High Court orders CFTC to refund Airtel K2.1bln it fined for unfair trading practices

* Upholds that Airtel was in breach of section 43(1)(g) of the Consumer and Fair Trade Act (CFTA) should cease and desist from engaging in unconscionable conduct

* Urges relevant authorities to expedite the enactment of the revised repealing the existing CFTA

* We will respect the decision of the court and will comply with the same—CFTC

* Our legal team is in the process of reviewing the decision to advise on the appropriate way forward

By Duncan Mlanjira

The High Court Civil Division has ordered the Competition & Fair Trading Commission (CFTC) to refund Airtel the K2,113,099,006 which the Commission imposed on the mobile phone service provider as a fine for unfair trading practices.

However, the High Court has upheld the Commission’s determination that Airtel Malawi’s conduct was unconscionable and unreasonable and ordered the Office of the Director of Public Prosecutions (DPP) to review the evidence in the matter and commence criminal proceedings against Airtel within 90 days.

In September last year, CFTC ordered Airtel to pay the fine for what was described as ‘unreasonable’ behaviour to customers over Khethekhethe loyalty bonus programme — following several complaints from consumers, alleging Airtel stopped automatically crediting into customer accounts with monthly bonuses.

According to the complaints to CFTC, customers were required to apply for the redemption of their bonuses on the 14th of every month but they were being forfeited if they were not redeem.

It was further alleged that the unredeemed bonuses were later appropriated and sold to other customers on the 15th and CFTC claimed that Airtel Malawi made a financial gain of about K2.1 billion, thereby acting “unreasonably and without conscious.”

The Khethekhethe loyalty bonus programme first had customers been redeemed airtime royalty bonus when they make a call, buy a bundle or use internet worth K1,000 and above and later changed that the reclaim system was through customers dialing *600# on the 14th of every month.

When it appeared before the CFTC, Airtel denied the charges levelled against it and did not agree with the consequential decision — thus it took the matter, first through the High Court and later to the Supreme Court but in his ruling, Justice Lovemore Chikopa contended that Airtel failed to show what the company wants to be done about the fine, saying the court was just told that the fine is huge.

It was thus referred to the Civil Division under Justice Allan Muhome who reviewed 8 grounds of appeal that CFTC erred in law making a finding of a contract between Airtel and its customers.

In his ruling, Justice Muhome contends that Section 51 of Consumer and Fair Trade Act (CFTA) presupposes the existence of criminal proceedings and the consequences thereof include a fine, disgorgement of financial gains and imprisonment.

He observed that the CFTA does not mandate CFTC to expressly convict offenders, impose fines, disgorgement of financial gains and imprisonment and also that it does not have the power to issue administrative fines since CFTA does not provide for the same.

“Under Malawi law, criminal prosecutorial powers are primarily vested in the DPP (Section 99(2) of the Constitution as well as section 76 of the Criminal Procedure and Evidence Code,” said the judgment.

The Court also took cognizance of the draft legislation aimed at repealing the existing CFTA, saying this “is progressive and clearly provides for administrative penalties” and further urged “relevant authorities to expedite the enactment of the revised legislation”.

CFTC was given 14 days to refund the funds while upholding that Airtel was in breach of section 43(1)(g) of the CFTA and should cease and desist from engaging in unconscionable conduct.

When contacted, Airtel’s Head of PR, Brand Communications & CSR, Norah Chavula-Chirwa said they “are satisfied with the outcome of the judgment since the Court has agreed with Airtel Malawi that the CFTC did not have jurisdiction to fine the company”.

“Currently, our internal and external counsel are reviewing the judgment as regards to the other orders of the Court as well as the other aspects that the Court has agreed with the CFTC,” she said.

On its part, CFTC’s public relations officer, Innocent Helema said they respect the decision of the court and will comply with the same and that their legal team is in the process of reviewing the decision to advise on the appropriate way forward.

On the way forward as regards to the court determining that CFTC does not have the power to issue such a fine, Helema said the ruling “affects the core of the enforcement mandate of the Commission”.

“However, you might be aware that the Commission is in the final stages of reviewing the Competition and Fair Trading Act which, among others, clearly provides for administrative fines. We hope that the reviewed Act will be in place soonest.

The CFTC was established under the CFTA of 1998 with a mandate to regulate, monitor, control and prevent acts or behaviours which would adversely affect competition and fair trading in Malawi.

The CFTA has been amended and is undergoing review by the government legal experts and the proposed areas of reform made by the Commission include revision of fines and penalties to be charged at percentage of turnover.

Currently, the fines are at K500,000, which was high then when the CFTC was enacted in 1998, which today companies can readily honour but continue their unfair trade practices.

There will also be mandatory merger application; introduction of on-spot fines; CFTC to replace Consumer Council under Consumer Protection Act (CPA) as well as commitment and settlement procedures.

Currently, CFTC is engaging the business sector to indulge in compliance programme which shall inform the company boards, management and employees on how to conduct their tasks without exposing the company to regulatory risk.

It will also help the company to correct competition and consumer related violations and assist them to avoid future transgressions through constant monitoring and feedback.

The way to go includes creating compliance awareness in the organization about CFTA and CPA; ensuring internal monitoring mechanism to detect and report on any suspected breach of the CFTA or CPA.

This can be easily be made possible by appointment a compliance team led by a legal expert and conducting competition law training on appropriate practices under competition and consumer protection law — which CFTC is readily available to facilitate.

The trainings shall open eyes on businesses on how their firm relates with other competitors i.e. horizontal agreements in order to put in place rules/procedures that prevent members of staff from participating in practices/conducts that would constitute collusion.

The firms shall also relate with downstream players — customers, suppliers and avoid agreements that undermine other suppliers or exploit customers and consumers.

The firms will also relate well with consumers since they will put in place rules/procedures that prevent the company from engaging in conduct that violates consumer welfare

On mergers and acquisitions, the business is being asked to always notify the Commission well in advance to seek guidance.