Predatory Pricing Under the Federal Competition and Consumer Protection Act of 2019 of Nigeria: An Unfinished Business

• DOI: 10.1177/0003603X211045437
• Author: Wiseman Ubochioma
• Published date: 01 December 2021
• Date: 01 December 2021

Symposium: Competition Policy and Law within the Context of the Continental Integration:

What Are the Sticking Issues for African Countries?

Predatory Pricing Under the

Federal Competition and

Consumer Protection Act of

2019 of Nigeria: An Unfinished

Business

Wiseman Ubochioma*,**

Abstract

Predatory pricing is one of the market practices that are prohibited in competition law. It occurs when

a dominant firm sells its product at an unreasonably low price in order to eliminate competitors from

the market. The Federal Competition and Consumer Protection Act, 2019 of Nigeria prohibits this

practice. This article, therefore, examines predatory pricing under the Act. It argues that the pre-

scription of the cost-based principles of marginal and average cost as sole determinants of predatory

pricing under the Act would not provide the Federal Competition and Consumer Protection Com-

mission (FCCPC) and courts with the appropriate legal standard in determining predatory pricing. It

suggests that the provision of the law should be reformed to include the principle of recoupment as a

legal standard for imposing liability for the practice against defaulting firms. This will assist the FCCPC

and courts to distinguish pro-competitive predatory pricing from anticompetitive predatory pricing.

Keywords

predatory, pricing, competition law, federal competition and consumer protection act 2019, nigeria

I. Introduction

Prima facie, a firm that sells its product at low prices would create competition and enhance consumer

welfare. Beyond this facade, however, firms could sell their product at low prices to squeeze out rivals

and attain monopoly power in an industry. Once the firm becomes dominant in the market, it would

raise the price of the product to a supra-competitive level to cover profit that it lost during the period it

lowered the price. This practice is called predatory pricing in antitrust law. Because of the difficulty in

ascertaining whether or not a firm’s reduction of the price of its product is geared toward attaining

monopoly power or benefiting consumers, the concept of predatory pricing is recondite in the sphere in

* Baze University, Abuja, Nigeria

** Blackfriars LLP, Lagos, Nigeria

Corresponding Author:

Wiseman Ubochioma, Baze University, Abuja, Nigeria.

Email: wiseman@blackfriars-law.com

The Antitrust Bulletin

2021, Vol. 66(4) 576–592

ªThe Author(s) 2021

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DOI: 10.1177/0003603X211045437

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law and economics. As a result, various cost-based models have been developed to resolve this puzzle.

Nigeria passed a competition law. The law termed the Federal Competition and Consumer Protection

Act (FCCPA) of 2019, which received presidential assent in January 2019, prohibits predatory pricing

using cost-based models. This article, therefore, unpacks predatory pricing under the law. Specifically,

it investigates the cost-based standards of marginal and average costs used in determining predatory

pricing under the Act.

1

At this point, it is important to note that no previous study has been conducted

on predatory pricing in Nigeria generally, and cost-based analysis, in particular. This makes this article

a novel research on the subject matter. The rest of this article is organized as follows. Part II explains

the meaning and the features of price predation. Part III examines the various theoretical debates about

predatory pricing. It also discusses the confusion that trails the concept and how the various cost-based

models have determined whether or not a price is predatory. Part IV examines predatory pricing under

the FCCPA of 2019. It then critiques the marginal and average cost tests that are used as the standards

for determination of predatory pricing. Part V, through a dialectical analysis, proposes the rule of

recoupment. Part VI concludes this article.

II. Predatory Pricing: Brief Meaning, Basic Features, and Concerns

of Competition Law

One of the cardinal aims of competition law is to remove any barrier to efficient operations of market.

Connected to this goal of competition law is the need to separate market prices that are pro-competitive

from those that are anticompetitive.

2

Price competition is important in markets because it determines

the flow of sales

3

and revenue of firms. Because of these critical roles of price competition, firms may

adopt practices that will negatively affect efficient operation of markets. One of the ways through

which competition law has attempted to prevent pricing policies of firms that impede market efficiency

is the prohibition of what is largely termed in competition law literature as predatory pricing.

Although predatory pricing is ancient in origin,

4

it is difficult for opinions of scholar to converge on

the precise meaning of the term. As an author once noted, “predatory pricing has been a relatively

vague concept in antitrust law. This may be because emotive terms such as predatory pricing do not

unite and sometimes defy analysis.”

5

Nonetheless, Yamey defined predatory pricing “as temporary

selling, at prices below its costs, by a firm (or concerted group of firms) to drive out or crush a

competitor.”

6

In the words of Joskow and Klevorick, “a dominant firm’s use of price to restr ict

competition by driving out existing rivals or excluding potential ones”

7

is predatory pricing. In

Elzinga’s opinion, predatory pricing entails “knowingly pricing below marginal cost in certain geo-

graphic markets for the purpose of disciplining or removing particular rivals and, as an ancillary effect,

discouraging new entrants.”

8

At this point, it is important to examine these definitions serially.

Notwithstanding the Yamey’s noble attempt at defining the term, the practical challenge with the

definition is that it assumes that the duration of the price reduction is transient. This excludes the

1. Federal Competition and Consumer Protection Act, 2019, s.72(2)(d)(iv).

2. HERBERT HOVENKAMP,PRINCIPLES OFANTITRUST 335 (2021) stating that: “few antitrust allegations are more sen sitive or

difficult for courts to assess than predatory pricing claims. Low prices are a principle if not the primary goal of antitrust

policy. In a predatory pricing case, however, a court must consider a charge that a price is unlawful because it is too low.”

3. BRIAN A. FACEY &DANY H. ASSAF,COMPETITION AND ANTITRUST LAW:CANADA &THE UNITED STATES 289 (2006).

4. See Thomas J. DiLorenzo, The Myth of Predatory Pricing CATO Institute Policy Analysis Paper No. 169, Feb. 28, 1992 at

1(Mar. 4, 2021, 3.55 PM), https://www.cato.org/policy-analysis/myth-predatory-pricing noting that “Predatory pricing is one

of the oldest business conspiracy theories.”

5. Oliver E. Williamson, Predatory Pricing: A Strategic and Welfare Analysis 87 YALE L.J. 284, 284 (1977).

6. B. S. Yamey, Predatory Price Cutting: Notes and Comments, 15(1) J.L. & ECONS. 129, 129 (1992).

7. Paul L. Joskow & Alvin K. Klevorick, A Framework for Analyzing Predatory Pricing Policy,89Y

ALE L.J. 213, 213 (1979).

8. Kenneth G. Elzinga, Predatory Pricing: The Case of the Gunpowder Trust,13J.L.&ECONS. 223, 225 (1970).

Ubochioma 577