Tag: Nigeria merger

Nigerian Competition Law: FCCPC Publishes Penalty Guidelines

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By Michael-James Currie and Jemma Muller

Nigeria is quickly emerging as one of the more important antitrust regimes on the African continent. Not only because it is a significant market, but largely due to a raft of recent legislative developments. The Federal Competition and Consumer Protection Commission (“FCCPC”) has been formally established and is fully operational with the legislative tools to tackle and prosecute the traditional spread of competition law violations including restrictive horizontal practices, abuses of market power and conduct robust analysis in relation to its merger control regime.

The most recent publication by the FCCPC is its Administrative Penalties Regulations, 2020 (“Penalty Regulations”). The publication of these Penalty Regulations not only serve as stark reminder of the risks of non-compliance with the competition laws but also signals the start of an active enforcement regime.

The Penalty Regulations provide for a largely mechanical calculation for purposes of quantifying an administrative penalty. In essence, however, the Penalty Regulations provide for a prescribed “base amount” (which is either fixed fee or calculated as a percentage of turnover) and this base amount is increased (or decreased) based on aggravating and mitigating factors as well as taking the duration of the infringement into account.

Importantly, the penalties are calculated with reference to annual turnover. This is not qualified by local or Nigerian derived turnover only. There is a risk that when calculating administrative penalties a firms’ total worldwide turnover is taken into account. This poses a significant risk for foreign entities who might only have a relatively negligible presence in Nigeria but are significant players on the global market.

Failure to notify a mandatorily notifiable merger (i.e., gun-jumping or prior implementation) attracts a base penalty of 2% of the parties’ annual turnover. This includes a pure foreign-to-foreign merger (i.e. where parties are domiciled outside of Nigeria) but have a nexus to Nigeria by virtue of having a subsidiary in Nigeria or derive turnover in or from Nigeria.

The good news for foreign firms is that parties to a foreign-to-foreign merger (or to a merger which raises no overlapping business relationships) may apply to have their transaction assessed under an expedited review regime. The expedited regime envisages reducing the review period of a phase 1 merger by up to 40%. It is advisable to engage the FCCPC by way of the pre-merger consultation process in order to confirm whether a proposed transaction qualifies for an expedited review.

Over and above administrative penalties, firms operating in Nigeria should also note that the FCCPC has the powers to pursue criminal prosecution against firms and individuals who violate certain provisions of the legislation. These include provisions dealing with, inter alia, price fixing, conspiracy, bid-rigging, obstruction of an investigation or inquiry of the Commission, providing false or misleading information, the failure to give evidence or appear before the Commission, and the failure to comply with a compliance notice or order issued by the Commission.

Like most jurisdictions which adopt a new, novel or revamped competition law regime, there are several aspects of Nigeria’s legislation which would benefit greatly from precedent. But in relation to the primary obligations of firms operating in Nigeria, the fundamentals are clear and the consequences for contraventions are of sufficient import to ensure that Nigeria is placed on the compliance radar.

[Michael-James Currie is a partner at Primerio and specializes in competition law in several African jurisdictions including Nigeria. Please feel free to get in touch with Michael-James by sending an email to m.currie@primerio.international]  

Nigeria’s Foreign-to-Foreign Merger Control Regime

Posted on by Editor

By Michael-James Currie and Camilla Johnson

Antitrust enforcement is on the rise across Africa. Many jurisdictions are developing competition authorities and endorsing legislation with the intention of controlling cartel conduct, abuse of dominance and anti-competitive mergers.

In February 2019, Nigeria developed their first competition law regime through the enactment of the Federal Competition and Consumer Protection Act (“FCCPA”), which largely mirrors the South African Competition Act. This legislation was welcomed by market players and consumers, as Nigeria, being the number one oil exporter in the continent, is a key regional player in West Africa.

Prior to the FCCPA, there was no dedicated merger control legislation regulating transactions between non-Nigerian entities that affected the control of a Nigerian business. Section 2(3)(d) of the FCCPA specifically extends the Act’s application to any conduct outside the country by any person through the acquisition of assets resulting in the change of control of a business, or part of a business or any asset of a business, in Nigeria. The Federal Competition and Consumer Protection Commission (“FCCPC”) went a step further in their merger control regime by issuing the Guidelines on the Simplified Process for Foreign-to-Foreign Mergers with a Nigerian Component (“the Guidelines”). They are the first of their kind in Africa.

The legal review of mergers is essential to ensuring competitive behaviour is not undermined, economic performance is promoted, and consumer welfare is protected. The Guidelines provide a succinct, informative glimpse into the requirements for a successful merger review by the FCCPC and are thus intended to incentivise foreign investment.

The FCCPC must be notified of a foreign merger if it meets one of the alternative thresholds provided in the Guidelines. If the parties have a combined turnover of at least NGN 1 billion (approximately USD 2.5 million), they meet the combined leg. The filing fee will be the higher of NGN 3 million or 0,1% of the combined turnover. If the target entity has turnover of at least NGN 500 million (approximately USD 1.2 million), they meet the target leg and the filing fee will be NGN 2 million. A foreign-to-foreign merger could trigger either leg of the threshold. While the Guidelines do not expressly prescribe a “local nexus” test, a transaction which has an impact on the Nigerian economy will trigger the nexus.

Through the review procedure, the FCCPC seeks to uncover whether the proposed merger will activate anti-competitive or competitive behaviour in the Nigerian market. This is executed by considering whether the merger will substantially lessen or prevent competition in the market, or whether the merger would offset the negative effect on competition by producing technological contributions to the economy. A merger will also be justified if it substantially benefits the public interest, for example if domestic entities are able to compete in the international market, or employment opportunities are elevated. These are the tests against which the FCCPC will assess the proposed merger.

In the interest of transactional efficiency, the Guidelines introduced an expedited process for foreign-to-foreign mergers. The FCCPC will conduct a simplified review procedure, which results in a decision being issued within 15 business days. This will circumvent the typically lengthy review period, but at an additional cost of NGN 5 million (approximately USD 12 000).

While the documentation required is generally less cumbersome than what woudl ordinarily be required, parties must provide sufficient information to the FCCPC so as to enable the authority to confidently conclude that the transaction is unlikely to raise any competition concerns.

Parties must submit a description of the merger in the form of a non-confidential summary that will be published by the Commission, an executive summary and an explanation why the merger qualifies for simplified treatment. Detailed information relating to the merging parties and nature of the parties’ business is required, as well as the nature and details of the merger. Here the parties must describe the economic rationale of the merger as it affects Nigerian markets and the value of the transaction. Information on the turnover in Nigeria in the last financial year must be submitted for each of the undertakings concerned. With regards to supporting documentation, copies of the most recent documents relevant to the merger and an indication of the online location where the most recent and relevant financial information is available, is required.

The FCCPC requires market definitions in the form of a product and a geographical study, as well as a description of the local market activities to be provided, in order to ascertain the scope of the market power resulting from the merger. This includes an estimate of the total size of the market and expected sales (in terms of value and volume), and the nature of existing horizontal and vertical relationships with the prospective mergers’ five largest competitors.

[Michael-James Currie is a director at Primerio, Africa’s first boutique law firm dedicated to competition law practice across the African continent. He can be contacted at m.currie@primerio.international]