Trade Association and Other Enterprises

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Meaning of Trade Association

A Trade Association is an organised group made up of business owners, traders or manufacturers, who are involved in the same type of business or trade.

The primary purpose of a trade association is to protect the interests of its members and to promote the growth of their industry. It serves as a platform for collaboration, unity and collective decision-making among members, who operate within a similar commercial line.

Trade associations are usually regional-based, which allows them to cater specifically to the needs of members within a particular area, town or city. Membership is voluntary and each member typically contributes financially through periodic subscriptions or dues, to help run the association’s activities.

Trade associations exist in nearly every line of business. Common examples include:

• Tailors’ Associations
• Garri Sellers’ Associations
• Butchers’ Associations
• Spare Parts Dealers’ Associations (e.g., Idumota Market)
• Yam Sellers’ Associations
• Taxi Drivers’ Unions

Aims and Objectives of Trade Associations

Trade associations are established to achieve the following key goals:

1. Maintain Quality Standards: Ensure that members deliver high-quality goods and services.
2. Price Regulation: Promote the use of uniform pricing among members, to reduce unhealthy competition.
3. Uphold Professional Ethics: Encourage members to follow ethical practices in their trade.
4. Information Sharing: Provide regular updates and news about changes or advancements in the trade.
5. Uniform Customer Relations: Standardise how members relate to and serve their customers.
6. Trade Promotion: Encourage the development and growth of the specific trade or industry.
7. Advocacy and Lobbying: Serve as a pressure group to influence government policies that affect their trade.
8. Member Welfare: Support and defend the rights and interests of members.
9. Mutual Assistance: Help members in times of financial need or business challenges.
10. Standardisation: Encourage standardisation of products and services among members.

 Functions of Trade Associations

Trade associations carry out several important functions to benefit their members and promote the industry. These include:

1. Disseminating Information: Share useful and timely information relevant to the trade.
2. Price Control: Set standard prices for goods or services to avoid undercutting and promote fairness.
3. Policy Advocacy: Engage with government agencies to influence policies that impact their members.
4. Conflict Resolution: Mediate and resolve disputes between members or between members and customers.
5. Provision of Support Services: Offer credit, grants or other forms of assistance to help members grow.
6. Industry Negotiation: Collaborate or negotiate with other associations on matters that affect their trade.
7. Training and Education: Organise workshops or seminars to build members’ knowledge and skills.
8. Standardisation: Develop and enforce guidelines or best practices for operating in the industry.
9. Research and Publications: Conduct research to improve the trade and share findings with members.

Meaning of Chamber of Commerce

A Chamber of Commerce is an organised association that consists of business owners, manufacturers, importers, exporters and entrepreneurs from diverse sectors of the economy.

Unlike trade associations that focus on a single trade, a chamber of commerce welcomes members from various lines of business within a city, town, region or even internationally. The main aim of this group is to promote, support and protect the commercial interests of its members and the general business environment in which they operate.

Chambers of commerce provide a platform for networking, advocacy and collaboration between businesses and government. They help members establish valuable business connections and stay informed about relevant commercial issues and opportunities.

Examples of chambers of commerce include:

1. London Chamber of Commerce
2. International Chamber of Commerce (ICC)
3. Lagos Chamber of Commerce and Industry (LCCI)
4. Ijebu Chamber of Commerce
5. Ibadan Chamber of Commerce
6. Oyo Chamber of Commerce
7. Nigerian-American Chamber of Commerce
8. Owerri Chamber of Commerce

Aims and Objectives of a Chamber of Commerce

The objectives of chambers of commerce typically include:

1. Encouraging commercial development in the community, state or country.
2. Building partnerships with other chambers to pursue shared business goals.
3. Advising or influencing government policies related to commerce and trade.
4. Creating an enabling environment for business operations and economic progress.
5. Supporting both local and international trade activities that benefit members.
6. Promoting investment opportunities and helping businesses grow.

Functions of a Chamber of Commerce

Chambers of commerce carry out a wide range of activities to benefit their members and the broader business community. These include:

1. Organising Trade Fairs and Exhibitions:
   They host trade shows and business expos to allow members to showcase their goods and services, attract customers and create new business leads.
2. Promoting Domestic and International Trade:
   Chambers actively promote trade both within and outside the country, by facilitating export-import activities and connecting local businesses to foreign markets.
3. Building Collaboration Across Chambers:
   They maintain working relationships with other chambers within the country and abroad to create a united business front and share opportunities.
4. Disseminating Business Information:
   Members are regularly updated with useful and timely information regarding market trends, economic policies, business laws and industry developments.
5. Conflict Resolution:
   Chambers may act as neutral mediators in resolving commercial disputes between member businesses, promoting peace and cooperation.
6. Monitoring Government Policies and Laws:
   They act as watchdogs to ensure that government regulations and decisions do not negatively impact the business environment.
7. Educating Members on Policies and Regulations:
   Chambers offer guidance and training on matters such as customs duties, tax laws, international tariffs and compliance with business legislation.

Cartel

A cartel is a form of monopolistic organisation, formed when independent producers or companies, usually within the same industry, come together to coordinate their activities, with the aim of controlling production and maintaining high prices.

The primary goal of a cartel is to avoid competition among its members and maximise profits, by agreeing on output levels and pricing.

The concept of cartels originated in Germany and a well-known example is the Organisation of Petroleum Exporting Countries (OPEC), where oil-producing nations agree on how much oil each country should produce, to influence global oil prices.

Key Features of a Cartel

Even though each member remains a separate legal entity, they cooperate under a common agreement. Cartels are often found in industries where the products are identical or very similar, such as oil, cement or steel.

1. Monopolistic behaviour: Cartels reduce or eliminate competition within the market.
2. Composed of independent producers: Members are separate companies that agree to work together.
3. Production quotas: Each member is assigned a specific amount they are allowed to produce.
4. Control of output: Output is deliberately restricted to keep supply low and prices high.
5. Price regulation: The agreed price is often maintained across members, removing price competition.

Reasons for Establishing a Cartel

1. To maintain or raise prices: By controlling output, members can keep prices from falling.
2. To secure higher profits: Limited supply and stable prices result in better earnings for members.
3. To eliminate wasteful competition: Resources are not spent competing against one another.
4. To stabilise the market: Avoiding price wars ensures consistent revenue for all members.

Trust

A trust is a business arrangement where multiple competing firms from different or similar industries come together under a single controlling body, often called a trustee.

While each company retains its legal identity, management and decision-making powers are centralised under a unified authority. Unlike a cartel, a trust often represents a merger or integration, especially of firms along the supply chain (vertical integration).

Trusts originated in the United States, especially during the late 19th century, when industrialists combined companies to dominate entire industries. Certificates or shares are often issued to participating firms, giving them part ownership in the trust.

Key Features of a Trust

1. Centralised control: All participating firms are managed by a single board of trustee.
2. Vertical integration: Firms in different stages of production or distribution are brought together.
3. Amalgamation of firms: Competing companies operate under one unified control system.
4. Retention of identity: Firms keep their names but surrender control to the trust.
5. Efficient coordination: Decisions are streamlined under central authority for consistency.

Consortium

A consortium is a temporary alliance of independent companies or organisations, that come together to undertake a specific project, that is too large, expensive, or technically complex for a single company to handle on its own.

The main reason for forming a consortium is to pull financial, technical and human resources, in order to execute a challenging project successfully.

Each firm in the consortium maintains its legal independence, but they collaborate and share responsibilities for the duration of the project. A popular example of a consortium is when several banks combine their resources, to provide a substantial loan to a media house like Africa Independent Television (AIT).

Why Consortia Are Formed

1. To raise substantial capital for large-scale or long-term projects.
2. To handle highly complex or technical projects that exceed the capacity of a single firm.
3. To share risk and expertise among participating members.
4. To increase chances of project success by leveraging diverse skills and experience.

Other Types of Industrial Combinations

Industrial combinations refer to various forms of partnerships or groupings among businesses to enhance productivity, efficiency or competitiveness. Here are some major forms:

1. Holding Company

A holding company is a business entity that does not produce goods or services itself, but owns a controlling interest (over 50%) in the shares of other companies. Its primary function is financial control.

• The company that owns the shares is called the holding or parent company.
• The companies whose shares are acquired are called subsidiaries.
• The subsidiaries retain their individual identities, but are controlled by the parent company.

2. Price Ring

A price ring is a loose alliance of competing companies that agree to sell their products at the same or similar prices in order to avoid price wars and maintain profitability.

• It allows firms to compete on quality, branding, or service, but not on price.
• The aim is to standardise prices across the market without merging the firms.

3. Syndicate

A syndicate is a group of independent organisations that voluntarily come together to pursue a common goal or project, particularly in areas like insurance, banking or publishing.

• Each member retains independence.
• A well-known example is the insurance syndicates at Lloyd’s of London.

4. Merger or Amalgamation

A merger (also called an amalgamation) involves the joining of two or more formerly independent companies into a single new entity. Unlike a consortium or syndicate, the original firms lose their separate identities.

• Mergers often occur to eliminate competition, diversify operations or expand market share.
• The new company may adopt a new name or a blend of the previous names.
• It results in a larger and often more competitive organisation.

https://www.legal500.com/developments/thought-leadership/merger-and-acquisition-in-nigeria-the-legal-procedure-and-guidelines/

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Association of Telecommunication Companies of Nigeria

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