The Price Fixing Punitive Fines for British Airways (BA): Any Lesson for Corporate Nigeria and the Nigerian Regulators?

By

Abubakar Atiku Nuhu-Koko

aanuhukoko@yahoo.com

Friday, August 3, 2007

World media attention shifted to the Corporate Headquarters of the undisputed Aviation giant – British Airways (BA) on Wednesday August 1, 2007. The reason for that intense focus was no other than the breaking news that the regulatory authorities in both the UK and the US have found BA guilty of colluding with rival airline – Virgin Atlantic and other airlines to fix Air Ticket price for long haul transatlantic flights to the US over a period of time. The act was considered breaches of both the Anti-Trust law in the US and Competition law in the UK.

Therefore, the UK Office of Fair Trading (OFT) and the US Department of Justice (DoJ), after painstaking investigations found BA guilty of the offence. Weighty fines totalling about £270m: comprising £121.5 million – the biggest ever imposed on a UK company and £147.6 million (US$300m) to be by BA to the UK office of Fair Trading and the US Department of Justice respectively for admitting to colluding with rival airline Virgin Atlantic on fuel surcharges. In addition, BA may face thousands of civil claims from passengers who believe they were ripped off.

The US Justice Department authorities described BA’s involvement in this sordid affair as unprecedented dirtiest corporate tricks in recent history of corporate misadventure. Other foreign airlines such as Korean Air, Lufthansa and Air France –KLM were similarly found guilty of the same offence and fined accordingly. According to the regulators, passengers who flew on BA flight between the UK and the US in the middle part of the decade “paid more for their tickets as a result of the illegal cartel.”  The UK regulatory authorities believe the “substantial penalty imposed, will send a message to corporate boards and business leaders,” according to Mr. Philip Collins, OFT Chairman.

Also, another anti-trust offence this time over attempted crude oil price manipulation involving a unit of Marathon Oil, a fourth-largest US oil company was settled with the US federal regulators. The case was uncovered by the US Commodity Futures Trading Commission (CFTC). The CFTC head of enforcement remarked that “West Texas Intermediate crude oil prices have an enormous impact on the daily lives of American citizens. As the guardian of the nation’s commodity markets, this case is yet another signal to the markets that we hold all companies accountable for their trading activities.” Marathon Oil agreed to pay a civil penalty of US$1m to settle the CFTC findings to “avoid the expense and distraction of protracted litigation.”

The above cited cases are very relevant to the current situation in a number of products and utilities services markets in Nigeria, particularly the airlines, telecoms, and energy utilities markets. For example, the GSM and fixed wireless telephone companies have been having unrestrained freedoms to arbitrarily fix their prices and have them endorsed by the regulatory bodies against consumers’ interest. Whenever there are such price hikes for GSM or utilities rates, it would be the Chief Executive Officer of the regulatory body concerned that appears on television, radio and pages of newspapers defending the hikes. For example, the Executive Vice Chairman and Chief Executive Officer (CEO) of the Nigerian Communications Commission (NCC) maintains regular lackadaisical attitude when it comes to protecting GSM services subscribers: instead of standing up and speaking up against the fleecing of subscribers being perpetrated by the GSM companies, he tilts in favour of the GSM companies and becomes active advocate defending with great zeal, the interest of the bosses of the GSM companies against the overall interest of the customers and the nation.

Another most recent example of such behaviour was exhibited when the prices of domestic petroleum products and Value Added Tax (VAT) rate were hiked on May 27, 2007, just two days to former president Obasanjo’s completion of his presidency. The action was engineered by the bosses of the Petroleum Products Pricing and Regulatory Agency (PPPRA) who misadvised former president Obasanjo into raising the prices and rate. The action unleashed a four-day national strike action spearheaded by the labour organisations led by the Nigerian Labour Congress (NLC), Trade Union Congress (TUC) and supported by the general public. Paradoxically while the new President was silent on the development, it was the bosses of the PPPRA that became the spokespersons and defenders of the shadowy oligarchs involved in petroleum products importation, against the Nigerian petroleum products consumers and VAT payers respectively.

 Another related recent example was that of BPE’s stout defending of the Nigerian and foreign private sector oligarchs favoured by former President Olusegun Obasanjo, especially the owners of the controversial Transcorp and the Bluestar Consortium who cornered the sales of major national assets, including the Port Harcourt and Kaduna refineries in unfair and non-competitive auctions. It is on record that even when the President of Nigeria, Alhaji Umaru Musa Yar Adua had reversed the sale because of the highly questionable manner the transaction was concluded, the BPE Chief was still insisting before a visiting US delegation defending the deal, thereby publicly rubbishing the position the President has already taken on the matter.

When the positions taken by the regulatory and compliance enforcement authorities in both the UK and the US regarding the Airlines and Crude oil price fixing scandals are compared with what obtains here in Nigeria regarding similar situations and issues, the story is completely different. And which, it shouldn’t be. No body has been asked to account for the scandalous transaction that took place between the BPE and the Bluestar Consortium in the much-criticised privatisation of the Port Harcourt and Kaduna refineries to private sector oligarchs favoured by former President Olusegun Obasanjo, for example.

Another example I would like to cite here, which is not related to utilities regulations, but of an issue of public and national interests and having to do with national oversight mechanism, is the passage of the new Iraqi Oil and Gas Law. Here, even in time of war and national emergency, the foreign imposed Iraqi national parliament stood its ground against passing an American crafted Oil and Gas Law for the country. If passed as presently constituted and without enough time of wider consultation with the Iraqi citizens, according to oil industry watchers, the new proposed Iraqi oil and gas law could “sign away Iraq future.”  “The law is permissive. All of Iraqi’s unexploited and as yet unknown reserves, which could amount to between 100bn and 200bn barrels, would go to foreign companies.”[1]

Therefore, public pressure from Iraqi citizens made the Iraqi parliamentarians to resist the pressure from Washington and the US oil lobby into hurriedly passing the new law. They argue that, “there is no need to rush the law, since at a time of insecurity no foreign investment is likely.”  Furthermore, they were reminded that, the US Congress can take years to make reforms on complex issues such as immigration and healthcare. Therefore it is unfair to expect the Iraqi parliament to do everything as fast as outsiders might wish.

Again, comparing and contrasting the above situation in Iraq with similar situation here in Nigeria involving the Nigerian government and national assembly, the story will be different. For example, the from 1999 to 2007, Nigerian government and parliamentarians have passed a number of World Bank, International Monetary Fund (IMF) and foreign governments inspired laws without taking into considerations long term Nigeria’s national security and public interests. The economic reform legislations and the ceding of the long disputed Bakassi Peninsula to the Cameroonians are just a few instances to buttress this concern. Our oil and gas laws, policies and management of the hydrocarbons sector are anything but nationalistic. Therefore, efforts must be made by the new administrations nationwide in making our mechanisms for holding our elected leaders and government bureaucrats publicly accountable for their actions and or inactions in the management of our national resources.

Therefore, President Umaru Musa Yar Adua (UMYA) – the servant-leader, the entire members of the National Assembly and all our statutory regulatory bodies should borrow a leaf from these above cited cases/examples whenever the interest of Nigerian citizens and overall national interest of the nation are involved in the discharge of their Oath of Office, statutory duties and responsibilities as the case may be. The existing situation whereby governmental agencies and public office holders engage in actions and or take decisions without wider democratic consultations with the citizens and or their elected representatives should not be allowed to continue. For example, a number of public agencies, elected public office holders and government bureaucrats do undertake decisions and or actions that are self-serving and more often than not, against our collective national interest.

In conclusion, President Yar Adua and the leaderships of the National Assembly should for example, ensure that decision-making processes in public agencies such as the NCC, BPE, Central Bank of Nigeria (CBN), PPPRA, Nigerian National Petroleum Corporation (NNPC), Power Holding Company of Nigeria (PHCN), Nigerian National Maritime Security and Administration (NIMASA), Nigerian Ports Authority Plc (NPA), Nigeria Customs Service (NCS) and the Independent National Electoral Commission (INEC), just to mention but a few, are brought within democratic culture involving: public participation, consultation, transparency, accountability and above all, subject to all the necessary established statutory channels of oversights. These public institutions have become nests of sleazes and personal fiefdoms of those entrusted in their management.

The ray of hope is that President Yar Adua has already started to make some positive changes in this direction. For example, the recent policies changes which, includes reversing of hikes of petroleum products prices and VAT rate, the revocation of the recent sale of Port Harcourt and Kaduna refineries. Also important was the directive of the president on the vexed issue of seized Lagos State Local Government funds; reversing of sale of some government-owned residential properties in Abuja; resolution of the lingering strike action embarked by the Academic Staff Union of Universities (ASUU), setting up committee to review and reform the electoral process among others. Yar’Adua is receiving accolades for all these policy changes.

However, more reform policy rethinks are expected from President Yar Adua by Nigerians in the coming months for the new administration to prove its worth. The directive by the Presidency to the newly inaugurated federal cabinet to ensure positive changes are made in their respective ministries and parastatals under them is a welcome development. The existing situation whereby many of the parastatals are running their show independent of their main mother ministries creates all manners of sleazes, thereby undermining the reform efforts of enthronement of transparency, probity, and due process in our public institutions. Therefore, Nigeria’s public policymaking processes and regulatory mechanisms and instruments should ensure that the interests of Nigerians always come first before personal aggrandisement, national vanity and corporate greed and anti-competitive manipulations