Competition law is that area of law that regulates business practice so that national or regional markets are not dominated by certain big players but rather, it makes the market open to all players on a somewhat level playing field.
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In other words, competition law consists of rules that set limitations on business practice for the purpose of ensuring fair and ethical participation in business.
Usually, the competition law is part of the competition policy of a country and the competition policy will contain laws and policies as part of a more comprehensive strategy to regulate business practices.
The competition policy of a country or a region is meant to build a healthy environment for business participation and completion so that the market is not dominated by a small group of powerful businesspeople.
It is important to understand the difference between competition law and competition policy.
Objectives Of Competition Law In Nigeria
Competition law must strike a balance between creating an open market environment in which business interests can participate and pit their goods and services against one another, on the one hand, and protecting the consumer by ensuring that there are standards within that open market environment that must be met by competing business interests.
The proposed Nigerian legislation in this regard covers both of these objectives.
Section 2 of the Nigerian Federal Competition and Consumer Protection Bill provides for the objects the Act is to promote and they are as follows:
- The balanced development of the Nigerian economy.
- The welfare and interests of consumers, and provide them with competitive price and product choices.
- Maintain and encourage competition and enhance economic efficiency in production, trade and commerce.
- Expansion of opportunities for domestic enterprises to participate in world markets.
- Enhance the ability of small and medium enterprises to compete effectively.
- Prohibit restrictive business practice which prevents, restricts or distorts competition or constitutes the abuse of a dominant position of market power n Nigeria.
Principles Governing Competition Law
The principles discussed below will explain how and why competition law seeks to control and regulate certain trade practices.
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Prohibition of Cartel
Sometimes, big businesses work together in order to control the market. They form what is known as a cartel, which is a closed trading or market group that controls a market.
Cartels are groups of market actors who work together to control the availability of goods and services, so as to control the price of such goods and services. They are harmful to business because they do not encourage producers and suppliers to work efficiently in order to provide the best goods and services, which would make the market diverse and dynamic.
Instead, when such actors join forces, they rely on their association rather than on their skills and innovation. Competition law, therefore, seeks to ensure a healthy competitive relationship amongst business actors, so that they can produce more efficiently as they compete for limited market share/participation.
Control of Cartels and Restrictive Agreements
When cartels decide to protect their interests against any form of competition, they can enter into agreements to distort the market flow.
Such agreements could be in relation to fixing the price of their goods so that it is low for competitors to enter the market and make a profit or such that consumers do not have a choice as to different price options, or they could enter into an agreement to control the market in certain geographical areas or in certain goods and services.
Competition law does not allow such agreements or activities that restrict competition.
Abuse of Dominant Position
In the market place, not all firms are equal. Some businesses have more money, more power, more control, and so on, so they maintain a dominant position over other companies, thereby making some of their actions affect the position of the market, or of competitors in the market.
Therefore, competition law ensures that businesses do not abuse their dominant power in such a way as to unjustly improve their position, and negatively affect the position of competitors.
When companies merge, they usually do so to improve their position in the market. Therefore, when two firms come together and increase their share in a particular sector of the market, competition law seeks to ensure that their joint share in the market is not such that gives them an unfair edge or advantage over their competitors, or that threatens competition in the market.
In essence, the law makes sure that there is some control over how mergers affect the market.
Featured Image Source: Competition Policy International
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