CFTC wins global award on consumer protection

* The global contest-based award is co-organised by International Consumer Protection and Enforcement Network (ICPEN) and the World Bank

* Which is aimed to showcase good practices in implementation, enforcement, and compliance matters regarding consumer protection

By Duncan Mlanjira

The Competition & Fair Trading Commission (CFTC) has been recognised by global contest-based award for its work in consumer protection — especially through cross border cooperation with other national and regional enforcement agencies.

In a statement issued today by CFTC Executive Director, Lloyds Vincent Nkhoma said the global contest-based award is co-organised by International Consumer Protection and Enforcement Network (ICPEN) and the World Bank, which is aimed to showcase good practices in implementation, enforcement, and compliance matters regarding consumer protection.

Nkhoma singled out a case in reference that in 2023, CFTC received a complaint from a consumer in Lilongwe “alleging that there were pieces of glass in a detergent paste which inflicted cuts in her hands during washing”.

“Upon receipt of the complaint, CFTC conducted market inspections and found two other shops selling the said products which also had glass particles inside.

“CFTC engaged the Malawi Bureau of Standards (MBS) to conduct tests on the product which revealed that the product had some material defect and that it indeed contained glass particles.

“Considering the cross border presence of the manufacturer, CFTC engaged COMESA Competition Commission (CCC) and the Competition and Consumer Protection Commission of Zambia (CCPC) to facilitate a broader and effective cross border redress.”

He added that CFTC has longstanding cooperation agreements with CCC and CCPC and through the collaborative investigations, it was found that the said products, particularly under the same batch, had also been supplied to other countries including Zambia and Zimbabwe.

Nkhoma said CFTC, CCC and CCPC ordered the manufacturer to recall the said products from the market, not just from the markets where the products had been found, but from all the countries where the products had been supplied to.

“The manufacturer also provided remedial measures to the complainant,” he said. “This is the third time that CFTC has received an international award for its outstanding work in competition enforcement and consumer protection.

“Earlier, in two consecutive years, 2015 and 2016, the World Bank Group, in conjunction with the International Competition Network, awarded CFTC for its innovative advocacy strategies in the promotion of competition in emerging markets,” he said.

Meanwhile, the CFTC has made tremendous strides in as far as enforcement of consumer protection from unfair and uncompetitive practices BT traders and services providers by amending the Competition and Fair Trading Act (CFTA), which is set to bite harder for its perpetual offenders as fines attract up to 10% of gross annual turnover.

This was after taking cognizance that big businesses and traders opted to become perpetual offenders of unfair trading practices because the punishment fine of K500,000, which was high then when the CFTA was enacted in 1998, had become too little to dent theirannual turnover.

Thus the companies and traders were ready to honour the K500,000 fine to escape 5 years imprisonment if in default in order to continue their unfair trading practices.

It has taken 26 years for the CFTA to be reviewed after it became a trend by big businesses to continue breaking the competitive and fair trading law — but the old law (CFTA, 1998) was repealed and enacted paving way for the new law (CFTA, 2024), which became operational on July 1, 2024.

It comes with it stiff penalties for its perpetual offenders as fines now attract up to 10% of gross annual turnover for enterprises and companies and up to 5% for natural person.

Aggravating and mitigating factors are going to be considered — thus the percentage of ‘up to…’ while imprisonment has been removed as part of penalties but just fines as they are not criminal in nature (CFTC v Airtel Malawi Plc case).

The administrative orders under Section 22 provides after considering aggravating and mitigative factors to declare abuses of dominant position; cease & desist orders; terminate contracts or agreements; prohibit and remedy unfair trading practices; order a product refund or exchange; impose the monetary penalty; issue an order for the recall of defective products; require a respondent to publish in notice of the infringement and suspend or revoke a merger.

In Section 58, it provides that during or after an investigation, the Competition & Fair Trading Commission (CFTC) can enter into a settlement agreement with a respondent which may include damages to a complainant or monetary penalty.

However, it allows for settlement by consent, but only with approval of court after the case has been reviewed by a competent High Court judge.

Section 59 provides that the CFTC may operate a leniency programme where an enterprise that voluntarily discloses the existence of an agreement that is prohibited under this Act, and cooperates with the Commission in the investigation of the practice, may not be subjected to all or part of an administrative order imposed under this Act.

And to ensure total independence of competition and fair trading commissioners, their appointment and removal shall first be approved by Parliament’s Public Appointments Committee (PAC).

Further, the commissioners’ removal shall be based solely on incompetence and misconduct, as outlined in Section 7, which specifies for the appointment of 7 Commissioners — two business persons (one from Malawi Confederation of Chambers of Commerce and Industry (MCCCI); two consumers representatives; one commercial lawyer (10 years of practicing); one economist (10 years and belonging to the economics association); one registered chartered accountant (10 years, PAAA).

It shall have four ex-officio commissioners — Secretary to Treasury; Secretary for Trade & Industry; Director General for Malawi Bureau of Standards (MBS) and Secretary to Justice (Solicitor General).

Section 5 of the CFTA, 1998 did not specify minimum qualification or experience or professional affiliation for commissioners, who were also 7 — two business persons; one lawyer; one economist; one accountant; two consumers and three ex-officio, Secretary to Treasury; Secretary for Trade & Industry and MBS Director General.

The CFTA (1998) had a list of unfair trading practices that are prohibited, however, the list did not include other types of unfair trading practices and the amended law includes those enacted in 1998 plus failure to give warranty or guarantee; engaging in improper or insufficient labelling; failure to display or indicate prices and engaging in excessive pricing.

Others are failure to issue receipts or invoices; failure to disclose material information; unfair consumer contracts (if it causes a significant imbalance in the rights and obligations of the parties to the detriment of the consumer, shall not be binding).

The CFTA was enacted following globalisation and market oriented reforms in the 1990s that led to price liberalisation, de-regulation and trade liberalisation.

Thus Malawi came up with a Competition Policy in 1997 leading to the enactment of the CFTA in 1998 followed by the Consumer Protection Act (CPA) that was enacted in 2003.

The Competition & Fair Trading Commission (CFTC) was set up in 2005 but became fully established as a parastatal in 2013.

Enforcement challenges with CFTA (1998), due to the gaps in some of the key provisions in the law, led to the review and enactment of the CFTA of 2024, which is aligned with the recent developments in the enforcement of competition and consumer protection law.

The CFTA (2024) is reflective of the current market dynamics such as technology and it is aligned with international best practices in the enforcement of competition and consumer protection.

Section 41 of CFTA of 1998 (misuse of market power), did not list the actual conducts that may amount to abuse of power and also did not include abuse of market power by exploiting consumers.

The CFTA (2024), under Section 28 (prohibition of abuse of market power or dominance) provides for examples, that include: (a) predatory behavior…; (b) excessive pricing; (c) discriminatory pricing… (g) resale price maintenance (h) margin squeeze; or (i) refusal to supply goods.

Abuse of dominance includes not only towards competitors, but consumers as well, with which the CTFC can issue administrative orders.

Section 31 prohibits a dominant buyer abusing its powers at the disadvantage or exploitation of sellers/suppliers and the examples include: delay in payment of suppliers; unilateral termination of contracts; refusal to receive goods etc; transfer of commercial risks meant for the buyer to the suppliers.

In the run up to the review of CFTA 1998’s framework for fines and penalties, the CFTA amendment was speeded up towards the end of 2023 through a court case (CFTC vs Airtel Malawi Limited) in which the High Court ruled that Section 51 of the old CFTA did not empower CFTC to impose fines.

The ruling weakened CFTC’s regulatory mandate but now, the amended law strengthens the Commission in its overall functions of regulating; monitoring; controlling and preventing acts or behavior which are likely to adversely affect competition and fair trading in Malawi.

It provides for it to carry out investigations on its own initiative or based on a complaint; provide advisory role on rights and duties under the Act; provide consumer and business education; undertake market studies — and “to do all such things necessary or conducive to better carrying out of its functions”.

Meanwhile, the CFTC has been engaging with the business community as well as the media to sensitise them on the new CFTA, and during the meetings which took place in Mzuzu, Blantyre and Lilongwe, CFTC‘s Nkhoma emphasised that it was important that the media, the business community and consumers were well versed with the new provisions of the Act.

“We are not here not to punish companies,” he said. “CFTC is there to encourage competition and private sector development that is why the Commission is under the Ministry of Trade & Industry.

“This is why we have taken the effort to meet the media and of course the business community to raise awareness on the new CFTA,” Nkhoma said.