Social media storm over Nakumatt’s pricing of goods

The Competition Authority of Kenya (CAK) on Tuesday said it had opened investigations into claims that retail chain Nakumatt has been overcharging its customers at the till for goods that are priced lower on the shelves.

The move came in the wake of a social media outrage sparked by hundreds of customers who complained that receipts issued at Nakumatt tills indicated they had been charged higher prices than was on the shelves. 

The competition watchdog said it had reached out to the consumers for evidence of the alleged overcharging in preparation for regulatory action.

Nakumatt, which has since acknowledged the existence of receipting discrepancies in its outlets, said the mistake had arisen from delay in updating the price lists.

Wang’ombe Kariuki, the CAK’s director-general, said the agency would analyse the evidence provided by the main complainant (who shopped at Nakumatt’s Village Market branch in Nairobi) before approaching the retail chain’s management.

“We are in contact with the customer who made the allegation and have asked him to file a formal complaint,” said Mr Kariuki.

“The allegations, if true, would amount to false representation on the retailer’s part. This is an unethical practice which is clearly outlawed.”

Mr Kariuki said the investigators would rely on Section 55 of the Competition Act, which protects consumers from businesspeople who knowingly sell sub-standard goods or lie about the pricing.

The provision was seen as one of the major gains for consumers when the law came into force in 2012 and was expected to instil some order in Kenya’s chaotic consumer goods market.

The provision says that “a person commits an offence when, in trade in connection with the supply or possible supply of goods or services…, he falsely represents that goods are of a particular standard, quality, value, grade or composition….” 

Sh500,000 penalty

A confirmation of false representation of pricing could leave Nakumatt  with a Sh500,000 penalty or imprisonment of its directors for a maximum of three years or both.

The Consumers Protection Act, 2012 has similar clauses.

Nakumatt has a regional footprint of 52 outlets across Kenya, Uganda, Tanzania and Rwanda, and is leading a sector-wide expansion race with Tuskys, Uchumi and Naivas.

The retailer found itself at the centre of a social media storm after consumers posted receipts allegedly proving differences in shelf and till prices.

The customers took to Twitter to express themselves using the hashtag #Nakumattontrial, share their experiences as well as raise other issues with the retailer.

Nakumatt’s managing director Atul Shah responded to the sustained pressure with an official statement on Monday evening. He said the alleged pricing discrepancies were being reviewed internally.

“The alleged price discrepancies are undergoing internal review to ascertain the circumstances that could have led to the slow updating of shelf price stickers,” he said, adding that all price changes, are centrally managed from the retail chain’s Nairobi headquarters and any discrepancies on the shelf can only be attributed to slow sticker changes at the branch level.

Nakumatt said the main complaint had arisen from its Village Market branch where an attendant had placed the new price sticker on the old one while adjusting the price of one milk product but the new sticker fell off leaving the old one in place.

Mr Shah said the business would instal digital price checker kiosks at strategic points within its premises to help buyers make decisions before proceeding to the tills.

“The management is sincerely concerned at the number of complaints shared on social media,” he added.

“We would wish to remedy the concerns raised and are requesting aggrieved shoppers to lodge complaints to facilitate commencement of immediate investigations.”

READ: Nakumatt to audit pricing system following outcry over discrepancies

On Tuesday, it emerged that Nakumatt’s problems were not limited to the public outcry and investigations by the competition watchdog.

The Consumer Federation of Kenya (Cofek) joined the social media campaign and promised to take legal action against the retailer.

Stephen Mutoro, the Cofek chief executive officer, said the lobby was preparing a formal complaint that would be delivered to Nakumatt by Thursday.

Cofek is demanding that Nakumatt agrees to an independent audit of its pricing system in the past year, failure to which the association would sue the retailer.

“Nakumatt’s statement amounts to an admission of liability and the presence of a defective pricing system that has cost its customers millions of shillings,” Mr Mutoro said.

“Consumers make the decision to buy a good based on its price tag and anything that happens between the shelf and the till to alter this price is not in their control and amounts to misrepresentation of prices.”

In the year ended February 2013, Nakumatt’s total sales hit a record Sh56.5 billion, nearly twice the Sh29.5 billion it reported just two years earlier. Much of the growth was attributed to the retail chain’s rapid geographical expansion.

Sales took a hit during the period ending February 2014, dipping to Sh52 billion.

Nakumatt plans to open 14 new branches in the next two years as part of a plan to become a billion-dollar retail giant and grow its gross revenues to over $1 billion (Sh95 billion) “in the medium term”.