Dangote Group, BUA Group, the FCCPC & Sugar Price Fixing. Daily Law Tips (Tip 790) by Onyekachi Umah, Esq., LL.M, ACIArb(UK)
Introduction:
BUA Group is a food and infrastructure conglomerate based in Nigeria, owned by Nigerians and formed by Mr. Abdul Samad Rabiu in 1988. Dangote Group is the largest conglomerate in West Africa, formed in 1981 by Mr. Aliko Dangote, having in investments in food and shelter, among others. Both business entities have huge investments in the Nigeria’s sugar industry. Relying on newspapers reports, Mr. Aliko Dangote of Dangote Group and Mr. John Coumantaros, Chairman of Nigeria Flour Mills Plc both signed and sent a petition against BUA Group vide a letter dated 28 January 2021.
The petition was addressed to the Minister of Industry, Trade and Investment, and it alleged that BUA Group was involved in activities that are contrary to the National Sugar Master Plan (NSMP) of the Federal Government of Nigeria. It was alleged in the petition that BUA Group does not intend to invest on development of sugar plantations, so as to qualify for raw sugar importation quotas, rather that BUA Group plans to only import and refine raw sugar through its new sugar refinery in Port Harcourt, Rivers State. The petition led to several other letters and a shocking allegation that
Dangote Group was involved in price fixing and had sought BUA Group to join the illicit exercise, but that the refusal of BUA Group, prompted the petition of allegations of Dangote Group. The allegation is weighty in a country with a competition and consumer protection regulator. This work focuses on price fixing and the powers of the Federal Competition and Consumer Protection Commission (FCCPC) to ensure fair competition and the expected interventions of FCCPC in the Dangote Sugar V. BUA Group price fixing allegation.
Dangote Group, BUA Group and the Price Fixing Allegation:
Following the petition of Dangote Group, the Minister of Industry, Trade and Investment wrote BUA Group via a letter dated 10 February 2021 and requested that a response be sent to him on or before 19 February 2021. By a letter dated 11 February 2021, Mr. Abdul Samad Rabiu of BUA Group responded to the letter of the Minister and stated that the company was not in violation of the NSMP. He further reiterated that the operations of the BUA Group were on the
approval of the President of Nigeria and that the petition of the BUA Group’s competitors (Dangote Group and the Nigeria Flour Mills Plc) was a challenge to the powers of the President of Nigeria. BUA Group assured the Minister that its activities will rather save Nigerians from price fixing and manipulations in the sugar sector; “the only way it will affect Nigerians is that Nigerians will pay lower prices for sugar …” and “where it is absolutely necessary- in the face of arbitrary price increases and collusion to force scarcity of the product locally.”
The response of BUA Group has been popularly interpreted to insulate that the BUA Group’s competitors (Dangote Group and the Nigeria Flour Mills Plc) may be involved in price fixing and manipulation. Furthermore, according to RipplesNigeria, “Dangote Sugar representative had allegedly approached BUA Sugar founder, Abdulsamad Rabiu, to increase price of sugar during Ramadan last year due to improved demand. Rabiu was allegedly asked to join their plan to fix price of sugar. But BUA turned down the suggestion, choosing to leave its price at the same rate. Prior to Ramadan, the price was N13,000 per bag, but Dangote and one other market competitor wanted the price increased to N30,000 per bag.”
However, Dangote Group has since denied being involved in any price fixing/manipulation, through Mr. Ravindra Singhvi (its Group Managing Director), and confirmed that, “DSR does not engage in artificial price manipulation of its products, either during the Holy month of Ramadan or at any other time.” “We have never ever increased price of our food items or commodities during the Holy month of Ramadan in the history of our operations.”. So far, the is no news or information about any investigation by Federal Competition and Consumer Protection Commission (FCCPC) on the allegation of price fixing in the sugar sector.
The FCCPC and Price Fixing:
Although, it is in the news that both Aliko Dangote and Abdul Samad Rabiu have reconciled their differences, through the intervention of Mr. Abdullahi Umar Ganduje (Governor of Kano State), the legal implications of their allegations and counter allegations have not settled, rather they call out the Federal Competition and Consumer Protection Commission (FCCPC) to play its statutory roles.
Federal Competition and Consumer Protection Commission (FCCPC) is a federal agency established on 30 January 2019 to promote and maintain competitive markets in the Nigerian economy. It has the objective to prohibit restrictive and unfair business practices, which prevent, restrict or distort competition or constitute an abuse of a dominate position of the market power in Nigeria. It is the apex consumer protection agency.
FCCPC is established by the Federal Competition and Consumer Protection Act (FCCPA) and the FCCPA criminalizes all forms and shades of unfair competition agreements in the Nigerian economy. Specifically, section 59 of the FCCPA prohibits all agreements that may actually or likely prevent, restrict or distort competition and also declares all such agreement as invalid and void. For avoidance of doubt, section 59 of the FCCPA went further to list out some common anti-competition practises, like; fixing a purchase or selling prices of goods or services. This is where the FCCPA clearly prohibits and criminalizes all agreements relating to price fixing/manipulation of all sorts.
By section 69 of the FCCPA, any entity that has an anti-competition agreement is punishable with an imprisonment term of not more than 5 years or fine of not more than N5 Million Naira, where the offender is a human being. Where the offender is a corporate being, the punishment is a fine that is not more than 10% of the turnover of the corporate being in the preceding business year and each of its directors are to be punished with an imprisonment term of not more than 5 years or fine of not more than N5 Million Naira or both.
The FCCPA, clearly in section 107, describes and criminalizes price fixing. It frowns at any business entity that directly or indirectly, by agreement, threat, promise or any other means, seeks to influence or conspire to influence an increase or decrease in prices of any other business entity, where that other business entity is not part of the entity seeking the price fixing.
Price fixing is punishable with imprisonment for not more than 3 years or fine for not more than N10 Million Naira or both, where the offender is a human being. Where the offender is a corporate being, the punishment is a fine that is not more than 10% of the turnover of the corporate being in the preceding business year and each of its directors are to be punished with an imprisonment term of not more than 3 years or fine of not more than N10 Million Naira.
Conspiracy between entities on price fixing is also an offence and it is punishable with 3 years or fine for not more than N10 Million Naira or both, where the offender is a human being. Where the offender is a corporate being, the punishment is a fine that is not more than 10% of the turnover of the corporate being in the preceding business year and each of its directors are to be punished with an imprisonment term of not more than 5 years or fine of not more than N10 Million Naira, under section 108 of the FCCPA.
The FCCPC, Dangote Group and BUA Group: Which Way?:
By section 2 of the Federal Competition and Consumer Protection Act (FCCPA), all government and non-government agencies involved in commercial activities in Nigeria are bound by the FCCPA and under the supervision of the FCCPC. The Dangote Group, BUA Group and all other business entities in Nigeria or outside Nigeria with interests in Nigeria are under the supervision of the FCCPC. Hence, the FCCPC should quickly investigate the alleged allegation of price fixing.
The FCCPC has powers by virtue of the sections 27, 28, 29, 30 and 31 of the FCCPA to authorize (on warrant of court or without warrant, in urgent cases), that the facilities and properties of Dangote and BUA Groups be searched, inspected and to remove any article, document or extract for the purpose of ascertaining whether there has been a price fixing or not. Also, Dangote and BUA Groups have the duty to assist and ensure that their facilities are properly searched and necessary materials taken away by FCCPC. Obstructing the search and investigation of FCCPC is a criminal offence and it is punishable with not more than 2 years imprisonment term or not more than fine of N5 Million Naira or both.
Also, the FCCPC can also write and demand that the Dangote and BUA Groups provide information to assist with investigation. And, the FCCPC can also summon any person in Dangote and BUA Groups to appear before the FCCPC during hearings. Furthermore, by sections 32 and 33 of the FCCPA, failure of the Dangote and BUA Group to provide any requested information to FCCPC or to appear at the hearings of the FCCPC is a criminal offence. This offence is punishable with an imprisonment term of not more than 3 years or fine of N20 Million Naira or both. The destruction of records/information or any materials by any person (the Dangote Group or BUA Group) is a criminal offence punishable with an imprisonment term for 3 years or fine of not more than N50 Million Naira or both.
Assuming that the allegation of BUA Group against Dangote Group is found to be true, the punishment will be a fine that is not more than 10% of the turnover of the corporate being in the preceding business year and each of its directors are to be punished with an imprisonment term of not more than 3 years or fine of not more than N10 Million Naira.
If the allegation of BUA Group is true, and both entities are found to have conspired to fix price on sugar, their conspiracy will be punished. Each of them will be punished with a fine that is not more than 10% of its turnover in the preceding business year and each of its directors are to be punished with an imprisonment term of not more than 5 years or fine of not more than N10 Million Naira.
The alleged BUA Group allegation against Dangote Group should be investigated by the FCCPC. If the BUA Group continues with its allegation at the FCCPC and the investigation of FCCPC finds the allegation to be false, then BUA Group should be punished for giving false and misleading information. By section 112 of the FCCPA, the punishment for giving false/misleading information by BUA Group is a fine that is not more than 10% of the turnover of the corporate being in the preceding business year and each of its directors are to be punished with an imprisonment term of not more than 5 years or fine of not more than N10 Million Naira.
Conclusion:
The two major sugar giants in Nigeria (Dangote Group and BUA Group) have fought over the Nigerian sugar sector. It is in the news that the fight is over, thanks to Governor Ganduje of Kano State, for intervening in the fight between two indigenes of his state (Mr. Aliko Dangote of Dangote Group and Mr. Abdul Samad Rabiu of BUA Group).
However, the alleged allegation of BUA Group against Dangote Group on price fixing, is an issue that is high and above the reconciliatory powers of Governor Ganduje. Price fixing is a criminal offence and is clearly provided by the FCCPA and only the FCCPC has the powers to investigate and prosecute such matter.
Price fixing aside its unhealthy market competition impacts, has a huge impact on consumers, and sits only on the statutory plate of the FCCPC. The role of sugar in households and in the production of Fast Moving Consumables (FMCs) makes price fixing on sugar a national issue and a threat to the NSMP. Hence, the alleged allegation of price fixing against Dangote Group by the BUA Group is an issue that should be immediately investigated by the FCCPC and the result of such investigation should be made public.
My authorities, are:
- Sections 1, 2, 3, 27, 28, 29, 30, 31, 32, 33, 59, 69, 107, 112 , 167 and 168 of the Federal Competition and Consumer Protection Act, 2019.
- BUA Group, “About Us” <https://buagroup.com> accessed 6 May 2021
- “Dangote Group” <https://en.wikipedia.org/wiki/Dangote_Group> accessed 6 May 2021
- Pro Share, “Dangote Vs BUA; The Sugar Wars Unredacted” (ProShare, 18 April 2021) <https://www.proshareng.com/news/Stock—Analyst-Updates/Dangote-Vs-BUA–The-Sugar-Wars-Unredacte/56840> accessed 6 May 2021
- Chike Olisha, “Dangote, BUA reconcile over sugar plant dispute after meeting with Ganduje, others” (Nairametrics, 15 April 2021) <https://nairametrics.com/2021/04/15/dangote-bua-reconcile-over-sugar-plant-dispute-after-meeting-with-ganduje-others/> accessed 6 May 2021
- James Emejo, “Dangote, Flour Mills, BUA at War over New Sugar Refinery” (ThisDay, 9 April 2021) <https://www.thisdaylive.com/index.php/2021/04/09/dangote-flour-mills-bua-at-war-over-new-sugar-refinery/> accessed 6 April 2021
- Martins Oloja, “Dangote vs BUA: Borrowing from Ganduje’s Initiative” (The Guardian, 18 April 2021) <https://guardian.ng/opinion/dangote-vs-bua-borrowing-from-gandujes-initiative/> accessed 6 May 2021
- Ripples Nigeria, “Dangote responds to BUA’s price fixing allegations” (RipplesNigeria, 9 April, 2021) <https://www.ripplesnigeria.com/dangote-responds-to-buas-price-fixing-allegations/> accessed 6 May 2021
- Wiseman Ubochioma, “BUA Group vs. Dangote Group debacle: Competition law and limits of price fixing” (TheGuardian, 27 April 2021) <https://guardian.ng/features/law/bua-group-vs-dangote-group-debacle-competiton-law-and-limits-of-price-fixing/> accessed 6 May 2021.
- Onyekachi Umah, “Punishment for Price Increment during COVID-19 Lockdown in Lagos State” (LearnNigerianLaws.com, 13 April 2020) <https://learnnigerianlaws.com/punishment-for-price-increment-during-covid-19-lockdown-in-lagos-state/> accessed 23 April 2021
- Pic Credit: PremiumTimes
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