New consumer market law puts traders in a tight spot
Some of the businesses with the highest risk of being sued are supermarkets, music and video shops, pharmacies, and electronic equipment dealers. File
Kenya’s consumer market is headed for a big shift next week when the new law on competition comes into force with heavy penalties for purveyors of fake and substandard goods.
The law, which was passed last year but officially comes into operation on August 1, will heavily tilt market power in favour of the consumer while demanding high ethical and operation standards from traders. Beginning next Monday, traders must sell to consumers only top quality goods and services or risk heavy penalties provided for in the law to shield buyers from fraudsters, counterfeits and conmen.
The Competition Act vests in the traders the responsibility of ensuring that any goods or services sold from their outlets are of the high standards and are true to whatever attributes consumers have been promised in advertisements, fliers or packaging.
“This law gives the consumer a firm legal ground to fight unethical business practices,” said Joseph Kieyah, an analyst at the Kenya Institute for Public Policy Research and Analysis (Kippra).
Prof Kieyah reckons that the buyers of goods and services have acquired even bigger muscle to defend their rights under the new Constitution which provides for consumer protection under the Bill of Rights.
Any trader convicted of selling a substandard good or service to a consumer or participating in predatory pricing runs the risk of compensating the buyer, paying a Sh1 million fine besides serving a jail term for five years.
Top on the list of businesses with the highest risk of being sued are supermarkets, music and video shops, pharmacies, car and electronic equipment dealerships.
Kenya’s consumer market is ranked among those with the highest amounts of counterfeits in the world, according to World Trade Organisation, a reality that has been attributed to weak market surveillance.
The law — whose enforcement lies with an independent watchdog — presents the single biggest empowerment of consumers who have, for decades, relied on the goodwill of businesses to get compensation for losses arising from the purchase of substandard items.
Right to sue
The competition law gives consumers the right to sue for compensation in the event that they have been cheated into buying substandard offerings and to reclaim illegal charges introduced in pricing.
Manufacturers face the highest risk as they will be under obligation to take back any goods that consumers reject as substandard. “An individual who suffers loss or damage may recover compensation through court action,” says the law that also provides for consumer compensation by executive fiat.
“In appropriate circumstances the authority shall have powers to refer consumer complaints to specialised agencies of the government, which shall make determination and inform the authority and the complainants accordingly.”
Though it remains to be seen what impact the law will have on Kenya’s nascent industrial sector, opponents of the law have argued that the high level of exposure in the marketplace could scare away investors and tilt the landscape in favour of neighbouring states.
It is the first time that Kenyan consumers will enjoy high level of protection that is backed by clear provisions for compensation.
Two years ago, thousands of motorists woke up to the shocking reality that Track IT – a car protection company that has since collapsed— had not installed any tracking devices on their cars despite charging for the service. Those who lost their cars in the scam were not compensated or refunded fees paid for the service. Only a few manufacturers have been compensating consumers for poor quality or damages, but this has largely depended on the assertiveness of consumers.
Under the new law, suppliers of substandard goods will be compelled to recall them, a move that offers consumers the level of protection only known in the Developed World where millions of cars and electronics are frequently recalled in the event of widespread complaints.
The law is particularly expected to strike a major blow against fake or counterfeit products that are common in electronics, batteries, pharmaceuticals, vehicle spare parts, packaged food, and beauty products markets.
Producers of counterfeits have mainly relied on strong brands to peddle their goods exposing the owners of big brands to the danger of suits.
The law says that if a product does not live up to its billing, a consumer can demand that the supplier reveal the identity of the manufacturer, who must provide information required within a month. Any supplier who declines will automatically assume the responsibility for damages incurred or risk being thrown out of business.
Suppliers of goods also have the responsibility to ensure that they match promises made to the consumer in marketing or fall in breach of the satisfaction standard that will attract hefty penalties.
False representation of an item’s value, price, warranty, and affiliation are some of the malpractices that will require the suppliers or manufacturers to compensate the consumer.
It will be a particularly difficult environment for fraudsters in the services industry such as education who have conned parents millions of shillings by using fake affiliations with prestigious foreign institutions to offer substandard courses and award worthless qualifications. The level of exposure is even higher in the electronics market where, save for a few appointed dealers and supermarkets, most stockists of mobile phones, DVD players, and television sets do not service or take back products that purport to have warranties. Such outlets are expected to come under intense consumer pressure after August 1.
In the financial services sector, consumers have been empowered to seek redress for predatory charges, a provision that is expected to shine the light on interest charges that some lenders have sneaked into contracts with borrowers. Under the new law, lenders shall not impose unilateral charges and fees — by whatever name — if such have not been brought to the attention of the consumer prior to the provision of the service.
The lenders are also required to inform the consumer of all charges and fees they intend to introduce during the life contract – setting the stage for vicious fights over variable interest rates and default charges that have seen the total interest and fees surpass the principal.
In the three years to January 2010, courts denied banks more than Sh100 million in interest income, by declaring their dealings with borrowers as dishonest and bordering on usury.
Analysts say consumer activism, including litigations, will be critical for the law to succeed in curbing exploitation in the market.
