President Lazarus Chakwera assented to the Competition and Fair Trading Act on May 19 2024 and the minister gazetted on May 24 when the progressive law became operational.
It encourages competition in the economy by prohibiting anti-competitive trade practices, regulating monopolies and concentrations of economic power, protecting consumer welfare, strengthening the efficiency of production and distribution of goods and digital products and services.
Section 4 of the law establishes the Competition and Fair Trading Commission (CFTC), where different professionals regulate, control and prevent acts likely to affect competition and fair trading in the country.
Under the Act, the commission has the powers to investigate and determine whether any business enterprise is engaging in prohibited practices.
The commission can declare certain business practices to be abuses of dominant position and order enterprises to cease and desist from any conduct likely to lessen competition.
The new law allows CFTC to hand monetary penalty on offenders, which was a subject of appeal in the Airtel Malawi v CFTC court case.
When the commission fined Airtel K2.1 billion for breaching the Act, the mobile phone company took the matter to the High Court of Malawi which reversed the order since the previous Act never sanctioned a monetary penalty.
According to the new law, an enterprise breaching the Act will now be sanctioned 10 percent of its gross annual turnover and an individual will be fined five percent of gross income.
The factors the CFTC will take into consideration to determine the penalties include the nature, duration, gravity and extent of the infringement; the damage suffered by a person, an industry or the economy as a result of the infringement; the degree of cooperation by the party involved; and whether the offender is a repetitive offender.
The law empowers the High Court to enforce the commission’s orders.
Section 26 of the Act prohibits price fixing, including collusive tendering and bid rigging, market or customer allocation agreements, concerted refusals to supply goods, digital products or services. Vertical arrangement is also prohibited.
Enterprises are warned against abusing their dominant positions.
The Act has described an enterprise as being in a dominant position if-it has the actual capacity to control prices or other commercial conditions, actual capacity to eliminate or restrain competition in the market, has 40 percent or more of the shares in the market, a position in the market which enables it to operate in the market to a substantial extent independently of competitors, suppliers and buyers.
An enterprise with such features is deemed to be in a dominant position and the law prohibits it from abusing their positions.
However, an enterprise charged of abusing its dominant position can raise its own defences. Section 29 allows an enterprise to prove that its behaviour was exclusively directed at improving the production or distribution of goods, digital products or promoting technical or economic progress and that the consumers were allowed a fair share of the resulting benefit, or the effect or likely effect of its behaviour in the market is the result of its superior competitive performance.
An enterprise is not deemed to be in an abusing position if it tries to enforce any right existing by virtue of any copyright, patent etc.
Section 31 prohibits buyer power and empowers CFTC to monitor activities that may lead to buyer power. Conducts such as delays in payment of suppliers, unilateral termination of contracts or mere threats to terminate contracts, are examples of such conducts.
The Act is here to promote fair trade and competition among enterprises. nvac
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