CFTC intensifies inspections on farm inputs

CFTC’s public relations officer, Innocent Helema

* There has been an improvement in product labelling by seed and other input manufacturers in terms manufacture and expiry dates

* Generally, traders that sell farm inputs are complying with the Competition and Fair Trading Act

By Duncan Mlanjira

Following instances where some farm inputs were not indicating expiry dates or dates of manufacture — mostly on imported products — Competition & Fair Trading Commission (CFTC) & has intensified inspections on such products across the country.

CFTC’s public relations officer, Innocent Helema says so far “there has been an improvement in product labelling by seed and other input manufacturers in terms manufacture and expiry dates”. 

“There were a few instances where we found inputs that had no expiry date or date of manufacture and these were on imported products.”

Another area of concern were reports of underweight inputs and through the inspections, CFTC assures the public that they did not find such incidences as was the case during previous engagements.

“Generally, traders that sell farm inputs are complying with the Competition and Fair Trading Act (CFTA) in terms of sale of expired products, issuance of receipts, display of prices and exclusion of liability,” Helema said.

“There has been a reduction in the prevalence of exclusive dealership arrangements especially for seed companies in that one trader is now able to sell inputs from different companies.”

On the way forward, said they “will enquire more or investigate on those products which we found to be lacking in terms of labelling”.

“We will continually be monitoring the market to ensure that there are no unfair trading practices or any anti-competitive trade practices being committed,” he assured.

CFTC has handled many cases of unfair trade practices and the most remarkable one was on sugar price by Illovo Sugar Malawi — a complaint it received from Consumer Association of Malawi (CAMA).

In its report circulated on August 29, CFTC said it commenced investigations against Illovo Sugar Malawi in January this year having received the complaint in October.

This was after Illovo had issued a press statement indicating that the reason for the price increase was to curb the conduct of smuggling sugar out of the country.

“The said statement stated that the devaluation of the local currency resulted in a reduction in the cost of exports, including Illovo sugar and, as such, some traders in the neighbouring countries were smuggling the product from Malawi,” said CFTC in its report.

“As a remedy to the problem, Illovo Sugar Malawi resolved to increase the price of sugar to make the product expensive on the local market, and thus curb the smuggling of sugar into the neighbouring countries.”

CFTC highlights that the complainants alleged that “the reasons for the price increase were unjustified considering that they are not reflective of the economic factors prevailing on the market”.

“In addition, the reasons stated by Illovo Sugar Malawi were not related to the company’s cost of production of sugar. The Complainants submitted that the conduct by Illovo Sugar Malawi substantially infringes on the welfare of consumers in the country, particularly during a period of already prevailing economic hardships.”

The Commission further said it took note that Illovo “did not dispute that they increased the price of sugar because they wanted to reduce illegal smuggling of sugar”.

It was also noted that Illovo “did not dispute that the price increase was not as a result of production costs [and] in its assessment, the Commission established that as much as the reasons for the price increase were communicated to the public through a press release, the reasons given were not justifiable and consequently, the increase substantially infringed on consumer welfare”.

“The Commission reasoned that, if the reason for the increase was indeed meant to protect and control the availability of sugar in Malawi so that consumers in the end are protected, Illovo Sugar Malawi should have engaged the rightful authorities to curb smuggling, and not take it upon themselves to increase the price of sugar under the notion of curbing smuggling which is not their mandate.

“The Commission also noted with concern that from the submissions it appeared that Illovo Sugar Malawi benefited and took advantage of consumers by using a purported fear of shortage of their product on the market to effect unjustifiable increase of sugar price.

“The Commission, therefore, found that, the reason for the price increase was unjustifiable, irrational and adversely affected consumers.”

The Commission then determined that the conduct by Illovo Sugar Malawi was in contravention of Section 43(1)(g) of the CFTA [and] in view of the foregoing, and resolved as follows:

* That Illovo Sugar Malawi should be prosecuted for violating S43(1)(g) of the CFTA. The investigations report should therefore be submitted to the Office of the Director of Public Prosecutions (DPP)for prosecution;

* The Commission to issue an advisory note to the Ministry of Trade & Industry to ensure that the supply of essential commodities such as sugar are not shielded from import competition in situations where the domestic beneficiaries under the Control of Goods Act are abusing their dominant positions or engaging in unfair trading practices; and

* The Commission to issue an advisory note to the Ministry of Trade & Industry, as a policy holder, to compel Illovo Sugar Malawi to reduce sugar prices taking into account that the Company does not have the mandate to control smuggling using price or any other means.

Following the verdict CAMA demanded the company to effect the product’s price by 25% with immediate effect early last month — but up to now this has been adhered to by Illovo Sugar Malawi.

A statement from the consumer watchdog, dated September 7, CAMA said Illovo Sugar Malawi’s justification that it was to control and reduce smuggling of sugar across the borders of Malawi is an activity outside its mandate.

CAMA Eexecutive Director, John Kapito stressed that “border control activities are managed by the State through institutions such as the Police and other border enforcement agencies”.

“As a consumer organization, we found that the reason for such a huge increase was unfair and unjustifiable as it was not related to any production costs of sugar to warrant any price increases of a basic product like sugar, by such a high margin.

“And that the purpose for the increase was insensitive and outside the mandate of Illovo Sugar Malawi. We must admit the sugar price increase was cruel and hurtful to poor consumers.”

Thus CAMA demanded the immediate reduction of the prices it contended that the company “has illegally been collecting from poor consumers” and that the company should “refund all the illegal revenues collected under this illegal sugar price increase from October 2021”.