Lozindaba Mvundula | Associate, Public Relations Officer and Coordinator of Corporate Social Responsibility.
Competition laws exist to ensure that the market place is driven by the forces of supply and demand, thereby ensuring that there is competition in the market. The protection of competition is of great importance to the national and world economy in that it strengthens the efficiency of production and distribution of goods and services and secures the best conditions for freedom of trade. In addition to all this, free and fair competition also ensures that the interests and welfare of consumers are protected. A consumer refers to any person who purchases or offers to purchase goods otherwise than for the purpose of resale or any person to whom a service is rendered. It, however, does not include persons who purchase goods for use in the production and manufacture of other goods for resale.
The protection of consumer welfare is one of the objectives of the Competition and Fair-Trading Act (CFTA). Although the protection of consumers is largely governed by the Consumer Protection Act, the competition regime also has a role to play because competition and consumer protection are essentially two sides of the same coin. This paper discusses the link between competition and consumer protection, and the role of the Competition and Fair-Trading Commission (CTFC) in the protection of consumers.
- The Link between Competition Law and Consumer Protection
There exists an undeniable link between competition and the protection of consumers from unfair trade practices. Anti-competitive behaviour e.g., price fixing and exclusionary practices, distort the market force of supply by restricting the entrants into the market. Where supply is low and demand is high, producers will most likely hike their prices. The obvious disadvantage of this on the consumer is clearly a concern of both competition and consumer protection regimes.
Concurrently, consumer protection offences, such as deceptive advertising, distort the market force of demand. They create a false image as to the true nature of a product or service, making it seem to be worth more than it actually is. Unfair trading practices not only affect the welfare of consumers, but also lessen the business of existent or potential trade rivals. Thus, in order to ensure that there is a free market, sufficient protection must be given to both the supply side and the demand side – to both competition and consumer protection regimes. While ensuring that the market force of supply is protected by safeguarding against anti-competitive behaviour, demand must also be protected by safeguarding consumers against unfair and deceptive trade practices, that make goods and services appear to be worth more than they actually are.
- Prohibited Unfair Trading Acts Against Consumers
The Competition and Fair-Trading Act prohibits any unfair trading acts committed against consumers. The following practices by producers or traders constitute unfair practices towards consumers and are prohibited under the Competition and Fair-Trading Act:
- Withholding or destroying producer or consumer goods, rendering goods unserviceable or destroying the means of production and distribution of such goods, whether directly or indirectly, with the aim of bringing about a price increase;
- Excluding liability for defective goods;
- Making warranties that do any of the following;
- Limit liability to a particular geographic area or sales point;
- Falsely represent that products are of a particular style, model or origin;
- Falsely represent that the goods are new or of specified age;
- Represent that the products or services have any sponsorship, approval, performance and quality characteristics, components, materials, accessories, uses or benefits which they do not have;
- Engaging in conduct that is likely to mislead the public as to the nature, price, availability, characteristics, suitability for a given purpose, quantity or quality of any products or services;
- Supplying any product which is likely to cause injury to health or physical harm to consumers, when properly used, or which does not comply with a consumer safety standard which has been prescribed under any written law;
- Claiming payment for unsolicited goods or services;
- Engage in unconscionable conduct in carrying out trade in goods or services;
- Engage in pyramid selling of goods and services (a scheme which makes money by recruiting people rather than by selling products);
- Engaging in bait selling (A sales tactic where a store/trader attracts customers by an advertisement for a high quality or low-priced item, that turns out to be unavailable. The trader then uses the opportunity to lure the customer into purchasing a higher priced or lower quality product as a replacement, or to purchase other products offered by the same producer. The advertised unavailable product is only used as bait);
- Offering gifts or prizes with no intention of supplying them;
- Putting out an advertisement which is misleading or deceptive; and
- Engaging in any such acts constitutes an offence.
- Role of the Competition and Fair-Trading Commission in Consumer Protection
The CFTC is empowered to enforce the CFTA and regulate, monitor, control and prevent acts or behaviour which are likely to adversely affect competition and fair trading in Malawi. This includes conducting investigations, whether of its own motion or otherwise, into the conduct of any business to ensure that its acts are not anti-competitive or unfair towards consumers. The Commission sits as tribunal and may hold public hearings in the conduct of its investigations. It has authority to summon and examine witnesses, to call for and examine documents, to administer oaths, to require that any document submitted to the Commission be verified by affidavit; and to adjourn any investigation from time to time. Following such hearings, the Commission may make a finding based on which the Commission can make orders and directions.
Thus, where unfair acts have been committed against consumers, the consumer may report to the CFTC, which will then summon the concerned parties and conduct investigations in the manner discussed above. The Commission also has power to unilaterally commence investigations of suspected unfair practices against consumers, without being moved by anyone. Once the Commission makes a finding, it can issue order and directions regarding the conduct of the trader against consumers. It may require that traders cease certain unfair trade practices or even make payment to consumers for injustices committed against them. Further, the findings of the Commission may be used as a basis for prosecution of those who engage in unfair trading practices. Through this, the welfare of consumers is protected.
The safeguarding of fair competition and the protection of consumers from unfair trade practices are interlinked and indispensable to each other. They both protect the market forces of supply and demand, which are necessary to ensure free and fair trade, as well as efficiency of production and distribution of goods and services. The Competition and Fair-Trading Commission plays a key role in the protection of the welfare of consumers through its findings, orders and directives issued pursuant to its investigative powers.