Achieving Consumer Welfare through Competition Reforms in

Zambia

George Lipimile

COMESA

Introduction

• Long absence of a national consumer policy.

• To date no comprehensive national competition law.

• Consumer rules scattered in various legislations.

• The Councils were the only bodies dealing with consumers through the Public Health Act.

Economic Reforms

• Realization of the vulnerable position of the consumer mostly against enterprise behaviour.

• Emerging of the consumer voice through lobbyists and consumer groups.

• Revision and Changes in trade related laws which addressed the consumer concerns.

Economic Reforms

• Emerging of consumer desks – Zambia Competition and Consumer

Protection Agency,ZICTA, ERB, ZESCO, almost all

regulatory bodies,Rejuvenated MCTI,More pressure from consumers on

government.

Regional Level

• COMESA Competition RegulationsTake precedent over national lawsMore broader coverage than most national

laws: False or misleading representation Unconscionable conduct in consumer

transaction Unconscionable conduct in business

transactions

Regional Level

• Warning notice to the public,

• Product safety standards and unsafe goods,

• Product information standards,

• Compulsory Product recall,

• Power of Commission to declare product safety or information standards,

• Liability in respect of unsuitable goods,

Regional Level

Liability for defective goods causing injury or loss,

Unidentified manufacture,

The economics of competition and consumer policy

• The underlying goals of competition and consumer policy are to improve the functioning of markets, thereby increasing economic performance while enhancing consumer welfare.

• The consumer protection policy and the competition policy are largely interdependent instruments of economic policy,both aimed at serving a common purpose of enhancing the efficiency with which markets work.

Competition Policy vs. Consumer Policy

• Competition Policy: Deals with the relations of economic operators with each other (eg: cartels, mergers etc).

• Consumer Policy: deals with the behaviour of economic operators in their direct contact with consumers.

• Despite the differences in their field of operation and types of remedies, it is essential for competition and consumer policy to operate in a complementary and mutually enhancing way, in the interest of the Zambia consumers and its international competitiveness.

Competition Policy

• Stimulates innovation,• Encourages companies to provide to consumer

products and services consumers want and pushes down prices.

• Rewards firms offering lower prices, better quality, new products and greater choice.

• Open, competitive markets boost economic performance by rewarding firms which are efficient and innovative. Such markets are key to increasing productivity and growth.

Consumer Policy

• Well informed consumers who are in a position to evaluate and compare products and reach well reasoned purchasing decision help to ensure that the benefits of open markets are fully exploited.

• Through their choices, such consumers become important instruments for driving innovation and efficiency.

• Consumers do not only benefit from competition, they drive it.

• Confident, informed and empowered consumers are the motor of economic change as their choice drives innovation and efficiency.

Consumer Constraints

• The benefits of competition are greatest when well-informed consumers are able to evaluate and compare products in contested transparent markets.

• A policy objective is therefore to ensure consumers have access to relevant information on price and quality.

Consumer Constraints

• However, there are limits on the ability of consumers to carry out thorough evaluations:

– There are instances where information needed to make proper evaluation is simply not available.

– Consumers do not have time or interest to undertake comprehensive search and evaluation of all alternatives for each of their purchases.

– Information can be hard to obtain, and processing information can be complicated and time-consuming.

– It is quite rational for a consumer to cease searching when the cost of searching outweigh the benefits.

Governments’ Role

• Competition policy: Governments seek to achieve competitive markets on the supply side through ensuring that:– There are no unnecessary barriers to entry for

firms.– Market concentration does not lead to

economic loss or unreasonable transfers from consumers to producers; and

– There are effective legal sanctions against consumer violations.

Governments’ Role

• Consumer Policy: Governments use consumer policy to protect consumers by providing them with:– Legal rights that enable them to defend

themselves against unfair commercial practices,

– The ability to make welfare enhancing decisions by encouraging or mandating the disclosure of information that would facilitate well informed decision making.

ConclusionsIn carrying out the task of examining and regulating markets, it is essential to acknowledge and engage in the interface between competition and consumer policy and effectively operate in a joint-up way.

• For consumer agencies: an action that will enhance consumer protection, but reduce competition, should raise a ‘’red flag’’ and a good look at alternatives.

• For competition agencies: an action that enhances competition but which also has some negative outcomes for consumers should also raise a ’’red flag ’’.

• The consumer empowerment questions are crucial.

THANK YOU

lipimile@zamtel.zm