CFTC fines 4 companies and orders 5 more to refund over K2m to consumers for committing unfair trading practices 

Wella Medical Society (Wemas), Southern Region Water Board, Old Mutual Life Assurance Company and Capital Foods Limited have each been fined K500,000 for being found guilty of unfair trading practices.

A public notice from Competition and Fair Trading Commission (CFTC) says it met in Lilongwe on October 10, 2022 to consider and adjudicate over cases under the Competition and Fair Trading Act (CFTA).

The Commission considered and adjudicated over a total of 73 cases that included 63 on unfair trading practices, one merger and nine cases on restrictive business practices.

On top of the K500,000 fine for unconscionable conduct, Wemas has also been ordered to refund K1 million to a client following a complaint filed in November, 2021 in which a complainant alleged that his mother, who was under Wemas’ medical insurance cover, got sick and died in September 2021 due to CoVID-19 related complications.

The complainant reported that they had to hasten funeral arrangements due to the nature of the death and undertook to pay for all costs relating to the hospitalization but also the funeral for the mother.

The complainant reported that they submitted a claim to Wemas for the said costs but the medical insurance firm “did not process the claim indicating that they did not believe that all the claims made were genuine”.

“The Commission found that the services accessed by the complainant were performed and they made payments that the respondent was supposed to refund under the medical scheme for which receipts had been provided.

Thus, CFTC ordered that Wemas should also refund K403,487 to the complainant as cost of medical services incurred during the hospitalization of the mother — in line with the terms and conditions of the medical insurance scheme.

The K1 million to be refunded is towards part of the funeral expenses for the complainant’s late mother.

In May this year, CFTC received a complaint against Southern Region Water Board (SRWB) on allegations of misleading conduct and unconscionable conduct that the house he rents had a faulty water meter, whose readings have been stuck at one spot since July 2017.

“As such, the utility service provider put the house on average billing arrangement for purposes of computing water consumption and by the time the complainant moved into the house, water consumption was pegged at 15 kilolitres per month.

However, in April 2021, SRWB revised monthly consumption upwards, without notice, to 20 kilolitres per month, with a corresponding bill of K9,649.78.

“The Commission established that the respondent used estimated water consumption to estimate the complainant’s bill and that in May 2021, the respondent increased the estimated water bills by double, which was on the higher side.

“However, upon establishing the actual consumption levels, the respondent did not undertake to properly bill the customer for the months he had been overbilled or provide him with a refund for the amounts he had been overbilled.”

This SRWB ordered to refund the complainant an amount equivalent to 126m3 in lieu of the overestimated water consumption and to pay K500,000 as fine for engaging in misleading conduct and a further K500,000 fine for engaging in unconscionable conduct.

Old Mutual Life Assurance Company is reported to have been accused by its client that he bought a policy in 2010 which was expected to mature in 2020.

He further alleged that as of March 2021, he had invested a total sum of MK9,801,430 and also submitted that he made three part withdrawals totalling to MK4,968,000; and received about MK2,288,000 as the final fund value despite his expectation to receive a benefit of about K15,233,180 as per agreement, and a further upward adjustment of the fund value as a reflection of the depreciation of the Malawi kwacha.

“In total, the complainant received a sum of MK7,256,000.00 which is far lower than the nominal amount invested/saved (MK9,801,430.00). When the complainant approached the respondent for redress, he was not assisted.

“The Commission found that there were incorrect deductions that had been made and that a refund was only made to the customer following the Commission’s interventions and not when the complainant approached the respondent on the same.”

Thus Old Mutual Life Assurance Company ordered to pay a fine of K500,000 for engaging in unconscionable conduct and that it should “cease and desist from engaging in unconscionable conduct”.

Capital Foods Limited was found guilty of allegations that it was supplying products likely to cause injury or harm to consumers and improper labelling of products and following findings of a market inspection that was conducted by the Commission at Chipiku Stores in Mzuzu on May 19, 2022 and in Mzimba on May 20, 2022, CTFC found that the respondent was supplying a product called ‘FlouRich Fortified Wheat Flour’, which was improperly and suspiciously labelled.

“The Commission found that the products’ ‘expiry date’ labels were printed on separate tags (stickers) stapled to the packaging material, and not on the packaging material itself.

“This was in spite of the fact that the respondent had previously been ordered not to engage in such conduct” and thus ordered to pay a fine of K500,000 “for failure to comply with a directive or order lawfully given by the Commission under the CFTA”.

Apart from being ordered to refund K320,000 that was deducted from his account in form of tuition fees for its training programme, CFTC has reported DAAM Project to the Ministry of Education as well as the National Council for Higher Education (NCHE) for effective redress on a complaint against on alleged unconscionable conduct in carrying out trade in goods or services.

It was alleged that DAAM Project released an advert calling upon willing primary school teachers to be trained on ‘Inclusive Education’, which indicated that DAAM Project would provide a ‘tablet computer’ as the training was meant to be done online.

All applicants were required to be K20,000 per month from their salaries as tuition fee and the complainant applied and enrolled onto the programme in which tuition fees were deducted from his monthly salary from March 2021 up to April 2022 and have accumulated to K260,000.

“However, the respondent did not give the complainant the promised tablet to enable him effectively participate in the training. As a result, the complainant was unable to participate in the training.”

In October, 2022, a complainant visited Pep Stores shop in Mangochi to buy men’s thong sandals, which had a price tag of K2,690 but at the till he was charged K3,350.

Thus Pep Stores was found guilty of selling products at a higher price than displayed and thus ordered to refund K600 which was over and above the displayed price and to cease and desist from engaging in misleading and unconscionable conduct.

SMB Electronics were accused of excluding liability for defective goods, misleading conduct and unconscionable conduct by a complainant who was supplied with a ‘glass panel’ for a ‘43 Inch Hinsense LED TV in September 2019 in Mzuzu.

“The complainant alleged that the respondent assured that the glass panel would fit onto the TV. The price was K75,000. However, the technician installing the panel found that the glass panel did not match with his TV, but also that the glass panel was not compatible with the model TV.

“The complainant returned the product and demanded an effective redress of the matter. The respondent committed to make a full refund of the money, however, the respondent never effected the refund for 2 years.

The Commission thus found the respondent liable and ordered to refund the K75,000 which he paid for the glass panel and to “cease and desist from engaging in excluding liability for defective goods, misleading conduct and unconscionable conduct”.

Another trader asked to refund money paid to is Yellowman Machines following a complaint from a customer that she purchased a Soya threshing machine at K600,000 but was not functioning properly.

She went back to ask for an exchange for a Soya grading machine at a cost was K300,000 but it too did not function properly.

Yellowman Machines gave her a partial refund of K300,000 instead of the full K600,000 and thus ordered to give back the remaining K300,000 to be made within 30 days from the date the order (November 17).

Having found no evidence against the allegations levelled against Kelfoods on alleged anticompetitive conduct, CFTC resolved to close the matter following findings of a market study into the country’s poultry sector which the Commission did after a complaint against Kelfoods.

The findings established that the supply of day-old chicks to small poultry producers is tied to the purchase of feed from Kelfoods and also that the small poultry producers alleged that Kelfoods refuses to supply them day-old chicks especially during the months leading to the festive season.

“In view of the information, the Commission perceived that the alleged conduct by Kelfoods was restricting competition in the supply of day-old chicks and was unfair to consumers.

“However, CFTC’s analysis of the findings of the investigation revealed that Kelfoods did not prevent competition through tying and bundling by making the supply of day-old chicks to small poultry producers dependent on the purchase of feed from their company.”

Following investigations, CFTC found information on Pemba Driving School Facebook page alleging that the Driving School Association of Malawi sets prices for all driving schools in Blantyre.

“Specifically, the information collected from Facebook page of Pemba Driving School, indicated that the Driving School Association in the Southern Region sets same price for all driving schools in Blantyre with effect from 18th October, 2021.

“It was further alleged that the Association sets regulations for driving schools in Malawi including setting of school fees. Following deliberations, the Commission found the Respondent liable, however, it was noted that there was an information gap.”

The Commission thus ordered the Association to undergo a compliance programme with the Commission and to cease and desist from engaging in price fixing.

Under its mandate, CFTC also considers business mergers in order to establish fair trading processes thus in March this year, the Commission received an application for authorization of acquisition of a poultry production and processing business of Food & Feed Wholesalers Limited, t/a Kapani Enterprises by Go Fresh Limited.

“Go Fresh Limited, is a new-start-up company registered under the laws of Malawi in 2019. The company is actively involved in the supply of meat and meat products including chicken on retail.

“The company also supplies Fast Moving Consumer Goods (FMCG) and runs a supermarket/butchery at old Cold Storage premises along Likuni road.”

CFTC says the target undertaking, on the other hand is Food and Feed Wholesalers Ltd, trading as Kapani Supermarkets — established in 1998, and is one of the largest meat processing plants in Malawi, operating an abattoir, meat-processing factory for the processing of beef and sheep, etc.

“The company is also actively involved in broiler production and processing and supplies to the markets both dressed chickens and live grown chickens.”

CFTC found that:

* Currently the chicken market in Malawi is controlled by Central Poultry with around 49% of market share;

* The combined market shares for the merged entity: Go Fresh Limited + Kapani, would be 9%. This implies that the transaction on its own will not change the structure of the market nor create a dominant player.

* Go Fresh is affiliated to Central Poultry. The proposed transaction would lead to accumulation of 58% market shares by Central Poultry.

“However, it was established that Kapani poultry business was failing and so the acquisition would save a failing firm and following deliberations, the Commission resolved to authorise the proposed acquisition of Kapani’s Prime Poultry and Mchezi Abattoir businesses by Go Fresh Limited.