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Consumer welfare in an imperfect market

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35 year old Sankhulani Phiri works as a teacher at one of the country’s primary schools in Ntcheu. She struggles to make ends meet but at the beginning of the year, she resolved that she would buy a small mini cooker to ease her cooking struggles.

She decided to use all her savings to purchase the appliance. She goes into a reputable shop and buys the cooker. With excitement, she rushes home to use it.

Two days after purchasing the cooker, she comes home from work and her maid asks her for money to buy charcoal as the new appliance is not working.

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Sankhulani rushes to the kitchen to try to switch on the cooker but her attempts yield no results. She remembers that she had kept the receipt for the purchase and vows to take the cooker back to the shop for a refund or exchange.

When she gets to the shop the following day, she is directed to the office of the manager who unceremoniously shows her a disclaimer on the receipt that says goods once purchased are not returnable. She is directed to leave the shop and told she will get no refund, exchange, or help of any kind.

Not knowing where to turn, Phiri makes her way back home. The mini cooker has since gathered dust and become a home to cockroaches. All her savings have been wasted and she now finds herself worse off than she was before making the purchase which she had hoped would change her life for good.

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Refusal by traders to refund buyers or allow them to return defective products is one of the many unfair trade and anti-competitive practices that are commonly being committed by business players in Malawi.

For years, consumers in the country have silently suffered abuse at the hands of business players having nowhere to run to for redress.

But the Competition and Fair Trading Commission (CFTC) says many people, like Sankhulani, lack awareness on the provisions of the Competition and Fair Trading Act enacted in 1998 with the objective of promoting competition and fair trading in the country.

The Commission says many people in the country do not appreciate the role that the body is playing to promote competition and safeguard the rights of consumers.

According to CFTC Executive Director Wezi Malonda, the enactment of the Competition and Fair Trading Act was necessitated by the imperfect market structure that characterises the Malawi economy and the emergence of undesirable business practices.

“The market imperfections and undesirable business practices act as hindrances to business and defeat competition, thereby negatively affecting efficient operation of the economy as consumers will be in constant distress because they are taken advantage of. Hence, the Commission is charged with the responsibility of ensuring that business players are acting in a manner that is consistent with the objectives of liberalisation.

“Specifically, the Commission is charged with the responsibility of overseeing the implementation of the Act and ensure that business players do not engage in anti-competitive and unfair trade practices,” she says.

According to Malonda, consumer protection is at the heart of the Commission and consumers should always contact the commission when they are faced with anti-competitive and unfair trading practices.

“Consumers should come and complain to us whenever they feel their rights have been violated. We are a case handling institution and invite any complaint which a person wants corrective action to be taken against any enterprise,” she says.

One of the Commission’s many mandates is to ensure that consumers are not exploited by producers or traders but are able to access products or services that satisfy their needs and that the exchange should take place under the best possible conditions.

According to Malonda, of particular interest is the objective to make sure that consumers should not be worse off than they were after transacting business, as was the case with Sankhulani.

“Warranty period for any product should not be less than six months that is what the law provides. The Act makes unfair trading an offence and included tendencies such as disclaimers in the supply of goods or services; refusing liability for goods that are faulty or defective; false representations and advertisement or labels; misleading conduct including price displays which at times do not include taxes or are in foreign currency; selling products which are harmful to one’s health such as expired goods, drinks or beverages or even at times finding alien products in food or beverages; unfair contracts particular when buying or selling of goods or services; and even promising to offer gifts or prizes and not supply them. These are just examples, but there are many case examples which in practice are unfair and unlawful,” she said.

Malonda adds that it is a challenge when people believe that the market still needs regulation for example price fixing. Some people actually condone it because they believe it is appropriate, yet it actually distorts the market by doing more harm than good.

“So we are currently engaging in advocacy efforts so that everyone should know the benefits that competition brings. It is also a challenge when the market is complacent and people just accept things the way they are even when they are wrong, so we are engaging the private sector and regulators so that they appreciate that we are there to ensure compliance with competition law, a service, which is beneficial to everyone,” she says.

Perhaps, if Sankhulani knew of the existence of the Commission, she would have rushed to report the violation and, perhaps, if the shop owners knew that refusal to accept defective goods and carry disclaimers on goods is an offence punishable by law, they would have helped her.

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