INTERVIEW: Why we can’t control consumer prices; what we’ve done on Multichoice, Discos — FCCPC

The Executive Vice-Chairman Federal Competition Consumer and Protection Commission (FCCPC), Babatunde Irukera, spoke to journalists recently on how his agency is responding to rising cases of consumer abuse by companies, businesses and service providers. He also gave an update on the agency’s recent clampdown on digital money lenders. Consumers have experienced an exponential increase in the prices of products in recent times. As a consumer protection agency, what are you doing to ensure that consumers pay the appropriate prices for goods? Mr Irukera: So we’re not a price regulator. Nigeria is a free market economy with only one limited provision in the FCCPC Act. It even allows the government to get involved in price. That is based on a lot of work, studies, research, a report and a recommendation to the president by the FCCPC for a limited time of controlling price in a specific sector, based on competition issues, not just increasing prices. Then, that decision when the president accepts the recommendation and adopts it, it will be gazetted. It will only be for a limited period of time. Other than that, we don’t regulate price. Now, there are provisions in the FCCPA that prohibit exploitative or reasonable, manifestly unjust contract terms, including price. Does that give us the authority to just say this thing is too high, this price is going too high? No, it doesn’t. What is not reasonable is not a subjective thing. It’s based on objective standards. What is unjust and manifestly so is based on objective standards not arbitrary. And it’s not just a number. That something cost N100,000 doesn’t make it unreasonable or unjust. And our regulatory approach must be methodical, and must be transparent and clear. Federal Competition and Consumer Protection Commission. [PHOTO CREDIT: FCCPC.gov.ng]So, I’ll give you one example, when we used that provision, about unreasonable pricing. On February 27, 2020, the Minister of Health announced the index case of COVID in Nigeria; it was discovered in Ogun State. We anticipated immediately that there would be a race to the bottom with respect to key public, private hygiene, and public health materials that were relevant to controlling the spread of, particularly, things like hand sanitisers and face masks. That’s what happened, prices just started going up. We put out a statement to businesses not to do this. We went in and investigated. We investigated one popular supermarket and what they had done, a hand sanitiser that was sold for N490 in the morning by noon, the price had increased to N1,400. By 5pm it was N3,400. We looked at their inventory, it was showing that they had 45 pieces left, but we couldn’t find it on the shelf or store. They hoarded that for the next day when the prices will keep going up. It wasn’t difficult to come to a determination that was exploitative, manifestly unjust and unreasonable, because there was no rational explanation for that progressive increase. You could find a circumstantial evidentiary basis, which is important for controlling COVID-19 and COVID-19 is now in town. So, there’s a method and a matrix to decide whether something is excessive. Take for instance if there is a rule of thumb for a business or a market, that there’s a 30-35% margin generally with respect to your business; for instance, you own a supermarket, and you say, once what I’ve done my 30 -35% margin, I’m fine. But in a certain product, we see, the prices have just gone up, anyhow, and you’re now doing 2,000-3,000%. That’s what we found out with hydroxychloroquine. The myth at the time was that chloroquine or hydroxychloroquine had proved efficacious with respect to COVID-19 indications. We saw that happen, your other paracetamol, all the other things you sell, still maintained the same margin, but all of a sudden, this particular drug. When you see things like that, you can tell that there’s been what ‘s called price gouging. In the absence of that, and more directly to your question, the number one mechanism for fair pricing is competition. In a fiercely competitive market, where the businesses are competing for the business, and the custom and patronage of consumers, whatever price you pay, is likely to be the fair price. I’m using the carbonated soft drink market as an example, where the competition was fierce. Is Pepsi much more expensive than Coca Cola, and Biggi is much cheaper than any of them? They’re all about the same price. They couldn’t raise the price for years. None of them could move, because they’re easily substitutable. If Coke goes this way, I go to Pepsi. If Pepsi goes, I just go to Biggi. FCCPC Office Building Isn’t that the case? Do you know how bottling companies started competing? They moved from 33cl to 50cl. They were competing on value. They are trying to get the business but they couldn’t move the price. On that one, we don’t need to worry about who’s increasing the price or not. We know that the system, if you make the mistake of hiking your price, it will remain on the shelf. So that’s what we are doing to address pricing, fighting hard on competition. That’s why we raided shipping companies, tobacco companies. That’s why we have investigations open in multiple industries right now as we speak, that’s why we went after airlines. I don’t know if N50,000 is fair or not, and we’re not saying it is excessive. The moment you guys come together to say N50,000, the price is not fair. Because the most important stakeholder, the consumer, you’ve taken him out of the meeting when you guys got together to say let’s do this thing together, you took competition. The most important stakeholder in determining fair price was thrown out of the meeting. If you decide to price your Lagos to Abuja N300,000, proceed. If I decide I’m going to do mine at N42,000. The only time that a competition regulator generally intervenes in price is when you strike price too low. When the price of something seems to be below a reasonable cost, we go in. It’s called predatory pricing. And you’d have thought that that doesn’t make sense, is it not when the price is high that you can see this as like a predator, preying on people? Correct? Or no, in competition analysis, it’s when you floor prices to push your competitors out of the market. That’s predatory pricing. We’re going to come and say no. And we would look. So sometimes you might find a business that is subsidised by the government. Sometimes you might find someone who strategises, you know what, I don’t mind losing for the next two years. Let me chase everybody away. If the fair price of certain thing is N100, as I’m selling my own N50, you know that nobody can do that business profitably at N50. What that person wants to do, drag everybody to sell at N50. Those who can’t do it at N50 would die a natural death. Then this gentleman would go from 50, straight to 200, because he’s now the only one in the market. So that’s the time we intervene in prices. But what we’re doing is working hard every day to make sure that there’s fairness. Now, reducing quantity is not a problem. A company must be allowed to determine what quantity it wants to sell. We also cannot restrict a company’s prerogative to fairly price its product to make a profit. But if you keep it at the existing size, and increase the price, that’s okay. If you reduce the quantity and sell at that existing price, that’s okay. So we are holding them responsible to tell consumers about the changes they effect on their product. Each time you increased the value you were giving you always made them know. So why would you be quiet when people are getting less. So those are the ways we’re combating. I’ll tell you that one of the companies that we have fought on this, instead of facing retribution, they said, you know what, we’ll go back to the former volume. Meaning that they’re going to now give more for the same price. So those are the initiatives. There are many of them. This is just an example. Once we ensure that the advert is not misleading consumers, you’re not cutting corners, and competition in the market is fierce, whatever price that comes out of that is typically that optimisation or equilibrium point that has captured inflation, devaluation, and all the supply chain issues. So that’s the work we’re doing. It is only after we’ve done that, that we can now begin to say, okay, what are the problems? Because when you’ve eliminated the barriers, most of the market is corrected, then whatever is left uncorrected, you can begin to think of targeted specific action. So that’s what we’re doing. We’re making sure that as much as possible, businesses don’t come together to fix prices. Babatunde Irukera, FCCPC with officials and journalists during a raid in Lagos The agency began an investigation some time ago on shipping companies after the FCCPC visited some of the marine companies and discovered shady activities, now, when will the exercise be concluded? Mr Irukera: I can’t tell. Investigations of this nature sometimes will take years and can be very expensive, all over the world. Investigations about anti-competitive conduct are very intricate, very extensive. But there’s one thing that is helpful to know; it’s that just the courage to open a broad investigation in itself starts to address behaviors. I give you an example. In barely six months now, we’ve come back from about 14,000 per container to about 10,500. Because everybody knows the regulator is looking. We raided five out of many shipping companies. Those five, they’re very worried about what we will find from what we took. We took emails, data, all kinds of things, about 7.5 terabytes of information, hundreds of 1000s of emails. They’re very worried about what we will discover. Advertisements The ones that we haven’t been to are very worried about whether we are coming or not. So right in that space, if I’m modifying their behavior, and once you’ve raided, nobody trusts each other again, they will not go to those secret meetings to discuss anymore, because they don’t know who has already entered into leniency and is cooperating with the authorities and coming to sit in the meeting, just to gather the information and implicate the orders. So you can see that when they were not able to get together when they became worried about getting together to decide, prices by itself just started coming down. Because we couldn’t agree and say okay, tomorrow, let’s move to 16,000. Tomorrow, I’ll do mine in the morning, you do yours in the afternoon. You do yours at night. Once you couldn’t have that agreement anymore, you are not trying to outplay each other, which is how it should be. And that is what is bringing prices down already. The FCCPC invaded the offices of some digital money lenders in Lagos due to the unethical conduct and abuse of consumer privacy. What is the update on the situation? Mr Irukera: We’re talking about investigative hearings, and some of the sharks, some that we raided, and even some that were not raided, have immediately come up. Let me tell you two things when we raided about two weeks ago. It was the product of three months of surveillance, trying to find location, trying to find where they are, and those types of things. We gave orders to two banks to freeze maybe six different accounts. Because that’s what we had discovered. But as at last week, we entered orders to about four or five banks to freeze up to 30 accounts. When you put what we were doing out, the response of citizens told us more about the companies’ bank. Even on Twitter, people shared details. Now, we are far more addresses without leaving our office than what we got being on the road, doing surveillance for three months, so we’re freezing more accounts. And they’re coming in, because once you restrict the ability to do business, they’ll come. They’re making commitments. It’s likely that there’ll be further regulatory action. But we’re getting interim commitment now that they would stop contacting third parties, stop defamatory messages and stop intimidating borrowers. And once we begin to see that bear fruit, we must be careful. We are not looking to close the money lending space. They fill a critical void, so in a society such as ours, access to soft or consumer loans that traditional financial institutions will not give is important. All we need or always say is that this business must be ethical. The interest rate calculation and the loan repayment strategies must be transparent, fair and must not damage reputations. If they could come in and do business in that way, we welcome them for the critical service they’re providing, so that’s why we’re engaging in the manner that we are. The guidelines will be out soon. The Federal Competition and Consumer Protection Commission (FCCPC) seals a popular Lagos plastic surgery hospital, Med Contour. The intelligence we are gathering from our investigation also shows us that there are certain things that need to be in the guidelines. For instance, in speaking with a foreign national, I have one of those companies. During the interrogation yesterday, we discovered that the company on ground is usually owned by a different company staffed by a different company and gets the working capital from a different company. And so just understanding all of that are important for the guidelines, to be able to identify everyone in the value chain for each business. Just that visibility allows us to know who Nigerians are dealing with, so the information we’re receiving and gathering in the course of investigation is also important to the guidelines. We’ll develop, but they’re coming shortly. Who are we working with? Now the raid was conducted by a joint regulatory and Enforcement Task Force. We started a joint team when we met towards the end of last year. The agencies involved the Central bank, the EFCC ICPC, FCCPC, NITDA and the National Human Rights Commission. We are working with people. Some of the service providers are usually taken to court when they are found wanting. Regarding the abuse of human rights, how many cases are being prosecuted in court? Mr Irukera: I don’t have them offhand, but in Uyo, I’m prosecuting five rice smugglers, then in Abuja we have Faxx, H-Medix and five other supermarkets, so that’s already 10 cases, we have other lawyers who are prosecuting different cases. We’ve got quite a number of cases. Matter of fact, we have plea bargains waiting to be signed and accepted by the court in about three of our cases. I’m prosecuting a shipping line right now for obstruction of justice, and a large multinational for obstruction. We have quite a number of cases that we’re prosecuting. And these are criminal cases, civil cases, a totally different thing. Nigeria imported bad fuel which damaged cars and caused scarcity of petrol across different states in the last few months. No proper explanation has been given for the scarcity, what has the FCCPC done concerning this? Mr Irukera: Immediately it happened, we engaged the primary regulator, that is the Nigerian Midstream and Downstream Regulatory Authority, the NNPC, which is the government owned business that imports, and we addressed a few things. First, we realised that we don’t test for methanol, because we don’t even import petroleum products with methanol. There are parameters that we check. But there are parameters we don’t check because they’re not applicable and methanol is not applicable. But immediately what we did on our engagement with the NNPC and the regulator was, can we increase the testing parameters now that we’ve had this experience, and that is how the regulatory system works? Even with your best effort when something goes wrong, you realise, you increase. It’s just like aeroplanes as safe as they are today, they still crash. They’re safer today than they were many years ago. When each crashes, there’s something we learn to make it safer. But it still doesn’t prevent it. So now what we do as regulators is plugging gaps as we go and strengthen the regulatory framework, that has happened now. The system has worked. They’re now checking far more parameters to ensure that this kind of thing doesn’t happen again. Now the question of holding those who imported this accountable, I believe that that is happening. The NNPC — we’ve met with them, we’re still meeting — are pursuing remedies where applicable. We’re supporting that process in a way we can. But we’re not in the front seat of that, because we’re busy doing other things anyway. But we continue to look out for our consumers who suffered injury, or the equipment or vehicles were damaged, and we put out a portal to harvest those complaints so that we can escalate them. There’s a system that was put in place, and they go back to the filling stations, where they purchased. If things are not resolved there, they escalate further up. Looks like this system has worked substantially because I just keep hearing about what are you doing? What are you doing, but I’m not getting that many complaints. The government introduced metering in the power sector as a way of improving the services or a way of closing gaps and reducing estimated billing. However, some Nigerians who paid for the meters are yet to get theirs after years. As a consumer rights organisation, what have you done to ensure customers get the meters? Mr Irukera: I know that the government has changed the metering policy a number of times. I believe this has happened because each of the methods adopted just hasn’t provided as many meters or close the metering gap. I’m not sure that this is a discrimination in the sense that treat some people this way and treat some people differently. If there’s evidence then we will go against the DISCOs but I agree with you that estimated billing, the way it is, is a travesty. Now, I don’t say that estimated billing on a whole is a problem. I don’t think that that’s the biggest challenge consumers have. Customers will understand if you tell them your meter will be ready in 10 months. In the meantime, this is your estimated bill. If it was reasonable, rational, and a true reflection of use, then customers pay. It is the fact that this estimated billing is far more arbitrary than it’s truly estimated. If you’re going to estimate what I use, when I don’t have light at all, how do I get a bill? It’s arbitrary people who have had a meter before. And on that meter, they were paying N300 per month, something goes wrong, the meter is ticking away to get put on an estimated bill. And then after getting a bill for N30,000, nothing has changed. How do I move from an empirical evidence base 300 to 30,000? It’s how arbitrary estimated billing is. We work with NERC to create a billing cap, estimated billing cap for residential areas. What needs to happen is we need to move to enforcing it. We have to make estimated billing unattractive. It is when it is unattractive that the Disco’s will rush to meet everybody. But to the extent that they can make more money from estimated billing than meter, what’s the incentive to meter everybody? And so it is enforcing the estimated billing cap? That will be, I believe, the game changer, which we’re working with NERC to see how we can support that enforcement procedure more. The Federal Competition and Consumer Protection Commission (FCCPC) sealed a popular Lagos plastic surgery hospital, Med Contour. With respect to Multichoice, there’s been another increase without increase in the services they render to the consumers, are there any engagement with commission Mr Irukera: We have engaged Multichoice. Interestingly, that increase came just days after we published the outcome of a long investigation into Multichoice. I think I’ve explained our rule with respect to price. However, what we have done is we have actually made some orders. And the reason why we’re engaging Multichoice, before we even get to this question of increase, let’s even know that you are complying with orders. For instance, the point you make about more value for money increases, that order said that we compelled them to introduce a price lock. Meaning that you can lock the price that you are on for one year. And I’m sure there’s, if I understand. Multichoice has been putting some things out now saying there is now a price lock, if you make the payment of your points as if you pay your bill, your current bill before the 31st of March. And you don’t default in any view for the next. It doesn’t matter what the increase is, what you pay now is what you’re going to pay until next year. It forced them to introduce some value-based features. We’ve also asked that the toll-free lines must be across networks, not just winning networks anymore, and subscribers must be able to suspend their accounts up to four times. I think you could only do it twice per annum. But now we’ve increased it to four times. More importantly, we said there needs to be more transparency in the bouquets. They need to provide far more options so that people can literally get more of their focused interests and packages that can be cheaper than getting 100 channels simply because I want channels in that bouquet. I think that with those things, once we are able to give consumers more, a broader spectrum of choice, at different prices, let that happen. And then we begin to talk about how is the pricing after that? When I first started working at the FCCPC, people complained so much about Multichoice. They’re too expensive. They’re crazy. I said to Multichoice the vast majority of these complaint is really because your services are poor. Complaints are coming in every day. We entered order to get orders against them, supervise them, and their consumer customer service improved. Quite frankly, some of the complaints were reduced. The biggest reason why people complain about price number one is value. It is after value, that you begin to find questions like affordability. But number one is value. Most times if people think they’re getting a fair share, they might be willing to pay. The Nigerian consumer just kind of understands and quite frankly, we’re so sympathetic with each other. The first thing is to get value for money. Read More Related News Here Let here it in the comment below if you do have an opinion on this; INTERVIEW: Why we can’t control consumer prices; what we’ve done on Multichoice, Discos — FCCPC