Wednesday, 23 November 2011

IPRs and Competition Law: a Nigerian Opportunity?

What does Kingsley Egbuonu do when he's not writing Afro-IP's A to Z features on official online connections to Africa's multifarious nations?  Here's part of the answer: he focuses his thoughts and his research powers on African IP issues such as the one which Afro Leo is pleased to host below.  Do please let us -- and Kingsley -- know what you think!
"IPRs and Competition Law: a Nigerian Opportunity?

The essence of intellectual property rights (IPRs) and the need to protect them as far as practicably possible is well documented. Although these rights are recognised “monopolies”, they are good for society but, when misused, they are detrimental to consumers and to the public interest. There is an interface between IPRs and competition law and this is recognised in the TRIPS agreement. [nb this is a vast subject in itself, far too big for a single blog post. This article just addresses some salient points]

TRIPS and Anti-Competitive Practices

Article 40 of the agreement recognises that certain exploitation of IPRs (eg licensing and/or its conditions) may restrain competition and impede technology transfer. While it essentially allows Member States to legislate against anti-competitive practices, this is not a mandatory requirement. However, it is rather unusual for a country to have an IPR system without a competition regime acting as a counterbalance to limit IPRs.

In the context of IPRs, the sectors which normally come under competition scrutiny are pharmaceuticals, IT/telecommunications and entertainment & media, while patents, know-how and copyright are the usual corresponding suspects. Practices that have been considered anti-competitive include (a) grant-backs of improvements relating to a licensed technology (b) no-challenge clauses; (c) tying-in or illegal bundling; (d) refusal to license IPRs; (e) extending the life of an expired patent in order to stifle competition or unduly profit from it; (f) charging discriminatory royalty rates; (g) control or refusal to supply interoperability/compatibility information; (h) standard-setting/compliance organisations and “patent ambush” risks; (i) mergers resulting in concentration of IPRs and (j) over-zealous brand extension strategies. The anticompetitive consequences of any or a combination of these practices include price collusion, market foreclosure and competitor exit. 
The Need for a Competition Regime in Nigeria 
A competition regime in a free market benefits consumers through lower prices, better quality and greater choice. It drives economic growth, ensures that wealth is not concentrated in the hands of the few and lifts millions out of poverty. Crucially, it also provides businesses with the opportunity to compete on price and quality, in an open market and on a level playing field without anti-competitive restraints. The only available means by which businesses can compete and showcase the quality of their goods is by the use of trade marks (this is yet another interface). 
A company (including an IPR holder) with significant market power and dominant position operating in a jurisdiction without standard competition law rules and an overarching competition authority can in effect engage in any of the above deemed anti-competitive practice(s) without fear. Unfortunately, Nigeria is one of those jurisdictions and according to sources there are “hard-core” cartels operating there at this very moment.

According to a Reuters news report last week, British Airways and Virgin Atlantic were fined a combined total of $235 million in Nigeria. The report adds: "We are charging British Airways $135 million and Virgin Atlantic $100 million for abuse of a dominant position, fixing prices, abusing fuel surcharges and taking advantage of passengers. We have been investigating for the last six months, Lagos to London has the highest route yield in the world. Our market is open for exploration, not exploitation." said Harold Demuren, Director General of Nigeria Civil Aviation Authority (NCAA).

According to The Nation, the NCAA in essence relied on the investigations/findings of the UK and US competition authorities in reaching its own decision. A statement from BA said: “We reject the allegations made by the Nigerian Civil Aviation Authority and we are vigorously defending our position….” while Virgin responded: “I don’t think we have violated Nigerian law in any way. We hold the Director-General of the NCAA and the agency in high esteem. We respect the laws of the land. A full response will be coming from our office later” (here). Is there a subtle message in both responses?
According to available information, the NCAA serves as the regulatory and competition body for the aviation sector in Nigeria. This is also similar in other sectors of the Nigerian economy. Perhaps, if it had a stand-alone competition authority, Nigeria might have had the benefit of information-sharing with its counterparts in the UK and/or the US since 2004 and could have acted swiftly on such information. At least, this would have avoided the inevitable suspicion that this was a politically motivated decision considering the fact that Nigeria and the UK had a recent dispute over their bilateral aviation agreement (here). 
Now back to IPRs and competition law. Nigeria (like other African countries) needs foreign direct investment (FDI) in its key sectors -- for example, the oil and gas, pharmaceutical and telecommunications sectors. The players in these sectors rely heavily on IPRs (patents or know-how) which will be exploited (by way of licensing and/or technology transfer). Without a stand alone anti-competition law and a competition authority to deter the practices cited above, how can Nigeria expect to benefit effectively from FDI as well as encourage a healthy competition in its economy? How does it ensure that smaller indigenous firms are not unfairly excluded from a market by dominant firms?

An economy like Nigeria is now overdue for a competition regime: a dedicated law and a competent authority to enforce it judiciously. Most state-backed monopolies or state aid in key sectors are failing or have failed and it is the case that there is still inefficient allocation of resources in its economy. A competition regime will protect the interests of millions of consumers as well as create a level playing field for all kinds of businesses to flourish. 
Looking to other developing countries, both India and South Africa have a competition regime and are taking significant steps in building their own unique jurisprudence by adapting this legal transplant to fit their socio-economic development needs. It is also impressive to see that they both follow best practices seen in Europe and the US, for example, the authorities have functioning websites packed with information about competition law/rules, their powers/jurisdiction, guidance for businesses and news updates.

If the lawmakers in Nigeria are not remotely convinced with the “IPRs argument” for a competition regime, then bribery and corruption must be obviously convincing. Anti-competitive practices can also be seen as a form of corruption (see United States of America v Abb Middle East & Africa Participations AG, CR-01-N-135-S, where the defendants pleaded guilty to conspiracy to rig contract bids on a United States-funded waste-water construction project in Egypt. Bribery and corruption in Nigeria is also well-documented.
Although sectoral regulatory authorities can enforce competition-like laws in their respective sectors, their competence and expertise cannot match those seen within a dedicated competition authority. 

I can see the attitude of the parties (NCAA, BA and Virgin) involved and it is not remotely surprising to me. The benefit of putting one’s house in order is that, when you speak, you speak with authority and you command respect. Once your house is in order, only a fool would disrespect your authority or decision.

If this is the wake-up call for Nigeria to put in place a competition regime, so be it! It can only go hand-in-hand with the IPR system that it already has in place - according to TRIPS".
Further reading

British Airways and Virgin Atlantic fined in the UK and the US here and here
Neat little list and summary of recent price fixing and contract bid rigging cases here 
Monopoly in the power sector in Nigeria here
Monopoly and collecting societies in Nigeria here 
Cartels in Nigeria and the need for anti-trust law in Nigeria here and here
Overview on the current state of competition in Nigeria here
Handy analysis of the interface between IPRs and competition law here
ECOWAS competition policy framework in West Africa here
Why Nigeria needs a competition regime here
Presentation on regulating the telecommunication sector in Nigeria and the need for competition law here


Ayo Solarin said...

Kingsley kudos on your write-up. Competition law has been on the cards in Nigeria since 1988.A comprehensive legislation & Review of all IP laws was submitted to the Federal Govt by then Justice Olakunle Orojo led Nig law Reform Commission between 1988-1990 but only the Copyright aspect was passed into law, with ammendments guaranteeing Fed government dominant monopoly control over IP rights, hence formation of the Nigeria Copyright Commission [NCC] which has in the last 23 yrs stifled any form of competition in the copyright enforcement system. Both the rich and Civil servants see monopoly as means of controlling the financial resources and businesses, both foreign and local,in Nigeria. BA/Virgin purported dispute is glaring evidence of mind boggling corruption perpetuated by the civil service, NCAA is discriminately applying decisions of foreign jurisdictions knowing fully well that competition laws are indeed none existent in Nigeria. Their aim is to fleece BA/ Virgin, and the matter will suddenly disappear once BA/Virgin gives bribes in the right quarters. this is a nation content with a Trade Mark Act 1938 & Patents and industrial design Act 1970 & has little interest in developing IPRs or implementing competition law.

Kingsley said...

Ayo, I hope BA/Virgin dare not bribe anyone in this. They must face it even if that means incompetence or inadequacy is ultimately revealed. If the system in Nigeria cannot catch them/bring them to justice if they try it, thank God for the UK's Bribery Act. In this particular instance, I also do hope someone makes good use of the recent FOI Act (if at all possible) to find out what on earth has gone on (within NCAA) or what led to this.

Even come to think of it (ordinarily), those who fly BA/Virgin are most likely attracted by the brand power (safety, comfort, reliability etc)and perhaps, they're the people who can afford to fly thus maybe affected(maybe less than 20 million or so and they're probably not bothered about price). However, the lack of a competition regime is currently affecting over 100 million people in Nigeria (who are really bothered and affected) and nothing is done or said about it. Cartels exist in Nigeria and are getting away with a "killing".

Unfortunately, it is often the case that corruption/politics has to come into anything one writes about Nigeria. SAD!

IPKenya said...

Well in, Kingsley.

Here in Kenya, as of August 1st 2011, the Competition Act came into force.

In addition, the Constitution of Kenya 2010 enshrines in Article 46, consumer rights. Read together, it is hoped that these two provisions usher in a new dawn for consumers who will now be cushioned against predatory business malpractices and the dismantling anti-competitive practices of barriers to entry, especially for the growing number of SMEs.

However the challenge, as always, has been implementation. So far, the members of the Competition Authority are yet to be vetted and approved by Parliament, in addition they are concerns that this Authority will not recieve the budgetary allocation it deserves as they are a number of Constitutionally-mandated Commissions and Independent Offices yet to be established.

In the end all we can do is be cautiously optimistic that the government will come up with a strong enforcement framework for the Competition Act and develop long-term strategies that will produce benefits for consumers and sellers.

Kingsley said...

Thanks for that insight IP Kenya. Yes, implementation and human capital are the two biggest challenges in Africa. But implementation is key because you can have the best of experts but when your environment is tainted with corruption, the whole system fails and the laws are of no use. Where corruption is rife, what stops cartels with billions in the bank from preventing investigations or paying their way out when caught. Perhaps, the civil and/or criminal sanctions regime seen in advanced economies should be adopted in countries where public office abuse is a common occurence.

Bob said...

Making the case for the speedy passage of a viable competition law frame work in Nigeria is as good as it urgent; well done.

However the imperativeness of the point espoused by IPKenya's in his message should not be over looked. This is more so as there is no one size fit all... passing a competition law frame work in Nigeria, without the necessary homework being done by the Nigerian government and scholarly commemntators like yourself, would rather than alleviating the current diastrousness of the Nigerian status quo lead to a plethora of problematic issues. Cartels as sinsiter organisations are not mere gun- in- pocket petty criminals. These are organisations with enormous resources to perpetuate the secrecy of their clandestine activities and with formidable legal representations at their beckon if need be. I think a point that is being ignored by most comentators clamouring for the passage for a competition law regime in Nigeria is the need for a careful understudying of the Nigerian terrace to determine what would actually be operational in the Nigerian milieu- according to Dimgba having a faulty competition law regime [in certain instances] could be worse than having none at all. You could check out my paper on the imperativeness of getting it right with cartel regulation at
(responses to

AS said...

Excellent piece. For follow-up discussion, see also our short piece on "Nigerian Antitrust?" at