The real estate sector is a key highlight of the Nigerian economy and has experienced significant growth in demand in recent times. As the real estate sector in Nigeria continues to evolve, there is a need to critically analyze the prevalence of price fixing and anti-competitive practices. These unethical behaviors not only disrupt the transparency of the market but also harm consumers and undermine fair competition.
In this newsletter, we shall explore the legal landscape surrounding price fixing and anti-competitive practices in real estate, as well as highlight the laws and regulatory bodies that protect consumers and businesses from such practices in Nigeria.
What is Price Fixing and How Does it Affect the Real Estate Market?
Price fixing occurs when real estate professionals—agents, developers, or brokers—collaborate to set property prices at a predetermined level, rather than allowing market forces to dictate fair pricing. This practice distorts the free market and results in:
- Overinflated Property Prices: Buyers pay more than the fair market value for properties.
- Lack of Transparency: When prices are fixed, consumers have limited access to accurate and competitive pricing information.
- Reduced Consumer Choice: When price fixing occurs, consumers often face limited options in terms of pricing and property availability.
In Nigeria, intentional measures have been taken to curb the manipulation in the marketplace by way of implementing legal provisions contained and regulated under national competition laws.
Legal Frameworks in Nigeria: Combating Price Fixing and Anti-Competitive Practices
Nigeria has established various legal mechanisms to ensure that the real estate sector operates fairly and transparently. These laws not only deter price fixing but also encourage healthy competition. Some of the key legal frameworks include:
- The Federal Competition and Consumer Protection Act 2018 (FCCPA)
The FCCPA is the primary legislation for the regulation of competition and protection of consumers in Nigeria. Prohibiting unfair or restrictive business practices that hinder or limit competition is one of the FCCPA’s main goals.
The Federal Competition and Consumer Protection Commission (FCCPC) is at the forefront of regulating business practices across Nigeria, including real estate. The Commission has the authority to investigate anti-competitive practices such as price fixing and collusion between competitors. Under the FCCPC Act, businesses found guilty of price fixing or unfair competition are subject to fines and penalties designed to safeguard consumers’ interests and maintain market integrity. Section 108 explicitly addresses price-fixing and anti-competitive agreements. It states that businesses found guilty of price-fixing, collusion, or engaging in unfair competition are subject to fines and penalties aimed at protecting consumer interests and ensuring market integrity. Additionally, Section 69 of the Act prohibits agreements, decisions, or concerted practices among competitors that directly or indirectly fix prices, limit production, or allocate markets, considering them restrictive trade practices.
- The Central Bank of Nigeria (CBN) Act 2007
The CBN Act expressly prohibits transactions in foreign currency for property sales within Nigeria. Section 20(1) of the Act states that “The currency notes issued by the Bank shall be the legal tender in Nigeria for all transactions.” Section 20(5) of the Act also provides for penalties against individuals or businesses that price goods or services in foreign currencies instead of the Naira.
In RB Properties Limited v. Guaranty Trust Bank PLC (FHC/L/CS/374/2016), the Federal High Court reaffirmed that transactions conducted in a foreign currency without CBN approval violate Nigerian financial laws.
- The Real Estate Laws e.g The Lagos State Real Estate Regulatory Authority Law, 2021
Various state-level regulations, including in Lagos, Abuja, and other major cities, are designed to govern real estate practices, ensure that prices reflect actual market conditions, and ensure that transactions are properly conducted and documented. These regulations require transparency in advertising, full disclosure of fees, and market-appropriate pricing for property transactions. Developers and real estate agents are bound by these laws to ensure they engage in fair practices and avoid anti-competitive behaviors.
The Role of Real Estate Professionals in Preventing Anti-Competitive Practices
Real estate professionals in Nigeria—whether agents, brokers, or developers—must adhere to strict ethical guidelines to prevent price fixing and other anti-competitive behaviors. These professionals play a vital role in maintaining the integrity of the real estate market. Here are the key responsibilities they must uphold:
- Adherence to Fair Pricing Practices: Professionals should ensure property prices are determined based on market dynamics, such as demand, location, and property conditions, rather than through collusion with other stakeholders.
- Compliance with Regulatory Bodies: Real estate firms and professionals must stay informed about the regulations set forth by the FCCPC and other industry watchdogs. Regular compliance audits can help identify potential violations before they become widespread.
- Promoting Transparency: It is crucial for real estate professionals to maintain transparency in all transactions. This includes providing full disclosure of any fees, the true value of the property, and avoiding hidden charges. Transparency ensures that buyers and sellers are not misled into paying inflated prices or entering into biased agreements.
- Avoiding Unlawful Agreements: Real estate agents and developers should refrain from entering into agreements that restrict competition or prevent other businesses from operating freely within the market. This includes collusive agreements regarding commissions, pricing, and market share distribution.
Consumer Protection: How to Safeguard Your Interests
As a consumer, it’s important to be vigilant and proactive in preventing exposure to price fixing or anti-competitive practices in the real estate sector. Here are some practical steps to protect your interests:
- Conduct Comprehensive Market Research: Always compare property prices across various sources, including online platforms, local listings, and multiple agents. Having access to a broad range of pricing information will help you identify inflated prices and avoid falling victim to price-fixing schemes.
- Seek Legal Counsel: Before making any significant real estate investment, consult a corporate law firm with expertise in real estate. Legal professionals can help you navigate contracts, advise on fair pricing, and ensure all terms align with Nigerian laws and regulations.
- Report Unethical Practices: If you suspect any real estate professional is engaging in price fixing or other anti-competitive practices, you can report the issue to the FCCPC or Nigerian Police. Taking action not only protects your interests but also helps prevent the spread of unethical behavior within the industry.
- Demand Full Disclosure: Always ask for detailed information about the pricing structure, including any additional fees or charges. Be sure that all costs are justified and align with industry standards.
The Importance of Maintaining a Fair and Competitive Real Estate Market
A competitive real estate market benefits everyone—buyers, sellers, developers, and investors alike. By preventing price fixing and anti-competitive practices, we ensure that:
- Property prices remain affordable and reflective of the true market value.
- Consumers have access to better options and transparent information.
- The real estate industry in Nigeria thrives in an environment of trust, integrity, and healthy competition.
