• Wednesday, May 29, 2024
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Closure of KFC, Chinese supermarket: Stop the enforcement by jungle justice!

Inflation: FCCPC moves against price-fixing, cartel formation

Last month, the Federal Competition and Consumer Protection Commission (FCCPC) behaved crudely when it stormed and shut down a Chinese supermarket in Abuja over allegations that it discriminated against Nigerians. When I saw the picture of FCCPC operatives dutifully sealing up the supermarket, my reaction was: Typical! Of course, it is typical. Nigerian law and regulatory enforcement agents are always in their element when exercising raw power. Rather than enabling economic activity, they enjoy it through heavy-handed enforcement, stifling enterprise, and undermining economic progress.

Q: “Yet, serious as the allegations are, they do not require shutting down the businesses. Rather, they require investigations and, if proved true, a warning, a demand for an apology, or probably even a modest fine.”

Earlier, in March, officials of the Federal Airports Authority of Nigeria (FAAN) shut down an outlet of the fast-food restaurant chain, Kentucky Fried Chicken, popularly known as KFC, at the Murtala Muhammed International Airport, Lagos, over allegations that it discriminated against Demola Daniel, the physically challenged son of Gbenga Daniel, a former governor of Ogun State, now a senator. Like FCCPC, FAAN believed shutting down KFC’s operations was the right response to the allegations.

Let me be clear. The allegations against the two businesses—the Chinese supermarket and the KFC outlet—are appalling. The former allegedly restricted entry exclusively to Chinese citizens and barred Nigerians, which, if true, is discriminatory, probably even racist. As for KFC, it allegedly banned users of wheelchairs from its premises and denied entry to Senator Daniel’s son, who uses a wheelchair. In an emotive tweet, Demola Daniel, a disability rights campaigner, said: “Today, I felt less than human, like a guard dog, not allowed into the house. Lonely and isolated.” As I said, both allegations are outrageous.

Yet, serious as the allegations are, they do not require shutting down the businesses. Rather, they require investigations and, if proved true, a warning, a demand for an apology, or probably even a modest fine. That is how regulators should behave to enable economic activity. But Nigerian regulators are always trigger-happy. According to the BBC, the FCCPC vowed that the Chinese supermarket would “remain closed during its investigations.” Closing down a business until investigations are completed? How is that proportionate enforcement?

In a sanctimonious tweet, the FCCPC laments what it calls “our Nigerianness,” which it describes as “that oddity in our behaviour that sets us apart, preventing us from upholding proper and common societal values; an idiosyncrasy we carry that gives us a peculiarity that easily distinguishes us.” But does the FCCPC realise that its own heavy-handed enforcement approach is also an oddity and that it does not align with global best practices?

A senior FCCPC official said on NTA: “This is a foreign company discriminating against Nigerians in our own country.” But that sentiment runs contrary to the World Trade Organisation’s “National Treatment Rule,” which says that once a foreign company operates legally in any WTO member state, the country must treat the company not as “foreign” but like a home business. This means that if that company breaks any domestic law, the country must treat it exactly as it would an indigenous company that breaks the same law.

Many years ago, the former British prime minister, Margaret Thatcher, was asked whether there were foreign companies in Britain. She said no; there were only British companies. Her logic was that once a foreign-owned company is registered in Britain, pays tax in Britain, and employs British citizens, it is no longer foreign but British. That is the attitude business-friendly countries adopt towards foreign-owned companies operating legally in their territories.

So, if Nigeria were a business-friendly country, the idea that the Chinese supermarket is a “foreign company” discriminating against Nigerians would not arise. What is really at issue here is discrimination against consumers, and the FCCPC should treat the Chinese supermarket exactly as it would treat a Nigerian-owned supermarket that discriminates against Chinese or Indians in Nigeria. Of course, there is also a need for proportionate enforcement actions.

Nearly two decades ago, in 2007, as a senior regulatory reform adviser at the UK Government’s Cabinet Office, I developed the UK’s first statutory code of practice for regulators, called the Regulators’ Compliance Code. The aim of the code was to ensure that when regulators enforced regulations against businesses, they did so proportionately and in a targeted, risk-based way to avoid putting unnecessary and costly burdens on enterprises. They must constantly remember that, as regulators, their role is not to stifle business but to enable enterprise, thereby supporting economic progress.

Of course, regulators must enforce regulations to protect society from harm and to ensure that bad businesses do not repeatedly get away with bad behaviour. But in all circumstances, the approach must be to reserve the toughest enforcement actions, such as raids on and closure of businesses, for those that pose the greatest risks and represent a clear and present danger, such as selling harmful products or engaging in nefarious anti-competitive practices, like price-collusion, that distort economic activities and the level-playing field for businesses in a market economy.

Unfortunately, Nigeria does not only have too many regulations that are choking businesses, but it also has multiple regulatory agencies, some with overlapping functions, that are enforcing regulations in a draconian way. It is always a nightmare when a Nigerian business encounters a regulator. Nigerian regulators tend to view businesses as enemies, even if they pose no risks.

Think about it. There is nothing in the allegations against the Chinese supermarket and the KFC outlet that suggests either of them posed a significant risk or was a clear and present danger. There is nothing that the regulators could not have managed a lot better by discussing the circumstances with the businesses and giving them stern warnings and strict instructions about future behaviour, especially as they were, from the allegations, first-time “offenders.”

In a statement, KFC denied having an exclusionist policy and formally apologised to Daniel. It also announced plans to conduct sensitivity training for its employees to prevent similar incidents in the future. The case of the Chinese supermarket is curious. With just about 9,000 Chinese people in Nigeria, according to the Statista website, it would really be strange if the Abuja Chinese supermarket were to bar Nigerians from patronising it. Would Chinese restaurants in Nigeria survive without Nigerian patronage? There is more to the Chinese supermarket case than meets the eye, and it required proper investigations rather than closing the store down. Where is the value in shutting down the two businesses? Absolutely none. Rather, there are costs due to the loss of business, thanks to their commercial strangulation.

Over three years ago, I wrote a piece titled “Nigeria lacks credible regimes for competition and consumer protection” (BusinessDay, September 21, 2020). I said that while the FCCPC has enormous enforcement powers under the Federal Competition and Consumer Protection Act, FCCPA, 2018, the real test of its success would be whether it could go after the “big beasts” that have long distorted Nigeria’s economy or only bear its fangs against “the small fries.”

In the Nigeria Industrial Revolution Plan, NIRP, published in 2014, the government states that “some industrial sectors have evolved into oligopolies, with just a few companies controlling the majority of the market” and that, as a result, the prices of certain products are “among the highest globally.” What is FCCPC doing about that? Well, instead of acting against the powerful oligopolists, as all competition bodies should do, it is chasing after foreign-owned companies.

But here’s the wider implication: Many Nigerians living abroad have businesses, including in China. Surely, Nigeria won’t like authorities in those countries to enforce regulations against Nigerian-owned businesses disproportionately without due process. Second, if Nigerian regulators treat businesses owned by foreigners with jungle justice, foreign investors will simply not beat a path to Nigeria’s door!