Anti-Competition Law to the Rescue

As more companies continue to fall victims to anti-competitive tactics, Raheem Akingbolu urges the National Assembly to fast track the passage of the Anti-competition Bill to check unfair practices

 

 

In a capitalist economy, the driving motivation for participation is profit. So, investors in a capitalist economy have only one goal, which is to make profit. As a result of lack of check and balances due to non-existence of anti-competition law in Nigeria, companies make profit at whatever cost, they don’t care whose ox is gored.

 According to the Chief Executive Officer of Brand I, a consumer based research and intelligence company that recently unveiled Consumer Halla, as a portal for provision of relief to consumers, Mr. Tunde Sowofora, the role of government in a capitalist economy is to put structures in place to ensure some level of orderliness and compliance.

He said: “Some business advantages are questionable, they are not just fair and the government has a role to play in a free economy to balance the market in such a way that it protects consumer rights. In today’s market it is sad that some organisation infiltrate the market with substandard products and consumers fall victim without any strong law put in place through which they can seek redress. Yes, we all talk about consumer right, the question is what are the legal structures put in place for consumers to pursue their cases to the logical conclusion when those rights are infringed upon,’’

Speaking to THISDAY on anti-competition law, Fadare Adekanmi, a market analyst, said in a market when government regulates a sector, the same government is expected to have put checks and balances within that sector to prevent investors, stakeholders or other players in that sector from taking undue advantage of whatever weaknesses or vulnerability there might be in the market place.

“That is why one finds that in free economies that are strong and well-coordinated, where people are allowed to play as they want; there are structures that set limits as to how far you can go. That’s where Competition Bill comes in,’’ Adekanmi said.

Speaking on the advantage such policy conferred on brand owners and government, Adekanmi stated that the policy is to prevent investors or players in the market from taking undue advantage of that market to benefit themselves alone.

“Government has come to realise that when one person owns too much of the market, it stifles growth and other businesses cannot thrive within that same sector; the monopolist takes control of everything and dictates what happens. If he sneezes, everybody catches a cold. The whole sector is dependent on one business or one player’s activity or action. That frustrates smaller players from coming into the market place.

‘’ And when those players don’t come into the marketplace, you get a distorted perception of what that market really is. You don’t get to understand how that market can balance because there is no competition. Because nobody is competing with him, he can decide that he wants to make 40 per cent profit and he sets the price to achieve that. And since people don’t have a choice, he is the main guy there. The other guys now take a cue from him because they are trying to survive,’’

 

Stanbic IBTC vs Infinity Snacks

 

Though operating in different sectors, Stanbic IBTC Bank Plc and Infinity Snacks and Beverages Limited are currently entangled in bloodless war over what the latter considered as breach of contract on the part of the former.  According to THISDAY investigation, Stanbic IBTC is a financial partner of Infinity Snacks and Beverages Limited, and their relationship was smooth until 2016, when it turned sour following the untidy manner in which the bank handled a loan facility of N864, 420,000, the cereals manufacturing company got from the Bank of Industry(BoI). Infinity Snacks, the manufacturers of Infinity Corn Flakes and Magic Crunch also accused  the bank of supporting one of its competitors –Multipro Enterprises Limited, who are franchisees of Kellogs Breakfast Cereals in Nigeria, to access similar facility from the same BoI. As a result of the roles the bank played in frustrating the company, Infinity Snacks and Beverages Limited, had last year through its lawyer, Olumide Sofowora Esq, a Senior Advocate of Nigeria approached the High Court of Lagos State for redress.

In a statement of claim obtained by THISDAY, the Ijebu Ode, Ogun State based manufacturing company averred that sometime in July 2014, it applied for a loan for its factory expansion from BoI and it received an initial approval for the sum of N934, 029,835 on 19^th August 2014.

The company further averred that since one of the conditions for the grant of the facility was the provision of a Bank Guarantee, it immediately notified Stanbic IBTC of the initial approval by email dated August 19, 2014 and requested the bank to start processing the Bank Guarantee. The bank, had in its reply by an email on the same date, was said to have promised to expedite action and ensure that the document was available to the company soonest.  By October 26, 2015, when nothing was heard, the company sent another email to the bank, requesting if the bank guarantee would be provided within 48 hours since BoI has communicated its decision to cancel the facility if the bank guarantee was not provided within the said period. Stanbic IBTC was said to have appologised through an email same day and indicated that it would meet the deadline, having reached the approval stage. However, it was not provided until December 1, 2015.

According the company, despite the abnormalities and the fact that the guarantee did not comply with the format earlier provided by BoI, a sum of N864,420,000:00, was eventually disbursed after necessary correction were made, to the bank’s account 9^th of May, 2016, but the company was not notified of the receipt of the funds. It was when BOI informed the company of the disbursement of the funds on 17^th May, 2016 that the bank in turn promptly confirmed the receipt of the fund. According to the company, they wondered how such amount would hit the account of the bank and it would not be aware of the receipt.

However, the company, through its lawyer, further stated that instead of  helping it utilised the money for the importation of machinery for its factory expansion, Stanbic IBTC was said to have continued putting stumbling blocks along the way by tying the said BoI to its loan portfolio granted to Infinity Snacks and Beverages Ltd.

After series of meetings, the company had on June 20, 2016 and June 22, 2016, sent request to the bank to bid for foreign exchange for the purchase of some of the needed machinery for its expansion. The bank was said not to have initially replied and when it did, after persistent requests, it said there was no foreign exchange supply in the market. Infinity Snacks became bothered because of the possibility of BoI recalling the fund. Meanwhile, while this was going on, the company stated that it had started paying interest to BoI.

At the end, the company discovered that the bank’s promises were all a ploy to frustrate it from the BoI facility because apart from bidding foreign exchange for some of its other customers, who applied for foreign exchange during the same period,  Stanbic IBTC was in fact supporting one of Infinity Snacks’ competitor –Multipro Enterprise Ltd. who are the franchisee of Kellogs Breakfast Cereals in Nigeria and it turned out that the bank actually applied for the same BOI facility as the one granted to Infinity Snacks on behalf of Multipro. The company also claimed that the bank also bided for and the procured foreign exchange for two other companies who also got the BOI loan at the same period the company did.

Reactions

Since the issue got to the public place, not a few analysts have commented and blame government for allowing such to happen in the market without any law in place to checkmate such abnormalities. Aside the dealings between the two corporate customers, the insinuation that the bank intentionally frustrated the first company to pave way for a competing brand, has made it attracted torrents of comments from various quarters.

 In an interview with THISDAY on the matter, the President of the Consumer Advocacy Foundation of Nigeria (CAFON), Sola Salako-Ajulo, said the absence of competition law creates such environment where there are no check and balances to enhance ethical dealings among business owners.

‘’The case of Stanbic vs Infinity is very worrisome because I don’t understand how a bank that supposes to act in the interest of its customers to help their business to grow now treat them with levity. To me, it wouldn’t have been an issue much if the same bank had not turned around to help a competitor to apply for the same loan it returns from company A to BoI on behalf of company B. For God sake, Kellogs, is a foreign brand that is just looking for the way to penetrate the market, now it is being assisted to frustrate a local brand that employs Nigerians, manufacture for Nigerians at friendly price and source for raw materials locally. For a government that is calling for foreign investment and backward integration, to look away when an existing company, owned locally by Indians, is being pushed out of the market, is disturbing. I can tell you, if the company eventually goes under, it will affect a lot of Nigeria and denied them of the ir daily bread. That is why I will urge the National Assembly to rise up to the occasion and passed the anti-competition law. If the law is in already in place, I bet, the companies would have regulated themselves because they would know the consequence. To this end, I can only call on government to investigate the matter carefully and save the troubled company. From what I gathered, Kellogs had initially approached Infinity that they wanted to buy into its business but the latter declined. Now, can we say it has colluded with Stanbic IBTC to muzzle the local manufacturing company,’’ the activist said.

 Also speaking on the matter, Fadare said it is too early to accuse Stanbic of working with another company to frustrate Infinity. He, however, admitted that if there was competition commission in the Nigeria, such issue would have been sorted out, without even attracting court litigation. He also warned members of the public from accepting what the Infinity Snack said hook, line and sinker, arguing that company must have reneged on some existing agreement with the bank.

He said: ‘’It is sad indeed because both lower and upper houses at the National Assembly have passed the anti-competition law but it is yet to be harmonized into a single bill that can be presented for presidential assent.  If this is done, there will be structures in place to protect small companies from being oppressed by the big ones. With such structure, terms of relationship among business owners will be well spelt out.

“At this stage, one may be forced to ask if this government is serious about its clamour for backward integration and attraction of foreign investment. I have not gotten the details but one should be very careful in accepting all what the company said about the bank. Perhaps Infinity has failed in its financial obligation to the bank in the past and the bank saw the opportunity to recoup its money through the said loan. But if there was nothing like this, then one should blame government for not protecting indigenous companies. I say this because Infinity products are made in Nigeria, sell in Nigeria and for Nigeria. If we have a company like this and it is now at the mercy of a bigger competition that wants to come in and chased it away from the market and a bank is looking like aiding this bigger company to frustrate the smaller businesses out of the market place, this is bad. This is exactly what competition commission would have addressed if it is in place. If what I’m hearing is anything to go by, the said company is about to close down and if this happen, the community will suffer, consumers who have access to cereals at affordable prices would suffer and many Nigerians would be out of job.”

 As at the time of filling in this report, the management of Stanbic IBTC is yet to react to the request made by this reporter on the issue.

 As things are, the two companies are said to be slugging it out with each other, with stakeholders looking for ways to resolve the crisis but it has not been confirmed if government has intervened. It is believed in some quarters that if government, either through relevant agencies or national assembly wade into the matter, the issue may be resolved amicably.