FCCPC Issues Guidance on Business Co-operations Relating to COVID-19

REGULATORY UPDATE | JUNE 2020

Corporate Finance & Capital Markets

 

Introduction

Following the COVID-19 pandemic (“the Crisis”) and the resultant disruption of the economy, the Federal Competition and Consumer Protection Commission (“FCCPC” or “the Commission”) issued the Business Guidance Relating to COVID-19 on Business Co-operation (“the Guidance”) to address certain concerns on business co-operation and consumer rights in a bid to mitigate the severe effects of the crisis.

Cooperation Among Businesses

Under the Federal Competition and Consumer Protection Act (“FCCP”), businesses cannot enter into agreements that prevent, restrict, or distort competition. However, the Commission recognises that given the exceptional circumstances, businesses might seek cooperation to meet the teeming demand for certain essential products and services. Therefore, the Guidance exempts a limited category of agreements contracted between businesses, from the provisions of Section 59 of the FCCP. These agreements must be solely for the purpose of:

a. promoting concerted conduct to prevent an escalation of the crisis and to alleviate, contain, and minimise the effects of the national disaster;

b. enabling companies and undertakings to cooperate on effecting the supply and distribution of essential products and services to minimise the negative impact of the crisis on consumers;

c. cooperation in the health and relief sectors which might be limited to entrusting a trade association, an independent advisor, independent service provider, or a public body to coordinate joint transport for input materials; or contribute to identifying essential medicines for which, in view of forecasted production, there are risks of shortages; or to undertake other purposes contemplated by the Guidance;

d. putting in place measures to adapt production, stock management, and potentially, distribution in the health industry that are designed and objectively necessary to increase output in the most efficient way to address or avoid a shortage of supply of essential products or services (such as those that are used to treat COVID-19 patients); temporary in nature (i.e. to be applied only as long as there is a risk of shortage or in any event during the COVID-19 outbreak); not exceeding what is strictly necessary to achieve the objective of addressing or avoiding the shortage of supply; and encouraged and/or coordinated by a public authority (or carried out within a framework set up by the latter);

e. entering joint purchasing arrangements among healthcare providers and other critical service and goods providers, such as those designed to increase the efficiency of procurement and reduce transaction costs; and

f. collaborations that involve agreements to engage in joint research and developments (“R & D”) that might involve sharing of information on technical know-how, without sharing company-specific data about prices, wages, outputs, or costs.

Requests for Authorisation

Companies requesting authorisation are required to provide at the time of the request, information on the proposed collaboration. This includes the following:

a. The companies involved and the parameters of the collaboration including its proposed scope and duration;

b. A detailed description of how the collaboration is intended to achieve a clearly identified COVID-19 related objective in the public interest and how it contributes to the benefit or wellbeing of consumers;

c. A description of the nature and rationale of the proposal (the product(s) or service(s) the proposal will cover, and the temporal and geographic scope of the arrangement), any proposed contractual or other arrangements among the parties (including copies of any documents memorializing the contract or arrangement), the names of the major expected customers, and any available information regarding the competitive significance of other providers of the product(s) or service(s) to be offered; and

d. Other information required by the Guidance.

Businesses should submit their request for authorisation to exemptionapplications@fccpc.gov.ng.

Certain Consumer Rights

The Guidance permits manufacturers to take steps to combat “price gouging” or excessive pricing and empowers consumers to ensure that the prices of health products or services are not artificially inflated. It protects the rights of consumers to return and full refund, provided that the goods are not used and remain in pristine condition. The Guidance reinforces the rights of consumers to warranty by stating that the right will not be extinguished by effluxion of time if the consumer is unable to physically return the defective product but notifies the undertaking of the defect by email or other means.

Comment

The Guidance is aimed at maintaining a competitive market by prohibiting business practices and collaborations forged to prey on vulnerable Nigerians coping with the effects of the pandemic. However, we note that the language of the Guidance does not consider co-operations or practices undertaken before the issuance of the Guidance. Nevertheless, the issuance of the Guidance is timely, and it is hoped that it will promote stability in market prices.

Kindly access the Guidance here.

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For further information on this topic, please contact Oreoluwa Adebayo at

S. P. A. Ajibade & Co., Lagos by telephone (+234.1.460.5091, 460.5092), or e-mail (oadebayo@spaajibade.com)

The S. P. A. Ajibade & Co website can be accessed at www.spaajibade.com

 

Click here to access the PDF version.