Industry contests 60% of fair-trade cases

Sixty percent of determinations made under the updated Competition and Fair Trading Act (CFTA) are being challenged in court, a situation experts say calls for greater clarity on the regulation’s practical application.

The new law, which replaced the 1998 legislation, gives the Competition and Fair Trading Commission (CFTC) stronger powers to penalise violations.

For instance, the updated Act, enacted in 2024, imposes administrative penalties of up to 10 percent of an enterprise’s gross annual turnover for violations, which can translate into substantial sums for large businesses.

In an interview, CFTC chief executive officer Desmond Kaunda acknowledged that, two years after the enactment of the new law, enterprises are challenging up to 60 percent of the commission’s determinations.

Kaunda attributed the situation to various factors, including enterprises seeking to protect their reputations and shareholders’ interests, as some penalties exceed K100 million depending on a business’s annual turnover.

“We have enterprises that have gone to court to appeal. They have obtained stay orders, and the matters are still ongoing in court,” Kaunda said.

However, Kaunda views the industry’s response as part of a process that will set a precedent and help both the commission and industry players understand the law and its practical application.

He said: “It could be seen as a setback in the sense that we would have preferred the enterprise to comply with the determinations of the Commission right away.

“But that is also an opportunity because the new law has yet to be tested, so these cases are going to give us an opportunity to have a better understanding of how it can be applied in practice.”

In a separate interview, Consumers Association of Malawi executive director John Kapito described the situation as strange, saying it points to weaknesses in the regulation.

Kapito said: “It’s the weakness of the law that triggers the many challenges we are witnessing. While institutions have the right to appeal, it must be noted that the independence of our regulatory institutions is questionable.

“What we witness in Malawi cannot happen anywhere. I would not blame the industry so much other than looking at the way we have positioned our institutions and enabling laws for them to operate effectively.”

Apart from imposing stronger penalties, the new Act also strengthens oversight of digital trade and online commerce, while putting more emphasis on consumer protection.

Section 31 of the 2024 CFTA also protects small and medium enterprises (SMEs) by prohibiting the abuse of buyer power, which is defined as a dominant buyer using its power to the disadvantage of suppliers.

In an interview, National Association for Small and Medium Enterprises national coordinator William Mwale described the new law as critical, saying delayed payments by ministries, departments and agencies, as well as large corporations, are a serious issue affecting SME operations.

“It’s a long-standing issue that has been discussed even at Common Market for Eastern and Southern Africa and Southern African Development Community fora to ensure governments pay SMEs on time,” he said.

Using the new law, CFTC has recently fined several companies, including two commercial banks, a total of K361 million for unfair consumer practices, misleading conduct and supplying defective products and services.

The current Competition and Fair Trading Act came into effect on July 1 2024, replacing that of 1998.

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