
The provisions of the FCCPA and the Regulations on restrictive agreements are useful in developing Nigeria's anti-trust legislation and entrenching fair market practices in support of economic growth. A useful point to note about the regulations is that it provides detailed guidelines on how to determine restrictive agreements and the criteria for obtaining exemptions, thereby limiting the discretionary powers of the FCCPC.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
