Author
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Seye Ayinla
Partner
A restrictive agreement or contractual restraint is only prohibited under Section 59(1) of the Federal Competition and Consumer Protection Act (“the Act”) if the agreement or contract has the purpose or effect of being in restriction competition. “Restriction of competition” shall be used as shorthand for preventing, restricting and distorting competition. Pursuant to Regulation 4(1) of the Restrictive Agreement and Trade Practices Regulations 2022 (“Regulations”), an inquiry if an agreement is an infraction of Section 59(1) of the Act is a 2 step process:
- assessing whether the agreement has the purpose of restricting competition (“Purpose Based Restriction”) or produces the effect of restricting competition (“Effect Based Restriction”). The use of the word “include” in Section 59(2) of the Act means that the list of agreements and practices listed in Section 59(2) of the Act are not exhaustive of anticompetitive agreements but merely serves as an indicative list of agreements and practices that are subject Purpose Based Restriction or Effect Based Restriction;
- if the agreement is found to be offending Section 59(1) of the Act because it is caught under a Purpose Based Restriction or Effect Based Restriction, the Federal Competition and Consumer Protection Commission (“Commission”) will assess whether the agreement will produce some pro-competitive benefits such as efficiencies and if the pro-competitive benefits exceed and outweigh the anti-competitive effect.
