The enhancement of Competition and Consumer Protection regulation in Zambia by the new amendments to the Competition and Consumer Protection Act

One of the cardinal amendments to note is that the COMESA Competition Regulations have been finally domesticated into law. This has been a long outstanding issue especially in merger control. Also, the amendments are without controversy as there has been an introduction of regulation regarding the ‘Core Assets’ as defined in the Amendment Act and restriction of movement of Core Assets without the approval of the Commission.

Further, the amendment has given the Commission more regulatory powers in that some provisions have been strengthened to give the Commission the power to impose administrative fines. The new amendments have cut across all the provisions of the Principal Act on both competition and consumer protection provisions.

It is paramount that businesses familiarize themselves with the new amendments to the Principal Act to ensure compliance and avert the imposition of steep administrative fines.

The following are some salient features of the amendments by Act No.21 of 2023:

New Definitions

“COMESA” means the Common Market for Eastern and Southern Africa, formerly the Preferential Trade Area, established by the COMESA Treaty which was signed on 5th November, 1993 and was ratified by Zambia on 8th December, 1994.

“COMESA Competition Regulations” means the COMESA Competition Regulations promulgated in 2004 by the COMESA Council of Ministers.

“Core Assets” means essential assets and includes important or valuable property without which a company is unable to carry on its normal operations.

“Trade Association” includes a business association, professional association and an interest group with a common business purpose.

“Unconscionable” includes a conduct of price gouging, selling of goods and services of unacceptable low quality and other unfair trading practice that defies good conscience and is harsh and oppressive to the consumer.

“Zambia Compulsory Standards Agency” means the Zambia Compulsory Standards Agency established under the Compulsory Standards Act, 2017.

Application of the Principal Act

Section 3 has been amended by the inclusion of a provision which has domesticated the COMESA Competition Regulations, 2004 which have been introduced in the Third Schedule set out in the Appendix.

These regulations will be the administrative oversight of economic activity impacting Zambia and have an effect within the economies of not less than two Member States of COMESA. Put differently, the COMESA Regulations shall now be binding on Zambia as it conducts international trade with other COMESA member states. 

This amendment is welcome and puts to rest the long outstanding controversy in which there was no domestication of the COMESA Competition Regulations, but a ‘gentleman’ agreement existed which was not dejure.

Functions of the Commission

There is an addition to the Commission’s functions by the insertion of the following provisions: 

1. investigate and assess, restrictive agreements, abuse of dominant positions market power and    mergers; and

2. review, in consultation with an appropriate authority, an application for relocation of core assets of an enterprise from the Republic. 

Functions of the Board

To enhance administrative oversight over the Commission, there is an insertion of a new Section 5A which outlines the Board’s oversight and management over the Commissions operations to ensure success in their operations. The Board’s functions are to:

1. oversee the implementation and successful operation of the policies, programmes and strategies of the Commission;

2. monitor and evaluate the performance of the Commission against the plans and budget;

c.  approve the annual workplan, action plan and activity reports of the Commission; and

d.  approve the budget estimates.

This amendment underscores the role of the Board in corporate governance and increased oversight of the Commission.

Inspectors

There is an amendment to Section 7(4) which provides that Inspectors, with a warrant, may seize and retain as evidence, goods offered, exposed, or sold in violation of the Principal Act.

Prohibition of anti-competitive practice, agreement or decision

Section 8 of the Principal Act has been repealed and replaced to now provide that where an enterprise group of enterprises or trade associations enters into agreements or undertake practices that would prevent or restrict, distort competition to an appreciable extent in the relevant market such an entity they will be liable to a penalty of not more than 10% of that entity’s annual turnover.

This means that the Commission has powers to impose an administrative fine for non per se prohibitions if the rule of reason or business justification defence is not accepted by the Commission.

Share of supply threshold for authorization of restrictive agreements

There is now a significant change in the share of supply threshold requirement for which Parties must apply for the Commission’s authorization when deciding to enter restrictive agreements. In this regard, Section 14 of the Principal Act has been amended to change the threshold requirements for authorization of restrictive agreements. For horizontal agreements, the threshold has been reduced from 30% to 15% of the market share whereas in respect of vertical agreements, the threshold has been reduced from 30% to 15%.

It seems not clear why there has been reduction, but our assessment is that the Commission wants to capture and review as many agreements as possible.

Determination of relevant market

Section 17 of the Principal Act has been repealed and replaced to provide that the Minister, may, on the advice of the Commission prescribe the relevant procedure for determining the relevant market within which the share of supply or acquisition thresholds are to be met under the Principal Act.

This amendment has added the involvement of the Commission in the formulation of market definition which is welcome as the Minister is not an expert in competition and consumer protection law.

Prohibition of relocation of core assets without authorization and Application for authorization to relocate core assets

Section 23 of the Principal Act is amended by the inclusion of Section 23A which prohibits the relocation of core assets from the Republic to another State without the approval from the Commission. An enterprise that contravenes this requirement will be liable a penalty of not more than 10% of that entity’s annual turnover.

The application for authorization is set out in the new Section 23B. 

This new inclusion of core assets is outside the scope of competition law and a potential Constitutional violation of the right to property. It will be interesting to see if this new amendment will be challenged in future. In the old law, there was such a provision which at the time was designed to prevent asset stripping following the privatization of state owned enterprises.

Definition of merger 

The control provisions on what constitutes control for merger purposes have been expanded. There has been an amendment to Section 24 (3) of the Principal Act which provides additional areas when determining who has control over an enterprise’s assets in a Merger. Accordingly, a person will also be deemed to be in control of an enterprise assets if they:

1. buys or leases the core assets of another enterprise;

2. has a market presence or a market turnover which is attributed to the assets bought or leased from another enterprise; or

3. controls the assets bought or leased.

Additionally, the Commission is authorized to issue guidelines for determining market presence and market turnover for the purposes of this section.

Compliance with conditions and undertakings of merger 

There is an amendment to the Principal Act by the insertion of a new Section 34A which provides that an enterprise is mandated to submit correct information to the Commission in relation to an assessment of a proposed merger and adhere to conditions stated in a determination or an undertaking given as a condition of an approved merger under section 34.

An Enterprise’s failure to comply with conditions and undertaking of a merger will make them liable to a penalty of not more than 10% of that entity’s annual turnover, in addition to such penalty the Commission may revoke an approved merger. 

Revocation of merger 

Section 35 of the Principal Act has been repealed and replaced to provide that the Commission may revoke an approved merger where the enterprise does not conform with the requirements set out in section 34A. 

The Commission is mandated to notify a party to the merger or interested parties of their intention to revoke the approved merger by giving such interested parties 30 days of receipt of the notice, within which to take remedial measures to the satisfaction of the Commission or show cause why the merger should not be revoked. 

During this 30-day period, the Commission shall not revoke the approved merger. However, where a party fails to take remedial measures to the satisfaction of the Commission or how cause why the merger should not be revoked, the Commission is mandated to revoke the approved merger.

Further to the above, an enterprise that implements an unapproved or rejected merger by the Commission is liable to a penalty of not more than 10% of that entity’s annual turnover.

Appeal to the Court of Appeal

To align the Principal Act in conformity with the Constitution, section 75 is amended to the effect that Appeals from the Competition and Consumer Protection Tribunal now lie to the Court of Appeal and not to the High Court.

The enhancement of Competition and Consumer Protection regulation in Zambia by the  new amendments to the Competition and Consumer Protection Act No. 24 of 2010 by Act No. 21 of 2023- Part 2

Consumer Protection Provisions and Powers of the Commission

Introduction 

In addition to the amendments in the competition provisions part of the Principal Act, there have also been substantial amendments to the consumer protection provisions of the Principal Act.  What is key to note has been the inclusion of the power by the Commission to impose administrative penalties. This is to enhance compliance because of the risk of financial penalties. The powers of the Commission have also been enhanced and the Commission can also impose administrative penalties.

Definition of unfair trading practice 

Section 45 of the Principal Act has been repealed and replaced to provide that a trading practice is unfair and thereby distorts, or is likely to distort, the purchasing decisions of consumers if the trading practice;

1. misleads consumers;

2. compromises the standards of honesty and good faith which an enterprise can reasonably be expected;

3. is unconscionable; and 

4. places pressure on consumers by use of harassment or coercion.
5.  

Prohibition of unfair trading practice

Section 46(2) of the Principal Act has been repealed and replaced to provide that a person who practices unfair trading will be liable a penalty of not more than ZMW 45,000.00 while an enterprise will be liable to a penalty of not more than 10% of that it’s annual turnover.

In addition to the penalties meted out against a contravening enterprise or person under Section 46 of the Principal Act, a person or an enterprise shall refund the consumer the price paid for the goods or services or replace the goods or perform the service to a reasonable standard.

False or misleading representations 

Section 47 of the Principal Act has been repealed and replaced to provide that where false representations or misleading representations as laid down in the newly amended Section 47 by a person then they will be liable a penalty not exceeding ZMW 45,000.00 while an enterprise will be liable to a penalty of not more than 10% of that its annual turnover.

 In addition to the penalties, a person or an enterprise shall refund the consumer the price paid for the goods or services or replace the goods or perform the service to a reasonable standard.

Display of disclaimer prohibited

Section 48(1) has been amended to provide that an owner or occupier of a shop or other trading premises or platform is prohibited from displaying any signs or notice that purports to disclaim any liability or deny any right that a consumer has under the Principal Act or any other written law.

A person who contravenes the above will be liable a penalty of not exceeding ZMW 45,000.00 while an enterprise will be liable to a penalty of not more than 10% of that its annual turnover.

Prohibition of supply of defective and unsuitable goods and services

Section 49(1) has been amended to provide that a person who supplies a consumer defective and unsuitable goods that are unfit for the purpose they are normally used for will be liable to a penalty of not exceeding ZMW 150,000.00 while in the case of an enterprise they will be liable to a penalty of not more than 10% of that its annual turnover.

Additionally, a person or enterprise that supplies a consumer defective and unsuitable goods that are unfit for the purpose they are normally used for shall within seven days or an agreed reasonable time of the supply of the goods concerned refund the consumer of the price for the goods.

Further to the above, Section 49(7) has been repealed and replaced to provide that in a situation where a person or enterprise does not supply a consumer with reasonable care and skill or within a reasonable time or, if a specific time was agreed, within a reasonable period around the agreed time, they will be not only liable to a penalty not exceeding 10% of their annual turnover, but they must refund the consumer the money paid for the service or must perform the service to a reasonable standard within 14 days of the provision of the service concerned.

Product labelling

Section 50(1) of the Principal Act has been amended to now provide that a product sold in Zambia should have a label in the official language to clearly indicate the product description, the ingredients used in the product, the date of the manufacture and expiry of the product, the manufacturer’s name, the physical location of the manufacturer, the telephone number and any other contact details of the manufacturer.

Further to the above, a person or an enterprise must sell goods to consumers that conform to the mandatory consumer protection standard for the class set by the Zambia Compulsory Standards Agency.

Prohibition for charging more than displayed price

Section 51 of the Principal Act has been repealed and replaced to provide that a person or enterprise is prohibited from charging a consumer more than the price indicated on the product or service. Where a person or enterprise does not comply with this requirement, they should sell the product or charge the service at the lowest price displayed to the consumer.

Further to this, a person shall also be liable to the Commission to a penalty of ZMW 15,000, while an enterprise will be liable to a penalty not exceeding 10% of their annual turnover. 

In a situation where a person or enterprise charges more than the price indicated on the product or service, in addition to the penalties above, they should refund the consumer the difference between the price indicated and the actual price. Whereas, in a situation where a person or enterprise displays more than one price for a product or service at the same time and sells the product or charges for the service at the highest price displayed shall refund the consumer the difference between the lowest price and the highest price displayed.

Consumer Product Safety

Section 52(1) has been repealed and replaced to provide that a person or an enterprise shall not-

1. sell any goods to consumers unless the goods conform to the standards approved by the Zambia Bureau of Standards or Zambia Compulsory Standard Agency under the Standards Act, 2017, or the Compulsory Standards Act, 2017, respectively, or any other relevant competent body; or

2. expose for sale, supply, import, or display a product that is expired, has exceeded its “best before” date, “use by” date, or “sell by” date, or has otherwise exceeded its shelf life.

A person or enterprise that fails to comply with the above shall be liable to a penalty of ZMW150,000.00 or imprisonment for a period not exceeding 5 years or both in addition to paying the Commission a penalty of not exceeding 10% of that entity’s annual turnover.

Further to this Section 52(4) has been amended to provide that the Zambia Compulsory Standards Agency will be the consulting Authority, that the Commission consults before applying to the Tribunal for an Order that goods that are unsafe or that the sale of unsafe goods to a consumer is prohibited or an Order that unsafe goods already sold to consumers should be recalled from the market by the supplier.

Investigations by the Commission

Section 55(5) has been repealed and replaced to provide that where a person or an enterprise under investigation contravenes the Commission’s request to furnish any information or produce documentation or appear before the Commission to produce documents relevant to the investigations as provided under the Principal Act, such a person will be liable to a penalty of not more than ZMW30,000 while an enterprise will be liable to a penalty not exceeding 10% of its annual turnover.

Further section 55(11) has also been amended to provide that the Commission shall not investigate or review a matter that is before the Tribunal unless the Tribunal directs otherwise.

The effect of this amendment is that enterprises must be vigilant because failure to provide information or produce or appear before the Commission has become harsh as the business will now be exposed to a fine in addition to criminal prosecution.

Consent agreement and undertaking

Section 57(2), (3) and (4) have been repealed and replaced to provide that the Commission on entering into a consent agreement with an enterprise under investigation, shall submit the consent agreement to the Tribunal for confirmation. Upon receipt of the consent agreement, the Tribunal may give their confirmation or return the matter to the Commission with an indication of any areas of concern to be addressed before the Tribunal confirms the agreement.

The amendment also provides that in the case where the Commission gives an enterprise under investigation an undertaking, the undertaking made by an enterprise to the Commission shall be communicated to the parties in writing in the form of a decision of the Board have the effect as if it were a directive of the Board.

Directions relating to anti-competitive business practices and unfair trading

Section 58(5) has been repealed and replaced to provide the Commission may, where anti-competitive conduct or an unfair trading practice falls within the scope of this Act, give an enterprise direction, in writing, that the Commission considers appropriate to ensure that the enterprise ceases to engage in that anti-competitive conduct or unfair trading practice. Such direction may require an enterprise to cease to engage in the anti-competitive conduct or unfair trading practice within a period that may be specified by the Commission.

In addition to the above the Commission may make an order imposing a penalty on the enterprise not exceeding 10% of that enterprise’s annual turnover during the period of the breach of the prohibition up to a maximum period of five years.

Enforcement , directions and undertakings 

Section 64 has been amended by the insertion of a new subsection which provides that a mandatory order of the Tribunal may be served, executed and enforced as if it were an order of the High Court.

Enforcement at the request of a foreign authority

Section 65 (1) has been amended to provide that subject to subsection (2), a foreign competition or consumer protection authority may, where the foreign competition or consumer protection authority has reasonable grounds to believe that an anti-competitive or unfair trading practice in the Republic is damaging competition or consumer welfare in the country of that foreign competition or consumer protection authority, request the Commission to investigate and make an appropriate determination.

This provision like in the past brings the effects doctrine into reality and enhances international co-operation.

Establishment of the Competition and Consumer Protection Tribunal

Section 67 has been amended to provide that a member of the Tribunal shall, on the expiration of the period for which that member is appointed, continue to hold office until a successor is appointed but in no case shall the further period exceed 3 months.

Appeal to the Court of Appeal

To align the Principal Act in conformity with the Constitution, section 75 is amended to the effect that Appeals from the Competition and Consumer Protection Tribunal now lie to the Court of Appeal and not to the High Court.