Merger and Acquisition: The Concept of Anti-Merger in Nigeria, A Comparative Analysis.

Merger And Acquisition: The Concept of Anti-Merger in Nigeria, A Comparative Analysis.

By Abdulkadir Ahmed DL, LL. B, BL (in view) ACIArb (UK) AIIIBF[1]

Merger and Acquisition (M&A) in Nigeria

Mergers and acquisitions have become increasingly prevalent in Nigeria, driven by various factors such as economic growth, market consolidation, and the desire to enhance competitiveness. However, the Nigerian legal framework imposes certain restrictions on M&As to prevent anti-competitive practices.

The Concept of Anti-Merger

An anti-merger refers to a merger or acquisition that is deemed to be anti-competitive. Such transactions can harm competition by reducing market choice, increasing prices, or stifling innovation. Anti – competition practices is not limited to instances of Merger and Acquisition alone, existing companies may engage in an anti – competition transactions by way of misleading the public or presenting their commodities or services in anti-competitive manner. The investigation into the branding, labelling and alleged anti-competitive practices by Coca-Cola Nig. Ltd is an example of such instances.

For example, in March 2023, the FCCPC proposed remedies for the proposed acquisition of a 21.61% equity stake by FMDQ Holdings PLC in Central Securities Clearing Systems PLC. The proposed remedies included both behavioural and structural changes to address potential competition concerns. While this isn’t a direct example of a blocked merger, it demonstrates the FCCPC’s increasing scrutiny of mergers and its willingness to impose conditions to ensure fair competition[2]

Anti-Merger Regulations in Nigeria

The primary legislation governing mergers and acquisitions in Nigeria is the Federal Competition and Consumer Protection Act, 2018 (The Act). The Federal Competition and Consumer Protection Commission (the Commission) is empowered to review and approve mergers and acquisitions, and has the authority to impose conditions or prohibit transactions that are likely to substantially prevent or lessen competition in a relevant market in Nigeria. The Commission also has the power to publish guidelines and/or regulations that guide the merger review process.[3]

In December 2023, the Commission concluded a comprehensive three-year investigation into British American Tobacco Nigeria Limited (BATN) and its affiliates. The investigation revealed that BATN had engaged in anti-competitive practices that violated the Federal Competition and Consumer Protection Act, 2018 and other relevant tobacco control laws. As a result of these findings, the commission imposed a significant fine of $110 million on BATN and its affiliates. The fine was imposed for various anti-competitive practices, including:

Abuse of dominance: BATN was found to have abused its dominant position in the Nigerian tobacco market by engaging in anti-competitive practices such as price fixing, exclusive dealing, and predatory pricing. And

Deceptive marketing practices: BATN was also found to have engaged in deceptive marketing practices, including misleading advertising and promotion of its products.[4]

Key Considerations for Anti-Merger Reviews:

1. Market Definition: The Commission defines the relevant market by considering factors such as product characteristics, geographic scope, and customer preferences.
2. Market Share and Concentration: The Commission assesses the market shares of the merging parties and the overall market concentration to determine the potential impact on competition.
3. Barriers to Entry: The Commission considers whether there are significant barriers to entry that could limit competition and hinder new entrants.
4. Potential Anti-Competitive Effects: The Commission evaluates the potential anti-competitive effects of the merger, such as price increases, reduced product quality, or decreased innovation.
5. Sector – Specific collaboration: The Commission, in accordance with Section 105(5) of the Act, plays a vital role in guiding businesses on merger control regulations. It works in collaboration with sector-specific regulators, such as the Nigerian Communications Commission (NCC) and the Nigerian Electricity Regulatory Commission (NERC), to develop and implement competition regulations tailored to specific sectors. This collaboration involves establishing procedures for the concurrent exercise of competition powers, aiming to prevent anti-competitive practices across various sectors and promote a fair competitive environment.

CHALLENGES:

The Commission has made significant strides in enforcing anti-merger regulations in Nigeria. However, several challenges hinder its effectiveness:

1. Limited Resources and Capacity:

• Understaffing: The Commission often faces a shortage of skilled personnel to effectively investigate and analyze complex merger transactions.
• Insufficient Funding: Limited budgetary allocations can hinder the Commission’s ability to conduct thorough investigations and take enforcement actions.

2. Lack of Awareness and Compliance:

• Inadequate Understanding: Many businesses in Nigeria may not be fully aware of the merger control regulations and their implications.
• Non-Compliance: Some firms may deliberately avoid notifying the commission f mergers or may fail to comply with its directives.

3. Complex Economic Analysis:

• Technical Expertise: Assessing the potential anti-competitive effects of mergers often requires sophisticated economic analysis, which may be beyond the capacity of the FCCPC’s current resources.
• Data Availability: Access to reliable and comprehensive market data is crucial for conducting thorough investigations, but data collection and analysis can be challenging in Nigeria.

4. Judicial Backlog and Enforcement Challenges:

• Court Delays: The judicial system is often overburdened, leading to delays in resolving cases and enforcing decisions.
• Weak Enforcement Mechanisms: The Commission may face difficulties in enforcing its decisions, particularly in cases involving complex legal and economic issues.

5. Balancing Economic Growth and Competition:

• Promoting Economic Development: The Commission must balance its role as a competition watchdog with the government’s broader economic development goals.
• Attracting Foreign Investment: Overly stringent merger control regulations may deter foreign investment, which is crucial for Nigeria’s economic growth.

RECOMMENDATIONS:

• Strengthen its capacity: By recruiting more experienced staff, investing in training, and seeking technical assistance from international organizations.
• Enhance its investigative powers: By obtaining greater access to information and documents relevant to merger investigations.
• Improve coordination with other regulatory agencies: To ensure consistency and efficiency in the enforcement of competition law.
• Raise public awareness: Through public education and outreach programs.
• Seek legislative reforms: To strengthen the Commission’s powers and enhance its ability to effectively enforce competition law.

Comparative Analysis: International Perspective

Many jurisdictions, including the United States, the European Union, and the United Kingdom, have similar anti-merger laws and regulations. These jurisdictions often employ economic analysis to assess the competitive impact of mergers and acquisitions. For instance:

• The United States: The United States has a robust antitrust regime, Hart-Scott-Rodino Antitrust Improvements Act of 1976 enforced by the Department of Justice (DOJ) and the Federal Trade Commission (FTC). These agencies review proposed mergers and acquisitions to ensure they do not harm competition. When necessary, the FTC may take formal legal action to stop the merger, either in federal court or before an FTC administrative law judge.[5]
• The European Union: The European Union has a comprehensive competition law framework, overseen by the European Commission. The Commission reviews mergers and acquisitions to determine whether they would significantly impede effective competition within the European Economic Area. The acquisitions of GRAIL by Illumina present a case study for this purpose. This case involved a proposed acquisition of a cancer diagnostics company by a leading genomics company. The European Commission blocked the deal, arguing that it would have significantly reduced competition in the market for cancer diagnostics. This case has been particularly significant as it involved a novel approach to merger control, where the Commission sought to expand its jurisdiction to review deals that may not traditionally fall within the scope of EU merger control.[6]
• The United Kingdom: The Competition and Markets Authority (CMA) in the UK is responsible for enforcing Competition Act, 1998, including reviewing mergers and acquisitions. The CMA has the power to block or impose conditions on mergers that could harm competition.[7]

While Nigeria’s regulatory framework is relatively new, it has been evolving to align with international best practices. The FCCPC’s increasing focus on merger control is a positive step towards ensuring fair competition and protecting consumer interests.

Conclusion

Nigeria’s anti-merger regime, as embodied in the FCCPA, is a significant step towards ensuring fair competition and protecting consumer interests. While the Nigerian framework shares similarities with international best practices, it also has unique characteristics. As the Nigerian economy continues to evolve, it is essential to keep abreast of regulatory developments and seek expert legal advice to navigate the complex landscape of mergers and acquisitions.

References:

1. Federal Competition and Consumer Protection Act, 2018
2. Federal Competition and Consumer Protection Commission website
3. ICLG Merger Control Laws and Regulations Report 2024 Nigeria
4. Dentons ACAS-Law: An overview of mergers and acquisitions in Nigeria

About the Author

[1] Abdulkadir Ahmed is a budding legal practitioner with keen interest in corporate advisory, Alternative Dispute Resolution and Litigation. He can be reach via his mail abdulkadiackahmed@gmail.com and phone number 07065419288

References

[2] Merger Control 2024. https://practiceguides.chambers.com/practice-guides/merger-control-2024/nigeria/trends-and-developments#:~:text=Under%20the%20Federal%20Competition%20and,acquisitions%2C%20and%20has%20the%20authority accessed 18^th November, 2024

[3] Merger Control 2024. https://practiceguides.chambers.com/practice-guides/merger-control-2024/nigeria/trends-and-developments#:~:text=Under%20the%20Federal%20Competition%20and,acquisitions%2C%20and%20has%20the%20authority accessed 18^th November, 2024

[4] BATN and Affiliated Companies: investigation into possible violation of FCCPA. https://fccpc.gov.ng/british-american-tobacco-nigeria-limited-and-affiliated-companies-investigation-into-possible-violations-of-the-federal-competition-and-consumer-protection-act-2018-and-other-relevant-tobacco-contro/#:~:text=Wednesday%2C%20December%2027%2C%202023%3A,to%20a%20final%20resolution%20with accessed 18^th November, 2024

[5] FTC Seeks to Block Virtual Reality Giant Meta’s Acquisition of Popular App Creator Within https://www.ftc.gov/news-events/news/press-releases/2022/07/ftc-seeks-block-virtual-reality-giant-metas-acquisition-popular-app-creator-within#:~:text=The%20Federal%20Trade%20Commission%20is,Mark%20Zuckerberg%20from%20acquiring%20Within accessed 18^th November 2024

[6] Mergers: Commission Prohibits acquisition of GRAIL by Illumina.  https://www.gov.uk/government/organisations/competition-and-markets-authority/about#our-responsibilities

[7] Competition and Markets Authority https://www.gov.uk/government/organisations/competition-and-markets-authority/about#our-responsibilities accessed 18^th November, 2024

Source: Sabilaw