* After CFTC received a complaint that it was excluding liability for defective goods; misleading conduct and unconscionable conduct
* Paramount Holdings was found to have already been fined by Malawi Bureau of Standards for supplying substandard fertilizer
* As CFTC orders 3 companies to pay fines as a percentage of their total annual revenue as provided under the amended CFT Act
By Duncan Mlanjira
Paramount Holdings Ltd, which was contracted by the Ministry of Agriculture through the Mega Farm Support Unit to supply fertilizers, has been found to have been supplying substandard products after investigations following a complaint received by Competition and Fair Trading Commission (CFTC).
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A press statement from CFTC Chief Executive Officer, Lloyds Vincent Nkhoma, reports that during its investigations, CFTC established that Paramount Holdings was found to have already been fined by Malawi Bureau of Standards (MBS) for supplying substandard fertiliser.
This company was contracted by the Ministry of Agriculture through the Mega Farm Support Unit to supply fertilizers NPK (23:10:5+6S+1.02n) and UREA 46%N to maize mega farmers under Malawi Agriculture and Industrial Investment Corporation (MAIIC) credit facility.
Nkhoma reports that CFTC commenced investigations on September 25, 2024 on allegations that Paramount Holdings Ltd was excluding liability for defective goods; misleading conduct and unconscionable conduct.
Lloyds Vincent Nkhoma
A complainant alleged that he bought on January 7, 2024, 70 bags of Paramount Gold NPK 23:10:5: 6S+1.Zn fertilizer at MK6,160,000 along with some 108 bags of UREA fertilizer from Paramount Commodities’ shop in Balaka.
“The complainant wanted to use the fertilizer at his farm in Ntcheu,” reports Nkhoma. “However, the complainant suspected that the fertilizer was substandard.
“Following his suspicions, the complainant took samples of the fertilizer to the Malawi Bureau of Standards (MBS) for testing [and] according to the test results, the fertilizer was found to lack crucial major nutrients and that it was substandard.
“The investigations found that the respondent engaged in excluding liability for defective goods and services and engaged in conduct that is likely to mislead the public in contravention of Section 51(b) and Section 51(d) of the CFTA, respectively.
“The Respondent also engaged in unconscionable conduct in contravention of Section 51 (g) of the CFTA.”
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It was during investigations that CFTC established that Paramount Holdings was contracted by the Ministry of Agriculture for the supply of the fertilizers.
It was also found that over the years, Paramount Holdings has been importing fertilizers under the brand of ‘Paramount Gold’ composed of the following types: NPK 23:10:5+6S+1.0Zn, UREA 46%N, CAN27%N, Ammonium Sulphate 21%N:24%S.
The fertilizer originates from different countries with more quantity imported from United Arab Emirates (UAE).
It was also found that MBS already fined Paramount Holdings for supplying substandard fertiliser and was also instructed to address the non-conformity of the fertilizers to ensure that the fertiliser conforms to standard requirements.
“MBS was also mandated to confiscate the defective batch of NPK fertilizer to prevent further sale of the commodity. However, the concerned batch was sold out/out of stock at that time, hence no further action was undertaken.”
CFTC thus considered that Paramount Holdings had already paid a fine imposed by MBS and as a result could not impose another fine — but following deliberations, the Commissioners ordered the company to refund the complainant MK6,160,000 being the amount paid to purchase the defective fertiliser.
In the statement, Nkhoma reported that at its 71st meeting held on December 13, 2024, CFTC considered and adjudicated over a total of 49 cases — out of which 26 were closed at preliminary stage due to, among others, lack of merit and early resolution of the issues at hand.
Three companies have been ordered to pay fines as a percentage of their total annual revenue, as provided under the amended Competition and Fair Trading Act (CFTA).
While other companies have been ordered to pay a total refund of K6.5 million to consumers for unfair trading conducts and anti-competitive business practices.
Investigations were carried out on Paramount Holdings; Friends Investments; Suncrest Creameries; Namonje Investments and Bao Steel Ltd.
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Friends Investments’ charge was alleged supply of products likely to cause injury or harm to consumers and unconscionable conduct and ordered to pay a penalty of 1% of their annual turnover for engaging in the supply of products likely to cause injury or harm to consumers.
It is also to pay a penalty of 1% of their annual turnover for engaging in unconscionable conduct and an additional 10% of the above penalties for failing to adhere to the Commission’s previous cease and desist orders.
CFTC commenced investigations against Friends Investments on May 20, 2024 and upon two shop inspections that were conducted, the company was found guilty in contravention of Section 51(e) and Section 51(g) of the CFTA, respectively.
Further, Friends Investments contravened section 70 (1) (a) (i) of the CFTA by failing to provide information when required to do so.”
For Suncrest Creameries Limited, after a complaint in Zomba on October 5 and during a subsequent inspection of its shop, it was found that it had in stock two more bottles of guava juice product that the complainant had purchased.
The complainant bought a bottle of 500ml guava juice manufactured by Suncrest Creameries and he noted that the manufacture date printed on the label of the product was October 23, 2024, a date which was ahead of the date on which he purchased the product.
Investigations found that Suncrest Creameries engaged in conduct that is likely to mislead the public in contravention of Section 51(d) of the CFTA.
Following deliberations, CFTC ordered Suncrest Creameries to pay a penalty of 1% of their annual turnover for the misleading conduct and failure to recall the defective batch.
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Namonje Investments was found to have engaged in supplying products which are likely to cause injury to health or physical harm to consumers, and unconscionable conduct — in contravention of Section 51(e) and Section 51(g) of the CFTA, respectively.
Nkhoma reports that on August 19, 2024, they carried out market inspections in Mchinji at Namonje Investments’ shop located at Kamwendo Filling Station where it found that it was stocking expired products.
“It was also reported that this was not the first time that the respondent’s shop had been found stocking expired products and following deliberations, the company was ordered to pay a penalty of 1% of their annual turnover for engaging in supply of products likely to cause injury or harm to consumers.
And also to pay a penalty of 1% of their annual turnover for engaging in unconscionable conduct and to pay an additional 10% of the above penalty for being a repeat offender.
On September 27, 2024 investigations were commenced on Bao Steel Ltd on allegations of misleading conduct and unconscionable conduct following a complain in June 2023, after a customer made payment towards purchase of roofing iron sheets at MK3,165,875.
“However, when the complainant went to collect the iron sheets, the respondent refused to supply the agreed number of sheets indicating that she could only collect half of the agreed quantity.
“According to the complainant, the respondent stated that this was because the accountant with whom the complainant had dealt with had left employment and took away the money that the complainant had paid.
“The investigations found that complainant made changes on the type of the sheets that she was quoted for from IBR to Versatile, which has a higher price.
“It was, therefore, noted that the difference between the money paid for the IBR iron sheets and the cost of the Versatile iron sheets collected was K430,000.
“The Commission noted that the respondent did not mislead the complainant with regard to the price, quantity or quality of the iron sheets and that the respondent did not act in a manner that was unreasonable.”
Following deliberations, Bao Steel Ltd was ordered to supply the complainant with 29-gauge Versatile iron sheets equivalent to the remainder of the amount paid to purchase the iron sheets (K430,000).
In the alternative, Bao Steel Ltd was to refund the complainant the amount of K430,000 being the remainder of the amount paid to purchase the iron sheets.
CFTC also recommended 12 mergers for authorisation by the COMESA Competition Commission.
After being in operation for 26 years, the Competition and Fair Trading Act (CFTA was reviewed after it became a trend by big businesses to continue breaking the law opting 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 their annual turnover.
Thus the old law (CFTA, 1998) was repealed and enacted paving way for the new law (CFTA, 2024), which became operational on July 1, 2024.
The amended law thus 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 being considered — thus the percentage of ‘up to…’ while imprisonment of up to 5 years imprisonment if in default, was 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 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 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 1990sthat 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.
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