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Thursday, 05 January 2012 22:45

Customers to Gain As New Consumer Laws Take Effect

By Allan Odhiambo

NAIROBI, Kenya, January 05, 2012 (Business Daily) - Product and service firms are likely to shift their mode of operation this year once consumer protection laws go full throttle.Two key laws -- the Competition Act and Price Control Act -- are expected to come into force this year once the enforcement agencies are set up.

 

These will push firms to offer quality products and services at reasonable prices.

 

The Competition Act provides for the creation of the Competition Authority of Kenya, which will punish businesses that knowingly sell sub-standard goods and lie on pricing. It also provides for warranties for damaged or injurious goods.

 

A key shift is that the authority would handle all forms of mergers unlike today when the Monopolies Commission is only allowed to scrutinise deals involving firms in the same line of trade.

 

"The new entity will break away from the current norm whereby the commission only handles merger cases of firms that deal with the same line of goods and services. It will handle all cases including mixed line of operations," Francis Wang'ombe, the acting diretor-general of the Competition Authority of Kenya said.

 

Mr Wang'ombe said the authority was setting up key institutions including the board. It has a budget of Sh160 million -- about four times what it got as a commission -- and is expecting more resources from the supplementary budget. It is also looking to lease office space outside the Treasury-owned Bima House to accommodate its expanded staff and underline its independence.

 

The Price Control Act on the other hand provides for the regulation of prices of essential commodities to secure their availability at reasonable prices.

 

Under this Act, the Finance minister is authorised from time to time, by the Kenya Gazette order, to declare any goods to be essential commodities and determine the maximum prices of the commodities in consultation with industry players.

 

Industry players and analysts expect the new regulations to trigger major shifts in the operations of both goods and services providers."It will no longer be business as usual because the power of the consumers will be enhanced. Firms must now work towards delivery best quality products and services," Stephen Mutoro, of the Consumer Federation of Kenya said in reference to Competition Act.

 

In this Act, firms proven to have supplied sub-standard or injurious products would be liable to a raft of punitive measures including recalling such products from the market, repair defects, replace faulty products or issue refunds to aggrieved customers.

 

Such firms would also be required to publicly disclose the nature and danger of defects on their products in conjunction with a newly created regulatory agency -- The Competition Authority -- in a bid to minimise the threat to the wider consumer population.

 

"It is good for the industry because competition on quality will bring fairness," Omar Ahmed, a mid-sized distributor in Nairobi said.Service providers will also be compelled to disclose all charges to potential consumers forehand to enable them make appropriate choices from offers available in the market.

 

The Act lists banks, consultancies and insurance firms as service providers. It also captures all those involved in the provision of, or the use or enjoyment of facilities for, amusement, entertainment, transport, broadcasting, tourism, recreation, education or instruction.

 

"Banks have been disclosing information to customers but we could see more enhanced disclosure because it would now be a legal requirement other than just ordinary customer service," Habil Olaka, CEO, Kenya Bankers Association said.

 

Persons that fail to make full disclosure of charges are liable on conviction to imprisonment for a term not exceeding five years, or to a fine not exceeding Sh10 million, or both under the new laws. "The current constitution also addresses consumer welfare and so the consumer is more protected," Mr Mutoro said.

 

The Constitution offers consumers an opportunity to act in groups and take claims before court against a company, trader, or the government for abuse of rights under what is commonly known as class suits. Currently, people with claims against companies or government arising from injuries incurred in consumption of goods and services offered can only sue individually.

 

Besides protecting consumer rights, the new Competition Act also seeks to curb unhealthy business competition through stringent vetting and monitoring systems on key undertakings such as mergers and acquisitions.

 

And to minimise the danger of backlog in merger cases, the new authority has been granted powers to set a threshold of the size of transactions unlike the case today when all transactions have to go through Treasury, however, small the size of the businesses that planned to merger their operations.

 

All verdicts on merger applications would be published in public to ensure applicants did not repeat mistakes from struck off cases as way of beating undue backlogs.

 

According to the Act decisions on merger cases will be published within 60 days except in instances requiring further investigation. Currently there is no time limit with regard to the publication of verdicts on such cases.

 

The new Act also seeks to address past concerns over the impartiality on the management of the Monopolies Commission by handing Parliament the role of vetting the appointment of some of the officials to serve in the new authority.

 

Analysts, however, said implementation of the Price Control Act may be tricky for the government as it juggles between protecting the poor through price caps on basic goods and maintaining the confidence of investors sensitive to free market economy conditions.

 

"The price controls may not work well because Kenya is a free market economy where pricing is a key component of any business," Mr Mutoro said. (END)

 

 

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