Abstract
Characterised by rapid market turnover and intense competition, the FMCG industry in Nigeria presents unique challenges and opportunities for companies. As the industry expands, the need for brand strength has become a critical success factor for the sustainability of these companies, whether indigenous or multinational, as it increases customer loyalty, public perception, and market dominance. However, the dynamics of competition among these leading brands are restricted by regulatory control to avoid unfair competition and abuse of market dominance.
This article examines how companies navigate competitive pressures and the legal environment that governs their operations. By analysing factual illustrations and regulatory developments, the article highlights the interplay between competitive practices and legal constraints, offering insights into how businesses can effectively manage brand competition while ensuring compliance with Nigeria's legal and regulatory landscape.
Introduction
The FMCG sector in Nigeria is a lively and fast-expanding sector that combines demographic opportunity, economic expansion, and regulatory complexity. Nigeria, Africa's most populous nation and largest economy provides a compelling venue for both domestic and international FMCG companies wanting to win market share in a country with so much potential.
However, FMCG companies in Nigeria must employ tactics to cater to Nigeria's diverse population, which includes people of various income levels, cultural backgrounds, and consumer preferences. As the FMCG industry has a low barrier to entry, there is intense competition in the sector, with companies striving to gain market dominance through promoting and protecting their brands.
Overlaying this competitive landscape is a legal and regulatory structure that governs significant areas of the FMCG industry.
The Federal Competition and Consumer Protection Act (FCCPA) 2018 established the Federal Competition and Consumer Protection Commission (FCCPC) and brought new dynamics to the market by outlining monopolistic activities as offences to foster a level playing field for all market participants. As the industry continues to grow, enhanced by shifting consumer preferences, and integration with global supply chains, the need for an in-depth understanding of the legal framework for competition in the industry has never been more relevant.
Brand Competition under the Federal Competition and Consumer Protection Act (FCCPA) 2018
The Nigerian Legislature enacted the FCCPA 20181 to promote fair competition and protect consumers and businesses thereby fostering economic growth. The FCCPA prohibits anti-competitive agreements between businesses, such as price fixing, market carving, and abuse of a dominant market position. It also prohibits concerted refusal to supply, which includes agreements to withhold goods or services from dealers who resell them in breach of conditions or to refuse supply except on less favourable conditions.
While these requirements may appear oppressive for some companies, for multinationals, these rules help ensure a level playing field with other businesses, which helps in fostering healthy competition.
This can prevent larger firms from using their market power to gain an unfair advantage over smaller competitors. To achieve a regulated environment that promotes fair competition among companies, the FCCPA also established the FCCPC2 and the Competition and Consumer Protection Tribunal3 (CCPT) to promote fair, efficient, and competitive markets. It is noteworthy that the Act encourages brand competition but frowns vehemently at the use of unfair strategies or abuse of dominance by businesses in their competition strategies.
Some other key provisions on brand competition under the FCCPA include:
1. Prohibition of Anti-Competitive Practices:
The Act prohibits agreements that prevent, distort, or restrict competition in the Nigerian market. Furthermore, one of the main objectives of the Act is to promote and maintain competitive markets in the Nigerian economy.4 Likewise, the FCCPC monitors business interactions between partners, wholesalers, and retailers, and investigates anti-competitive practices for possible legal action.5 Some of these Anti-competitive practices that attract these legal actions include:
a. Bid rigging: This anti-competitive strategy involves collusion between competitors to fix the outcome of a bidding process, ensuring that a particular company wins a contract. This undermines fair competition and can lead to inflated costs which can impact consumers and businesses in similar markets.6
b. Price Fixing: This usually involves agreements between competitors to fix prices, set minimum prices, or maintain price levels at a certain level. This reduces competition and can lead to higher prices for consumers. As with bid-rigging, the FCCPC may, upon the conviction of a company for price fixing, impose a maximum fine of 10% of the company's annual turnover in the preceding business year.7
c. Conspiracy to reduce competition: Under the FCCPA, businesses cannot conspire to unfairly limit production, supply, or transportation of goods and services, reduce competition, or raise prices unreasonably. Such actions are prohibited to ensure a fair and competitive market.8
d. Obstruction of monopoly investigation: An obstruction of monopoly investigation prevents regulators like the FCCPC from uncovering and addressing unfair practices and allows the company under investigation to maintain its market power, delay corrective actions, deter new competitors, and undermine trust in regulatory bodies ultimately harming competition and market fairness.9 Many undertakings do this by providing false and misleading information which is also punishable by conviction under the FCCPA.10
Upon the conviction of a company for bid-rigging, price-fixing, and conspiracy to reduce competition, the FCCPC may impose a maximum fine of 10% of the company's annual turnover in the preceding business year and also reserves the right to proceed against each director of the company.11 When a director or member of a company obstructs an FCCPC investigation, such person is liable to two years imprisonment or a fine of ₦ 2,000,000.00 (Two Million Naira) or both, upon conviction.12
One of the most notable benefits of these provisions for multinationals is the increase in consumer choice. When multiple companies compete fairly, consumers enjoy a wider range of products and services. Invariably, this provision compels FMCG companies to continuously innovate and enhance their offerings to meet evolving consumer preferences.
Footnotes
1 The Federal Competition and Consumer Protection Act (FCCPA) 2018.
2 Section 3 of the FCCPA 2018.
3 Section 39 & 40 of the FCCPA 2018.
4 Sections 1(a) of the FCCPA 2018.
5 Federal Competition and Consumer Protection Commission https://fccpc.gov.ng/aboutus/ourmandate/#:~:text=Anticompetitive%20Practices,actions%20against%20the%20involved%20parties. Accessed on 7th August, 2024.
6 Section 109(1) FCCPA 2018.
7 Section 107(1) FCCPA 2018.
8 Section 108 of the FCCPA 2018.
9 Section 110 of the FCCPA 2018.
10 Section 112 of the FCCPA 2018.
11 Sections 109 (3), 108 (3), and 107 (4) of the FCCPA 2018.
12 Section 110 of the FCCPA 2018.
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