2021 End of Year Performance Update of the Competition & Consumer Protection Commission.
2022-01-31As we look back on the year 2021, without a doubt the COVID -19 pandemic has accelerated the growth of the Zambian digital economy. This rapid pace of innovation that is fueling the digital economy has given Zambian businesses and consumers unprecedented opportunities to seize the full potential of the digital sector. However, it also raises new questions and challenges from a competition perspective.
The Commission has remained committed to enforcing the Competition and Consumer Protection Act (CCPA) No. 24 of 2010 and ensuring that competition enforcement responds to the challenges posed by digital platforms coupled with competition and consumer related violations such as price gouging, scams and misleading advertisements among others.
We will continue ensuring that markets are regulated by actively monitoring against exploitative business practices and punishing those found in contravention of the Act.
In view of the aforementioned, am pleased to render an update on the Commission’s operations, its performance and achievements for 2021.
In 2021, the Commission resolved 2,366 cases involving 2,933 violations. An amount of K2,462,657.24 was recovered in refunds and K1,774,482.79 was recovered in replacements. The total amount recovered was K4,237,140.03 which is the value of goods and services consumers would have lost. The Commission observed that the majority of consumer complaints were from the Insurance, Retail, Microfinance, ICT and Construction sectors which collectively accounted for 86.13% of the complaints.
In the Retail sector, most of the cases concerned the supply of defective products, such as mobile phones, television sets, batteries etc. In service sectors like Insurance, Microfinance and ICT, most cases had to do with provision of unsuitable services and misrepresentations, such as failure to pay maturity values for insurance policies or unsolicited deductions from consumer’s salaries or bank accounts. In the Construction sector, most of the cases had to do with non-delivery of building materials.
In this regard, the Commission has continued to collaborate with the Pensions and Insurance Authority (PIA), Securities and Exchange Commission (SEC), Bank of Zambia (BoZ), Drug Enforcement Commission
(DEC) and the Ministry of Commerce, Trade and Industry (MCTI) in resolving complaints in the financial services sector.
The Commission also received twelve (12) complaints concerning fraudulent and unregistered money saving and investment schemes some of which were advertised on social media. The Commission is working with BoZ, SEC and DEC on these schemes.
In 2021, the Commission through its Inspector’s Project, joint inspections with Local Authorities, the Zambia Compulsory Standards Agency (ZCSA), Zambia Metrology Agency (ZMA) and the Zambia Medicines Regulatory Agency (ZAMRA) inspected six hundred seventy-six (676) trading premises in twentyfour (24) districts across the country and goods worth K154,819.05 were seized for not meeting the provisions of the Act or the Food Safety Act No. 7 of 2019. These goods were either expired, improperly labelled, or had damaged packaging.
Mergers and Monopolies
The Commission experienced a reduction in the number of merger applications assessed. This may have been caused by disruptions and uncertainties in Zambia’s business environment and the global economy at large, brought about by the Corona Virus Pandemic (Covid-19).
In 2021, the Commission handled a total of sixty-eight (68) merger applications as compared to eighty-three (83) mergers in 2020. Of the 68 merger applications handled in 2021, fifty-six (56) were reviewed and closed as compared to sixty-six (66) that were reviewed and closed in 2020. This represents a 22.1% reduction in the total number of merger applications handled and a 17.9% reduction in the total number of merger applications reviewed and closed in 2021.
The value of merger investments facilitated by the Commission in 2021 was five hundred and seventy-three million, three hundred and sixteen thousand, four hundred and forty-four Kwacha (K573,316,444) with over eleven thousand, three hundred and thirty-four (11,334) jobs maintained in various sectors of the economy. It is worth noting that as these merged companies expand their operations, there is a high likelihood that more jobs will be created. These merger investments cover broad sectors of the economy from Services, Information and Communication Technology (ICT), Energy, Wholesale and Retail, Manufacturing, Agriculture and Mining. Other sectors include Real Estate, Banking and Finance, Insurance, Construction, Transport, Tourism and Livestock.
Abuse of Dominance
A number of sectors in the Zambian economy are characterised by a few players and therefore, are highly concentrated. In 2021, the Commission investigated nineteen (19) Abuse of Dominance cases and closed eleven (11) compared to 2020 where eighteen (18) Abuse of Dominance cases were investigated with twelve (12) cases closed. The cases investigated in 2021 relate to tying and bundling, excessive pricing, refusal to deal, unfair contract terms and exclusivity with regards to contracts. The increase of Abuse of Dominance cases in 2021 was as a result of the supply chain disruptions caused by Covid-19. This meant import competition was affected and product imports could not be supplied leading to shortages of certain products. This mainly affected the manufacturing sector. Other sectors affected were the Tourism, Insurance, Services, Wholesale, Retail and Agriculture sector. The cases investigated were all meant to unlock the various sectors in order to allow participation of both big and small players, and ultimately contribute to the growth of the various industries in Zambia.
Restrictive Business Practices
In the year under review the Commission experienced a reduction in the number of complaints handled relating to Restrictive Business Practices (RBPs) as compared to the previous year due to increased awareness of provisions of the law which resulted in increased compliance amongst enterprises. The Commission handled forty (40) RBP cases of which twelve (12) cases were from the previous year and twenty-eight (28) cases were received in 2021. Of the forty (40) cases, the Commission closed twenty-seven (27) cases with thirteen (13) cases still being investigated. Of the cases closed, the Commission handled a case that involved a global company that operates a Multi-Level Marketing System in which it prohibited its distributors from reselling their products below a fixed minimum price. The dangers of setting minimum resale prices is that it limits the distributors’ ability to reduce prices in response to market demand. The Commission’s intervention therefore enabled the distributors to change prices thereby
increasing a consumer’s range of prices available for the same product. The Commission also handled several applications for agreements in the financial sector and in the manufacturing and distribution vertical chain.
As in the past years, combating cartels remains a top priority for the Commission as they are considered the worst violations of competition law. Considering the Covid-19 pandemic, the Commission is alive to the possibilityof enterprises colluding in a bid to endure the economic challenges caused by the pandemic. In this regard, the Commission enhanced its investigations into cartel conduct. In the year under review, the Commission conducted dawn raids in five (5) sectors on enterprises suspected to be engaging in cartel conduct.
In 2021, the Commission handled sixteen (16) Cartel cases which were mainly from the Agriculture, Manufacturing, Construction, Aquaculture, Retail and Public Procurement sectors, closing eight (8) cases in the Manufacturing and Agriculture sectors with the remaining eight (8) still under investigation.
Research and Market Studies
The Commission has continued to review the operations of different sectors and the conditions of competition and consumer protection in those sectors. The Commission concluded a total of four (4) studies focusing on; the effects of Covid-19 on Consumer Protection in Zambia, the effects of Covid-19 on Competition in Zambia, the Aviation sector and Roaming (telecommunications) sector.
Prices of essential commodities in the retail sector generally increased. The Pharmaceutical and Fast-Moving Consumer Goods sectors also witnessed a general price increment between April and August 2020. This suggests that price gouging may have occurred due to shortages necessitated by increased demand. There were also disruptions in logistics along the value chains due to lockdowns in other countries. The two Covid-19 studies further showed an ever-increasing need for the Ministry of Commerce, Trade and Industry (MCTI) to invoke its powers vested in the Control of Goods Act Cap 421 of the Laws of Zambia to reign in on profiteering by enterprises in crisis times. The Commission recommended to MCTI the need for continued sector collaboration to ensure measures put in place to address challenges do not unduly affect the functioning of markets.
Aviation is a key part of the Zambian economy. It allows for transporting people and goods inside, outside and across the country, and stimulating economic activity, job creation, tourism and trade. The Commission as a member of the African Competition Forum (ACF) together with 7 other competition agencies; namely; South Africa, Kenya, Nigeria, Angola, COMESA, Mauritius and Gambia participated in a cross-country study.
The Zambian aviation sector revealed that there was adequate regulatory and institutional framework to make the aviation industry competitive, however,the enforcement levels were low. The study further showed that the flight fare costs in Zambia remained high due to high operation costs. It was thus concluded that, the aviation liberalization and an effective regulatory regime were an essential tool for Zambia to experience the benefits of free trade and economic integration such as, cheaper fares for passengers, greater connectivity, more route frequency, innovative competitiveness and time efficiency.
With regard to the study on roaming, the findings have shown that international roaming has been associated with high and often obscure pricing of roaming services. Lack of contestability and low consumer
awareness maybe the reasons why roaming charges are considered unjustifiably high. The study sought to assess levels of information disclosure, levels of consumer awareness of roaming services and rates and adequacy of regulation for consumer protection for international roaming. The study revealed that the three MNOs in Zambia provided their roaming clients with tariff advisory largely through Short Message Services (SMSs) with options on which MNO to switch to while roaming in Zambia.
Education and Advocacy
The Commission has continued to engage with several industry players through virtual platforms and the distribution of Information, Education and Communication (IEC) materials. Priority has been given to sectors with a high potential to engage in conduct that is likely to be inconsistent with the Act. As expected, the Commission has seen an increase in the use of e-commerce or online transactions during the Covid-19 era from four hundred and fifteen (415) to six hundred and three (603), with a corresponding increase in e-commerce related consumer rights violations. While some of the violations border on criminality such as data theft, online scams and phishing among others, the Commission has also noticed misleading advertisements, pressure selling techniques and non-disclosure of material information. These are some of the issues that the Commission has constantly been educating the consumers on and training various enterprises to ensure that such practices are avoided and to encourage secure systems.
The Commission is greatly encouraged by the number of requests from stakeholders wishing to have compliance training conducted virtually in a bid to ensure self-policing. The Commission continues to encourage other stakeholders to reach out to the Commission for compliance training which is provided free of charge. Equally, consumers are advised and remained to be on the lookout for infringements such as online scams, unfair trade practices and breach of consumer privacy among others and to actively report such incidences to the Commission or other appropriate law enforcement bodies.
In a bid to incessantly maintain international best practices, the Commission has continued to be an active participant in international competition and consumer protection groupings. The Commission under these groupings won the 2020-2021 ICPEN Consumer Education Awards under category 2 which was on; Financial inclusion and financial services consumer education initiatives related to financial inclusion and financial services. The Commission was also accorded several opportunities to share its regulatory experiences in the digital era. The Commission has further continued to attend meetings, workshops and respond to several requests for information from different institutions.
Legal and Corporate Affairs
In the year 2021, the Commission continued to enforce the law in line with its mandate mostly through litigation. In this regard, the Commission had a total of ten (10) cases before the Courts with the following breakdown:
Cases before the Supreme Court
The Commission has one (1) case before the Supreme Court which is pending determination.
Cases before the Court of Appeal
Two (2) cases which had been commenced by way of Appeal to the Court of Appeal and are yet to be determined.
Cases settled via Ex-Curia
Eight (8) cases were settled through Ex-Curia (out of court), while six (6) cases were delivered in favour of the Commission.
Cases before the High Court
Seven (7) cases were commenced in the High Court by way of Appeal against the decisions of the Competition and Consumer Protection Tribunal (CCPT). Out of the seven (7) cases, three (3) were concluded and are pending delivery of judgment, while one (1) case is currently before the Tax master for determination of costs following the delivery of judgement in favour of the Commission. Three (3) are yet to be determined.
Cases before the Competition and Consumer Protection Tribunal (CCPT)
In relation to cases before the CCPT, there were a total of thirty (30) cases before the Tribunal. Out of these, six (6) cases were pending judgment.
It is apparent that turbulent and uncertain market conditions will continue to prevail, even as government works to bring the fourth wave of the COVID-19 pandemic under control. Therefore, competition law enforcement will continue to play an important role in determining how Zambian markets develop and grow amid the continued ravaging effects of the pandemic. The Commission will continue to promote and champion competition and consumer protection through advocacy, using local, as well as international engagement and through enhanced enforcement in key sectors of the economy.