By: Stewart Payne - Senior Associate at Herbert Smith Freehills

Competition and consumer regulators are increasingly leaning on their consumer protection mandate as an enforcement tool to address perceived abusive or exploitative market conduct by large corporations across sub-Saharan Africa.

Authorities in key jurisdictions on the continent – including Nigeria, Kenya, Zambia and Malawi – hold a dual competition and consumer protection mandate.  This means that they are tasked with enforcing both competition and consumer protection provisions under a single empowering legislation.  The same is true for the most prominent regional competition authority on the continent, the COMESA Competition Commission, which also has a consumer protection mandate under its empowering regulations.

In recent times, regulators with this dual mandate have increasingly turned to their consumer protection powers when acting against firms that are perceived to have engaged in conduct that is abusive or exploitative of consumers.  This is particularly the case for regulators pursuing firms that supply essential goods and services, where the impact of high prices or harsh trading terms is felt most keenly by consumers.

For example, the Malawian Competition and Fair Trading Commission is currently pursuing investigations against a range of firms that have increased prices for goods such as bread and fertiliser.  It alleges that these firms have engaged in excessive pricing and unconscionable conduct.  The authority has gone so far as to issue interim orders requiring firms not to increase prices further and to continue supplying goods into the market pending these investigations.  This despite the country facing significant macro-economic challenges, including high inflation and foreign currency shortages, which have driven up costs throughout the supply chain.

Excessive pricing is traditionally a competition law concept: the concern typically arises when firms that hold significant market power exploit customers by increasing prices to levels that are unreasonable compared to prices that ought to prevail in a competitive market (where customers would be able to switch to alternative suppliers).  Excessive pricing is therefore traditionally a structural issue arising from a lack of competition in a relevant market.  A variety of (complicated) legal and economic principles have been developed to test whether or not a price is excessive, including an assessment of the firm's costs, comparator prices and levels of profit in a competitive market, and structural characteristics of the market.

But perceived high prices on the continent are increasingly being prosecuted as a form of "unconscionable conduct" and other consumer law prohibitions on unfair, exploitative or excessive prices.  These concepts are much more nebulous and often invoke opaque notions of what price is regarded as morally acceptable.  It is generally difficult to identify clear legal standards from decisions on these issues.  They do not require that the regulator inquire into the structure of the market, nor do they necessarily engage the same level of rigor required of regulators when applying established competition law principles.

It is understandable that reliance on consumer protection provisions, rather than enforcement of traditional competition law prohibitions, may be seen as an attractive option for authorities in the short term.  The lower evidentiary burden can allow a regulator to achieve a "quick win" in the public interest.  In an election year, and when consumers are facing particularly tough economic circumstances, this may be a compelling proposition for any regulator and its officials.  And businesses may quickly find themselves facing judgment in the court of public opinion as a result.

Consumer protection laws are no doubt important and have a vital role to play in protecting the public against unfair treatment by corporations.  But enforcement of these laws must be appropriately seen as complementary to, rather than a substitute for, enforcement of competition laws.  Competition laws provide a tool for regulators to address important structural market issues, particularly in smaller, developing economies where there is often only scope for a few large players to sustain operations.  Authorities with a dual mandate should be cautious of abandoning efforts to address these more fundamental issues of market failure, which could benefit consumers over the longer term, in favour of instead addressing only the "symptoms" of such market failure through consumer law enforcement.

Experiences in more developed competition law jurisdictions – such as the European Union, or South Africa on the continent – show that establishing good legal precedent for competition law cases can be a long and difficult road.  Yet it is important for younger regimes to invest the time and resources required to prosecute appropriate test cases now in order to lay the necessary groundwork for effective competition law enforcement in the future.  This may require, and should receive, support from other more experienced regulators and international bodies.  The earlier this capacity is developed, the better – both for the authority and for businesses that operate in their jurisdiction.  Developing a body of competition law jurisprudence is essential to guide future conduct by firms and enforcement by regulators across Africa.