The Competition and Fair Trading Commission (CFTC) has faulted Illovo Sugar Malawi plc for the alleged unconscionable conduct and misleading in sugar price increase.
CFTC Executive Director Lloyds Vincent Nkhoma told reporters in Lilongwe on Tuesday about the recent decisions by the Commission following its 67th meeting.
He said in January 2023, CFTC commenced investigations against Illovo and the investigations were commenced following complaints that the Commission received from October 2022 subsequent to the publication of a press statement by the company informing the general public of a sugar price increase.
In the said press statement, the company indicated that the reason for the price increase was to curb the conduct of smuggling sugar out of the country. The said statement stated that the devaluation of the local currency resulted in a reduction in the cost of exports, including Illovo sugar and, as such, some traders in the neighbouring countries were smuggling the product from Malawi.
“As a remedy to the problem, Illovo resolved to increase the price of Illovo sugar to make the product expensive on the local market, and thus curb the smuggling of sugar into the neighbouring countries,” he said.
Adding that the complainants alleged that the reasons for the price increase were unjustified considering that they are not reflective of the economic factors prevailing on the market.
In addition, the reasons stated by the company were not related to the company’s cost of production of sugar.
The Complainants submitted that the conduct by Illovo substantially infringes on the welfare of consumers in the country, particularly during a period of already prevailing economic hardships, he said.
During Consideration of the findings of the Secretariat, he said, the Commission noted that Illovo did not dispute that they increased the price of sugar because they wanted to reduce illegal smuggling of sugar.
The Commission also noted that the the company did not dispute that the price increase was not as a result of production costs.
In its assessment, Nkhoma said, the Commission established that as much as the reasons for the price increase were communicated to the public through a press release, the reasons given were not justifiable and consequently, the increase substantially infringed on consumer welfare.
“The Commission reasoned that, if the reason for the increase was indeed meant to protect and control the availability of sugar in Malawi so that consumers in the end are protected, Illovo company should have engaged the rightful authorities to curb smuggling, and not take it upon themselves to increase the price of sugar under the notion of curbing smuggling which is not their mandate,” he said.
The Commission also noted with concern that from the submissions it appeared that the company benefited and took advantage of consumers by using a purported fear of shortage of their product on the market to effect an unjustifiable increase of sugar price.
The Commission, therefore, found that, the reason for the price increase was unjustifiable, irrational and adversely affected consumers, he said.
In this regard, Nkhoma said, the Commission determined that the conduct by the company was in contravention of Section 43(1)(g) of the CFTA.
However, the Commission resolved that Illovo should be prosecuted for violating S43(1)(g) of the CFTA, saying the investigations report should therefore be submitted to the Office of the Director of Public Prosecutions (DPP)for prosecution.
They also resolved that the Commission should issue an advisory note to the Ministry of Trade and Industry to ensure that the supply of essential commodities such as sugar are not shielded from import competition in situations where the domestic beneficiaries under the Control of Goods Act are abusing their dominant positions or engaging in unfair trading practices have the mandate to control smuggling using price or any other means.