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CPC VS MultiChoice: Exploiting Consumers Or Exploring A Market

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On Monday, August 20, 2018, the news of a court order halting MultiChoice’s recent price hike broke, and since then, typically opinionated Nigerians took to various media platforms to argue for and against the order. Many who argued for, felt that it was high time authorities stepped in to protect Nigerians from the apparent exploitation by MultiChoice which enjoys a dominant position in the Pay TV industry, and which, according to one writer, has increased its prices by 55 per cent, between 2009 and 2017. Those who argued against, considered the injunction an interference with Nigeria’s “free market economy,” and asserted that the government has no business regulating pricing. In an attempt to further clarify the court order, the Consumer Protection Council (CPC), at whose instance the federal government obtained the injunction, released a statement noting that the move was to protect consumers from conduct it considered potentially exploitative, obnoxious or unscrupulous. According to the statement, the Council, pursuant to its mandate under the Consumer Protection Council Act (CPCA), was investigating MultiChoice to determine whether the company had complied with the Council’s previous orders, and to address new issues arising from persistent complaints to the Council (from the public and the House of Representatives), which alleged that the company was exploiting consumers in Nigeria.

The CPC statement noted that, “in any inquiry under the CPCA, the question must be whether any entity or individual has engaged in conduct that constitutes an obnoxious practice, or unscrupulous exploitation. “If any conduct is declared to be these, and such conduct has sufficiently distorted the market and redounded to the benefit of an entity or person at the expense of consumers, the objective, and or outcome of such conduct, is necessarily suspect and implicated under law whether it is price, market share, appearance, name or other features of a commodity or service. An Inquiry in this respect does not question whether a price is acceptable or excessive. It simply really examines conduct.” CPC assured that “the investigation, or indeed the Council, did not intend to regulate price, or in any way interfere with the commercial interface between Multichoice and its customers in fixing price.” Some consumers who felt exploited by MultiChoice commended the CPC. Curiously, some commentators still considered CPC’s approach and the court order as an attempt to fix price,and they argued that pricing was a forbidden terrain for any Nigerian authority to tread, because according to them, Nigeria operates a “free market economy,” and as such, any interference must be resisted. But experts have argued that this argument only exposes the ignorance of its proponents as it is only in free markets that regulation occurs. Other than that, what we would have is imposition. According to them, the theory being peddled, that a free market means no one is looking to ensure that there is fairness, no abuse, and that the market is truly free, is erroneous, entirely incorrect, and very dangerous. Their position is that market is neither onesided nor unilateral. On the contrary, it is bilateral, sometimes, even multilateral. That is why it is called a market-a place where consensus is built, negotiated and agreed in the form of price or consideration. That negotiation, is not necessarily oral haggling, but a similar principle of some sort. As such, the vital element of consensus which is choice, remains the defining feature of any legitimate and transparent market, properly so called. The role of a regulator, or regulation is as the name conveys, to be a thermostat that essentially regulates the “temperature” of the market to ensure it is optimal.

Anything short of that, would result in exactly what the critics argue against- imposition. They further stated that it is disingenuous for anyone to argue that what makes a market free is the ability of a seller to impose a price on buyers. The freedom and choice should exist both ways. Where a seller is compelled to sell at a certain price, or a buyer optionless but to buy at a certain price, then there is no free market. Free market is not synonymous with a seller being predatory and a buyer having no choice. Adding that there are certain conducts that had been globally accepted to operate against the interest of a free market. Some are monopoly, dominance, vertical and sometimes horizontal agreements, exclusive and tie-in contracts, transfer pricing, collusion and many others which together constitute obnoxious, unscrupulous or exploitative conduct. Therefore behaving in a manner consistent with any of these, distorts the market, and when the market is distorted, inappropriate conduct that is relevant to the outcome such as pricing is implicated. Such conduct must continue to be illegal, as it materially affects and prevents markets and prices from truly being free, freely negotiated and optimal. It leads to a market that is not free where the perpetrator of the inappropriate conduct imposes a price on the buyers. “When this happens, consumer protection must either kick in, or be considered to be failing. It is not true that pricing is always off limits. Where necessary, governments world over have intervened to regulate unfair/ exploitative pricing, and they will continue to do so. “Only this month in Botswana, did a court declare that the Botswana Communications Regulatory Authority had the power to approve any increase in cable TV subscription fees. Similarly, Article 102 of the Treaty on the Functioning of the European Union (TFEU) provides that, “any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions,” said Mike Oteru, an Abuja-based economist and public affairs commentator.

He added, “The present question is: Should a regulator which has a statutory mandate to address obnoxious practices or the unscrupulous exploitation of consumers by companies, firms, trade association or individual, fold its arms and do nothing if it has reasonable grounds to suspect that obnoxious practices or the unscrupulous exploitation of consumers is being perpetuated in any manner whatsoever, including pricing?” Other experts who spoke with LEADERSHIP also argued that any agency of government with a mandate to protect citizens, must explore all avenues available to it in the bid to truly protect. “It is true that Nigeria has no competition authority with an express mandate to regulate pricing, however, to argue that in the absence of such, existing legalisation prohibiting inappropriate conduct is unenforceable, and Nigerians ought to be left vulnerable and at the mercy of unscrupulous and exploitative businesses, is a disturbingly wrong approach, and consumers should really be worried if the government or any of its agencies ever took that approach to their protection responsibilities,” they contended. But the express mandate of the CPC to protect consumers from obnoxious practices or the unscrupulous exploitation did not make any exception for when the conduct or practice in question relates to pricing. In the usual fashion, Nigerians have admirably taken the investigation of whether MultiChoice is indeed exploitative upon themselves. They have researched and found that Nigerians pay relatively low DSTV subscription tariffs, when compared to other countries in which MultiChoice operates, and had, as a result, concluded that no exploitation was happening, and that CPC was being meddlesome. While the efforts are commendable, they noted that the question of exploitation did not end with a price comparison, adding that attention should also be paid to purchasing power, market size, and other relevant factors. A complex economic, market behavioural analysis is also required for such a determination. “I wonder if those who researched it also noted that while MultiChoice increased tariffs in Nigeria in August 2015 by about 20 per cent, the following year it reduced tariff prices in Ghana, Kenya, Botswana, Tanzania, Zimbawe and Uganda, by between 11 per cent and 21 per cent. The company said this was in recognition of the economic hardship those countries were experiencing.

“However, it appears that MultiChoice paid no heed to economic hardships in Nigeria, because, in May 2017, during an officially – declared economic recession, MultiChoice again increased its prices by 5 per cent. In the same 2017, Multichoice again slashed its prices in Ghana and Kenya, by between 3.42 per cent and 30 per cent. “When in 2017, MultiChoice justified its price increases in Nigeria, by citing the hike in foreign exchange rate, one would expect that when the forex dropped we would see a reduction in prices, on the contrary, in August 2018, we have again witnessed price increases. “So, the mere fact that Nigerians pay a purportedly comparatively low tariff is not enough to rule out exploitation, more expert analysis needs to be done, to reach a determination on the issue. “I dare say, that the pattern of behaviour in view, raises many questions, and thus warrants such an investigation as the CPC is conducting. And the court’s order to maintain status quo, is therefore appropriate. In any case, if there is any legitimate challenge to this court order MultiChoice can, at appeal, express its concerns, rather than taking to the media to declare a lawful court order an affront. Such denigration of the country’s judiciary is despicable,” continued Oteru,who further stated that now that the country has a regulator that is alive to its responsibilities, Nigerians ought to let it do its job. “We should allow CPC to conclude its ongoing investigations, and then interrogate its findings. If eventually, it appears as though the order was a malicious attempt to interfere in MultiChoice’s legitimate business activities, MultiChoice may approach the Court for an award of damages against the federal government. “If our government does not protect us from MultiChoice’s monopoly of the market, who should? It is true that StarTimes is also in the Nigerian Pay TV market, but it only competes with the low-end GOtv brand, while thehighend DStv brand has no competitor. The presence of other players in a market does not defeat a monopoly or dominance argument.

Markets are segmented in different ways to determine conduct in that market. “ In the absence of a competition authority that can effectively regulate the space, should the federal government allow Nigerians to be plundered? No, it must do what it can, within the ambit of existing laws, to ensure protection. How long shall we continue like this? Nigeria is the biggest economy in the world without a competition law.Why then are we reading such an exception into the law? “ I hope that this experience with MultiChoice would drive home the point to our legislative and executive institutions that they must work assiduously to ensure that we have an adequate competition authority in the nearest future. He said that while the country works at achieving a robust competition regime, legitimate efforts by existing regulators to bridge the gap under prevailing law was not only welcome, but also laudable. “We should commend such efforts for the ingenuity, doggedness and passion to protect, and encourage them to go on full steam because we all (critics and supporters alike) are the beneficiaries of their hard work,” he concluded.



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