There has been so much written and said about the latest increase in monthly subscription fee across all subscriber categories by the digital satellite television company, Multichoice, owners of the DSTV platform. This is one more case that goes to show that a market economy cannot run effectively without a well-functioning competition or anti-trust regime. In the absence of the appropriate legal tools – in the form of a competition law – to deal with the issues around this brouhaha, the consumers, the company itself and the economy as whole, are worse off.
The outrage over the price increase borders on the perceived arbitrariness of the company in making these increases almost annually. More subscribers are concerned about the quality of service – in terms of signals and customer relations – offered by the company. Yet others are concerned about the inability of the pay tv platform to offer pay-per-view options as obtainable in other parts of the world. However, almost all commentators believe that the DSTV enjoys a “monopoly” status and this accounts for the perceived lack of sensitivity to its subscribers.
The company on its own side has come out to say that the increase is a routine it implements in all the countries it operates in order for it “to continue to offer the best in local and international entertainment to its subscribers”. The matter, however, has taken a new twist with some aggrieved subscribers dragging the company to court. In fact, these subscribers obtained an interim order restraining the company from implementing the price increase pending the determination of the substantive suit. The subscribers are asking the court to compel the Nigerian Broadcasting Commission to mandate Multichoice to adopt the pay-per-view option, among other demands.
In the midst of these, the Consumer Protection Council (CPC) and the Nigerian Broadcasting Commission (NBC) are being inundated with petitions against Multichoice. Unfortunately, there is little any of these agencies could do about the pricing practice of Multichoice/DSTV in the absence of a competition law or regulation. The CPC’s mandate on consumer protection does not extend to regulating the pricing practice of firms, rather it is only limited to ensuring that consumers get value for their money in terms of quality of services, proper information, etc. The CPC cannot decide how much a firm charges for its services. Similarly, the NBC is also handicapped. Its mandate is limited to licensing and ensuring that the licensees abide by the terms of the license covering content, coverage and other technical specifications. However, there is some latitude in the enabling laws of both the CPC and the NBC to explore the angle of pay-per-view demand by some of the subscribers as well as the issues around quality of service. However, the real tool for dealing with the pricing policy of a monopoly or dominant player like Multichoice-DSTV is a competition law (otherwise known as anti-trust law).
Without second-guessing what informs the Company’s pricing policy, it is generally accepted theory that the lack of credible competition is a major fact that determines the pricing policy of many firms. In other words, when a firm is a monopoly or a dominant player in a market, it tends to set prices without recourse to repercussions from the market. Price is not the only variable affected by the absence of competition, quality of services also suffer because the monopoly or dominant firm has no incentive to please its customers or to constantly improve its services.
Competition is good for the economy. In fact, competition is at the root of the market economy. Competition exists where there are many suppliers of particular goods or services striving to gain the patronage of the buyers. These suppliers then adopt several mechanisms – such as reduced prices, better quality services, value added and after sale services, promos, etc – to live up to, and beat the competition. At the end of the day, the consumer is better off and efficiency is enhanced in the overall economy. Two fundamental problems or market conditions that detract from the virtue of competition often arise. One is where there is only one supplier of a particular product or service, otherwise known as a monopoly situation. The second problem is where there are few or even many suppliers but who have agreed not to compete among themselves but rather to exploit the consumers through the fixing of prices or the inducement of artificial scarcity in order to keep prices high, among other tactics – a situation commonly referred to as a cartel.
This is where we need laws to define the ambits of acceptable structure or conduct in the market. This law is called competition law. Unfortunately, Nigerian does not have an economy wide competition legislation after more than two decades of vigorous push towards a market economy! The result is that we have a number of anticompetitive market practices in different sectors of the economy.
Competition law frowns at the existence of monopoly in any market, except where the nature of the market is such that the product or service can only be economically offered by one operator. These markets are referred to as “natural monopolies”. For example, distribution of on-grid electric power is most viably undertaken by a single distributing company within a given locality. However, advances in technology has largely rendered the traditional concept of “natural monopoly” redundant. For instance, electric power can now be supplied off-grid by a captive power generating company in competition with supply from the grid. Similarly, telephone services used to be thought of as “natural monopoly” in the days of fixed mobile lines but the advent of mobile technology has changed the face of the market. Hence, in principle, competition can exist in most markets today.
Competition law also addresses situations where one firm is dominant in a given market. Here the law does not frown at dominance per se but at the abuse of the dominance. This seems to fit into what the Multichoice-Dstv is accused of at the moment. A firm enjoying dominant market position is said to abuse the dominance when it uses its market power to muscle out competition. This can be done by denying other players or prospective players access to vital network which it already controls, fix prices at which its products or services must be resold by dealers, price its products or services below market value (in order to run other firms out of business or to scare new entrants into the market) with the intention to subsequently raise prices above market value once competition is eliminated – a practice otherwise known as predatory pricing, refusal to deal with certain dealers or suppliers, tying the purchase of one of its products or services to the purchase of another, etc. In most of these cases, the law allows the firm to adduce evidence to show that its practices are economically justifiable or that the practices in questions do not substantially reduce competition in the market, or that the practices are necessary in other to deliver better or cheaper services to the consumers.
In the present case involving Multichoice-Dstv, a competition law would have enquired into the question whether the company is a dominant firm in its relevant market – which is the market for pay digital satellite television. If the firm is found to be a dominant firm, then the law would enquire into whether it has abused that position by its business practices – not only restricted to price increase. For instance, it is well known that the driving factor for the cable/satellite television market in Nigeria is the European football leagues channels over which the DSTV currently enjoys a monopoly in Nigeria by virtue of their purchase of the tv rights. However, it is also part of the contract between Multichoice and the owners of the television rights that the rights can be subleased to other cable television operators or even terrestrial television stations at an agreed commercial value. In addressing the issue of dominance in this market, a court applying competition law can compel Multichoice-Dstv to sublease the European league television rights to other cable telvision operators at a reasonable commercial value. This move would effectively check the monopoly Multichoice enjoys with respect to the rights and also help reduce its dominant power in the market since other strong operators can exist side by side with it. This measure is akin to the interconnectivity arrangement in the telecommunication sector where all existing operators or network companies are obliged to interconnect new entrants on a commercially agreed price, failing which the regulator would intervene to fix the price. A competition law would also be interested in the practices of Multichoice-Dstv with respect to its dealership, sale of equipment, etc.
Unfortunately, the absence of a competition law means that the right tool to address the kind of complaints raised against the Company is lacking. Therefore, any instrument being applied right now is akin applying a wrong instrument in a task – it would result in an overkill or under-kill. The situation is bad for both the consumers and the Company. For the consumers because they are foisted with a situation of almost helplessness; and for the Company because it is judged not by the law but in the court of public opinion. Whatever, the grievances the consumers have may never be adequately redressed and whatever justifications the Company has may never be known. The absence of competition law is felt in other sectors such as cement, aviation, food and beverages, etc. in fact, the recently reported accusation and counter accusation between Nigerian Breweries Plc and Guinness Nigeria Plc over their marketing strategies is a clear case that would come under the scrutiny of competition law. Same goes for certain mergers and acquisitions in that and other sectors because competition law is also concerned about mergers that reduce competition in a particular market.
The point sought to be made is that the absence of competition law in Nigeria is bad for the whole economy. It is as bad for businesses as it is bad for the consumers. At the end of the day it is the economy that loses investments, suffers inefficiency and lack of innovation, among other losses. The presence of sound regulatory environment is critical to the attraction and retention of investment, either domestic or foreign. Many investors would not venture into a market or country for the simple reason that the regulatory environment is not sound. One of the regulations investors, especially the foreign ones, look out for before venturing into a country is competition law, especially when they intend to compete with existing firms.
The outgoing government – like other governments before it – has taken some steps in the direction of enacting a competition law for Nigeria. Unfortunately, the Bill got to the National Assembly just few weeks to the general elections, raising concerns on whether the Bill can still be passed by the current session of the National Assembly. It is advised, however, that the incoming government should make it a priority to continue the process from where the present government leaves it off until Nigeria has an economy wide competition law and a strong enforcement agency.
Leonard Ugbajah is a lawyer, based in Abuja.
