Regulation gaps that leave you exposed when you shop online

Consumers buying goods through online platforms are at risk of losing money through low quality goods or unmet orders thanks to a loophole in e-commerce regulations.

While consumers are opening up to the idea of online shopping as fully-fledged online companies are established, the e-commerce sector regulation is still in the formative stages in Kenya.

“There has not been a comprehensive review in commercial laws in Kenya based on these technological advances. There is a challenge in aligning our laws to this new virtual world,” says Muthomi Thiankolu, a law lecturer at University of Nairobi and also a partner at Muthomi & Karanja Advocates.

The legal gaps are despite the United Nations Conference on Trade and Development (UNCTAD) business to consumer (B2C) e-commerce index 2018 on Africa ranking Kenya seven out of top 10 e-commerce developing and transitioning economies in Sub-Saharan Africa.

UNCTAD puts the number of online shoppers in Kenya by end of 2017 at 2.614 million, the second highest on the continent after South Africa (2.929 million). It adds that the number could surge if all internet users embraced online buying.

Kenya also ranks fourth on the continent in terms of the proportion of individuals shopping online.

Some of the established e-commerce players in the country include Africa Internet Group’s Jumia, Safaricom’s Masoko, Kilimall International and OLX, which is a unit of Johannesburg-listed Naspers Ltd.

Jumia alone has over 10,000 vendors selling about 3.5 million products. Its Managing Director Sam Chappate says the industry must now set up code of practice to align it to the requirements of all relevant regulatory bodies such as the Kenya Bureau of Standards.

“We want customers to have confident in buying from legitimate online market places. We don’t want a case where one bad actor turns off customers,” says Mr Chappate.

Data from Communications Authority of Kenya (CA) covering three months to September 2018 show that the number of mobile commerce transactions hit 526.9 million, pushing the value transacted to Sh1.5 trillion. This is more than half of what Kenya intends to have spent at the end of 2018/2019 financial year.

But hidden in this numbers is disappointment from a section of consumers. In September, CA asked consumes to exercise caution when shopping online, saying fraudsters have created look-a-like e-commerce websites and mobile applications to steal from unsuspecting buyers.

“The online shopping criminals entice unsuspecting buyers through deals via email, SMS, social media pages and telephone. They also request a registration fee for goods or services,” the statement read.

Social media platforms such as Twitter and Facebook are replete with frustrated customers reaching out to respective customer care desks of well-established players.

The Consumer Federation of Kenya (Cofek) Secretary General Stephen Mutoro says between October and mid-December, the organisation has received about 500 written complaints from customers about poor quality products.

“There is a very strong co-relationship between counterfeits and penetration of e-commerce in Kenya. Many complains are on quality because of lacuna in law especially around product verification,” says Mr Mutoro.

“When you sell online you need to include details such as unique identification number for the product. But online businesses sell through photos and so a consumer only makes the assumption that they will receive the right item.”

Kenya also lacks a national addressing system, making it hard for e-commerce businesses to deliver goods to customers at accurate locations within the desired time. In addition, there are no specific regulations for the e-commerce sub-sector to safeguard Kenyans from fraud.

CA is mulling bringing the two into existence within next year. Last month, CA Secretary General Francis Wangusi said the guidelines are ready but awaiting stakeholders’ engagement in the first quarter of 2019.

Further, CA says, government through the Ministry of ICT has established a multi-sectorial National Steering Committee on e-commerce, to establish the current status of e-commerce in Kenya and develop strategies aimed at driving it in future.

Mr Thiankolu notes that the Kenyan law has not caught up with the reality that most sale contracts are now negotiated and concluded online. He says Kenya has made some attempts through amendments such as Evidence Act to admit electronic evidence but this is not sufficient to protect consumers.

“When an area is not adequately regulated, crooks will exploit all gaps. Ideally, we should have laws designed so that when you deal online, it is as good as dealing the traditional face-to-face way,” says Mr Thiankolu

According to CA, online trading platforms do not constitute electronic services as envisaged under the Kenya Information and Communications Act (KICA) and are therefore not licensable.

This means consumers cannot enjoy protection under the Consumer Protection Regulations, 2010, which apply only in instances where the authority’s licensees offer services.

Yet, Mr Mutoro says e-commerce platforms’ policy on returning goods is not sufficient to protect customers even as online purchases surge.

“The biggest undoing is how they on-board new vendors. They don’t have goods systems to check on quality of goods or a good customer grievance mechanism,” claims Mr Mutoro.

Safaricom, which in November last year launched e-commerce platform dubbed ‘Masoko’ discloses in its 2018 Sustainable Business Report that it had to cut the number of vendors from 200 to about 100 due to quality concerns.

“...we have learnt much during the year and used this experience to improve the platform such as enforcing much more stringent quality control measures to ensure the integrity of products on offer,” it said.

Jumia’s Mr Chappate says all players must now increase level of transparency by giving customers history of vendors and customer feedback on quality of products from each vendor.

For Jumia, he says, it checks on quality by carefully selecting and monitoring its vendors and also sampling the products being sold.

“We train vendors so they know rules and there are consequences if they don’t abide by our standards. These include getting delisted,” said Mr Chappate. Though Sale of Goods Act covers areas such as warranty, quality and fitness to purpose of products, Mr Thiankolu says the challenge is now for a customer to prove that the sale happened in case no proper digital documentation happens.

Charles Kanjama, the Managing Partner and head of Dispute Resolution Practice and Support Services at Muma & Kanjama Advocates says customers seeking redress from e-commerce businesses usually have narrow options especially if the value of products bought is low.

There is a general problem, he adds, with seeking remedy on matters classified as ‘small claims’ since the legal fee may surpass the value of the product.

“If you buy an item for say Sh3,000, consultancy fee alone may be Sh3,000. If you buy a phone worth Sh20,000 and the lawyer has to use alternative dispute resolution, it is going to cost more,” he says.

Mr Kanjama says on an individual level, such online purchases appear small but when put together, they run into substantial amounts, which many businesses get away with.

“There is need to have an agency and mechanism that can deal with small claims of consumers. At the moment, most individual consumers just decide in pain to let the matter rest yet cumulatively it is a lot of money,” he says.