The Executive Vice Chairman and CEO of the Federal Competition and Consumer Protection Commission (FCCPC), Babatunde Irukera, has said that British American Tobacco Nigeria Limited engaged in conduct considered abusive from a dominant player in the market, which led to the steep fine that the company was slammed with.
In an interview with ARISE NEWS on Thursday, Irukera also revealed that the $110 million fine that BAT incurred was a reduced penalty as the company went through an administrative route in order to avoid judicial prosecution, which in turn, earned them a reduced penalty.
The FCCPC boss, speaking on the investigation into BAT, which started in 2020, and it’s conclusion said, “What the evidence ultimately showed was that the company and affiliates or associates had engaged in certain anti-competitive conduct and then violations of prevailing tobacco controls and public health measures.
“From an anti-competitive standpoint, investigation and market studies show that the company is a dominant player, and there are rules when you’re dominant, rules about your conduct. You shouldn’t act unilaterally in a way that distorts the market or potentially excludes competitors from having the opportunity to thrive in the market.
“But some of the things we found out showed that this company had abused its dominant position, including using its reach and muscle to try and prevent the market entry of products of competitors, including working with elements within, even making requests to government institutions with how to characterise or tax devices or products of the competition.
“Also, looking at some of the manuals called TMRs, the trade marketing manuals, they are also training their trade reps on how to engage retailers and reward retailers who promote their products over other competitors and penalised those who provided a fair and even platform. That kind of conduct from a dominant player is abusive.
“In addition, we, in some of the records of information that we were able to gather during the investigation, we discovered that there was commercially sensitive information about their competitors in their records. Those are pieces of information you cannot get from public sources, and it shows that you are monitoring the competition in a manner that is inconsistent with the law.”
Irukera then revealed that the company representatives expressed a desire to resolve the issue without prosecution or a full blown investigation, which then entitled them to benefits, such as their penalty reduced to $110 million, as they prevented the hassle of the judicial route.
He explained, “We have what we call the administrative penalties regulations, which is gazetted and I think it was in 2021, and it has a matrix. It calculates how penalties will be applied, the base minimum, depending on the conduct, and points for aggravations or mitigations depending on, and obviously, coming into corporation and assistance is a mitigation.
“Like most plea bargain regimes, when you save a regulator or a prosecutor or an investigator the time of having to go through the whole hog and prosecute a case, there are some benefits that come for that. It could be reduced penalty, it could be a waiver of prosecution of certain offences or certain charges or certain counts depending on what the circumstances are.
“So, based on the cooperation and assistance on the standing, we used the matrix to determine this, but the corporation and assistance rules also allows the commission to provide additional mitigations from the rules.”
Irukera then said that BAT was able to fall within some of the exceptions, and as a benefit, they got “significantly reduced penalties”, as well as prosecutorial discretion.
He said, “What we did was for the charges that we will have filed based on this mutual understanding, we didn’t file the charges, but some charges had already been filed in furtherance of the investigation, and so, we withdrew those charges based on the mutual understanding.”
Speaking on the reason for such high penalties for these offences, Irukera said that that is what the law has stipulated, and that this law is not local to Nigeria, but is the same globally.
He said, “You’ve got to understand that distorting the market affects economies, affects nations in ways that you cannot. Just think about, first, the consumer effect of it. Consumers don’t get the best possible deal. And secondly, think about the fact that other businesses cannot enter into that space and thrive.
“Some just barely survive because of the conduct of a big one in the space, and some don’t even come in. Just imagine the amount of work the federal government is doing, including the president, going out there trying to promote investments and trying to attract investors. At the end of the day, when we talk about how harsh the environment is, sometimes we focus entirely on what we think is the conduct of government. But in reality, many times, the biggest entry barriers are not government, it’s other businesses in concentrated markets.”
He further said, “The reasons why the fines are what they are is very important. First, it is important to divest anybody who is engaged in malfeasance of whatever they’ve profited from their malfeasance. And secondly, it’s important to make sure that it’s not worth it for them to do it again. And even more importantly, it’s important for others who are looking to say you know what, I’m not going to get engaged in this kind of conduct because this is what can happen to me.
“Finally, it’s important so that others who are looking from outside and want to enter that market can say there’s a serious strong consequence management mechanism that will protect us when we go in there.”
Ozioma Samuel-Ugwuezi
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