The Efficacy of the SEC and FCCPC’s Joint Advisory on Mergers and Acquisitions: A Critical Assessment

Contributor: Cyril Samuel Dandison

Introduction

The intersection of regulatory oversight and business combinations is a critical area in modern commercial law, especially in light of recent shifts in Nigeria’s legal framework governing mergers and acquisitions. With the introduction of the Federal Competition and Consumer Protection Act (FCCPA), significant changes have emerged, reshaping the regulatory landscape and raising questions about the jurisdiction of key authorities such as the Securities and Exchange Commission (SEC) and the Federal Competition and Consumer Protection Commission (FCCPC).

The repeal of certain provisions within the Investment and Securities Act has effectively transferred the regulatory authority over mergers and acquisitions to the FCCPC, leaving the SEC’s role in this domain in a state of uncertainty. To address this vacuum, the SEC and FCCPC issued a joint advisory, providing guidance on mergers and acquisitions pending the full constitution of the Federal Competition and Consumer Protection Tribunal (FCCPT). This joint advisory, however, has sparked a debate on its legality and efficacy in the absence of a fully operational FCCPT.^[1]

This article critically examines the implications of this joint advisory, exploring whether it aligns with the broader objectives of promoting competition, safeguarding consumer welfare, and ensuring economic efficiency. Ultimately, this work seeks to uncover whether this law serves the long-term interests of the Nigerian economy, or whether it represents a precarious compromise that could give rise to legal and practical challenges.

Merger and Acquisition: Understanding the Concepts

Mergers and acquisitions (M&A) are two fundamental strategies used by companies to achieve growth, enhance market presence, or restructure their operations. A merger involves the consolidation of two or more companies into a single entity, often to leverage economies of scale, enhance competitiveness, or acquire new capabilities. Mergers may be classified as horizontal, vertical, or conglomerate, depending on the nature of the entities involved. In contrast, an acquisition refers to one company purchasing another, either by buying its assets or acquiring a majority stake in its shares. Acquisitions may be friendly or hostile, depending on the cooperation between the acquiring and target firms.^[2]

The legal and regulatory landscape surrounding M&As is critical as these transactions can have profound implications for competition, consumer protection, and market structure. In Nigeria, regulatory bodies like the Securities and Exchange Commission (SEC) and the Federal Competition and Consumer Protection Commission (FCCPC) play key roles in ensuring that M&A activities do not stifle competition or harm consumers.^[3]

FCCPC’s Policy on Mergers and Acquisitions

The Federal Competition and Consumer Protection Commission (FCCPC), as Nigeria’s competition authority, is responsible for ensuring that mergers and acquisitions comply with the principles of fair competition. Under the Federal Competition and Consumer Protection Act (FCCPA), the FCCPC is empowered to review and approve mergers and acquisitions that meet certain thresholds. The primary objective of FCCPC’s oversight is to prevent anti-competitive practices that may arise from market consolidation, such as monopolies or the abuse of market dominance.^[4]

One of the notable aspects of FCCPC’s M&A policy is its focus on consumer welfare. The Commission is tasked with evaluating the potential impact of mergers on consumers, particularly with respect to pricing, quality, and access to goods and services. Mergers that are likely to lead to higher prices or reduced quality of products and services may be blocked or subjected to remedial conditions. Additionally, the FCCPC ensures that mergers do not unfairly disadvantage smaller businesses or lead to excessive concentration in specific sectors.^[5]

However, the FCCPC’s policy has encountered challenges since its inception. One significant issue is the overlap in jurisdiction between the FCCPC and other sector-specific regulators, such as the SEC. This has led to confusion among businesses regarding which authority has the final say in approving M&A transactions. Moreover, the FCCPC has faced criticism for its sometimes-lengthy review process, which can delay transactions and cause uncertainty in the business environment. Inconsistencies in the application of competition law, particularly in complex or cross-border transactions, have also been highlighted as areas of concern.^[6]

SEC and FCCPC’s Joint Advisory on Mergers and Acquisitions in Nigeria

In response to the jurisdictional conflicts between the SEC and FCCPC, the two bodies issued a joint advisory on mergers and acquisitions to harmonize their roles and responsibilities. These advisory aims to clarify the regulatory processes and eliminate the duplication of oversight functions, ensuring that businesses are not subjected to conflicting decisions or prolonged delays in securing approvals.^[7]

The joint advisory marks a significant improvement in Nigeria’s regulatory framework for mergers and acquisitions. It defines the scope of each regulator’s authority and sets out a clear process for collaboration between the SEC and FCCPC. Under the advisory, the FCCPC retains its primary role in assessing the competitive effects of M&A transactions, while the SEC focuses on the capital market implications, particularly for publicly listed companies. This division of responsibilities helps to streamline the review process and provides greater certainty for businesses engaged in M&A transactions.^[8]

The joint advisory also introduces important changes in the notification thresholds for mergers, ensuring that only transactions above a certain value are subject to full regulatory review. This reduces the regulatory burden on smaller transactions, thereby promoting efficiency and reducing the administrative costs for businesses. Additionally, the advisory provides for a more transparent and predictable timeline for merger reviews, addressing one of the major complaints about delays in the past.^[9]

Despite these improvements, potential challenges remain. For instance, while the advisory has clarified the roles of the SEC and FCCPC, there may still be areas of overlap or ambiguity in specific cases, especially when transactions involve multiple sectors or international elements. Furthermore, the efficacy of the advisory will depend on the ongoing collaboration between the two bodies. A breakdown in communication or cooperation could lead to renewed jurisdictional conflicts. Lastly, the advisory does not completely address concerns about the capacity of the FCCPC to handle complex M&A transactions, particularly those involving multinational corporations or intricate competition issues.^[10]

Conclusion

The joint advisory issued by the SEC and FCCPC represents a positive step towards creating a more efficient and coherent regulatory framework for mergers and acquisitions in Nigeria. By clearly delineating the roles and responsibilities of both bodies, the advisory reduces the risk of jurisdictional conflicts and provides greater certainty for businesses. However, challenges such as potential overlaps in jurisdiction and the capacity of regulators to handle complex transactions remain. The efficacy of the advisory will ultimately depend on the continued cooperation between the SEC and FCCPC, as well as their ability to adapt to evolving market dynamics. As Nigeria continues to attract both domestic and international investments, a robust and efficient M&A regulatory framework will be crucial for fostering healthy competition and protecting consumer interests.

Keywords: Mergers, Acquisitions, Regulatory, Federal, Competition, Consumer, Protection, Commission, Market, Security, Exchange,

Snippet: The joint advisory of SEC and FCCPC marks a significant improvement in Nigeria’s regulatory framework for mergers and acquisitions.

1. J. O. Olabisi, & M O Olajide, (2018). Mergers and acquisitions I Nigeria: A Review. (2018) 6 (3) Journal of Finance and Accounting, 98-104. ↑
2. Section 92(1)(9) of Federal Competition and Consumer Protection Commission Act 2018 ↑
3. D C E Halliday and G C Okara ‘Company Reconstruction’ in C C Ohuruogu (ed), Law of Business Associations in Nigeria (Lagos: Princeton & Associate Publishing Co. Ltd, 2022) p 628. ↑
4. P. Amire & M. Comfort, ‘Restructuring on the Performance of Financial Institutions in Nigeria: AReview’ (2016) 1(1) International Journal of Economics and Financial Modelling, 1-11. ↑
5. Olaniwun Ajayi, ‘Federal Competition and Consumer Protection Act, 2018: A New RegulatoryLandscape for Mergers in Nigeria. https://www.olaniwunajayi.net accessed 23^rd October 2024. ↑
6. N Udeagha, ‘Cultural Integration in Mergers and Acquisitions: A Case Study of Nigerian Banks., (2019) 23 (1) Journal of Organizational Culture, Communications and Conflict, 56-67. ↑
7. Understanding the Legal Implications of Mergers and Acquisitions in Nigeria, https://trustedadvisorslaw.com/understanding-the-legal-implications-of-mergers-and-acquisitions-in-nigeria/ accessed 23^rd October 2024; Securities and Exchange Commission (SEC). (2020). Guidelines on Mergers and Acquisitions ↑
8. C.E.Halliday & E. Ogbonna, “Appraisal of the legality and Efficacy of the SEC & FCCPC’s Joint Advisory on Mergers and Acquisitions under the FCCP Act” (2019) Vol 6 NAU. JCPL; C.I. Emechebe, S.O. Ahaneku, C.V. Okpalangwu, “Examining the legal and Regulatory Framework for safeguarding Employee Rights in Nigerian Mergers and Acquisitions” (2024) Vol 11 (1) NAU. JCPL. ↑
9. Ibid ↑
10. Ibid ↑