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Unfair And Restrictive Trade Practices During And After The Natural Disasters

Unfair And Restrictive Trade Practices During And After The Natural Disasters
Bobby Maharaj
February 29
14:26 2016

Bobby Maharaj is the chief executive of the Fiji Commerce Commission. This is a regular column from the Commission in the Fiji Sun.

 

Fiji Commerce Commission (“FCC”) is an independent government statutory body established under Section 7 of the Commerce Commission Decree 2010. This week the Commission is covering some very pertinent issues relating to unfair and restrictive trade practices which usually surfaces during and after the natural disasters.

Since Fiji has just experienced the natural disaster in the form of TC Winston, it is essential that the traders and consumers are familiar with certain conduct that may result in breaches under the Commerce Commission Decree 2010 (“CCD 2010”).

 

Price Gouging

Price gouging refers to the market conduct where a traders has spiked the prices of goods, services or commodities to a level much higher that is considered reasonable or fair, and is considered exploitative, potentially to an unethical and illegal extent.

Usually this event occurs after a demand or supply shock such as increasing the prices of basic food items, medicine, hardware items, clothes and  other items such as candles, lamps, tarpaulins, tents, etc after a natural disasters or any civil emergencies .

However, it has also been noted that at times the traders attempt to raise prices artificially even without the demand or supply shocks.

More typically, “price gouging” claims involve three factors:

Price deemed unfairly high;

An emergency or difficult situation, and;

A product or service useful in responding to the emergency.

Price Gouging is also sometimes used to refer to practices of a coercive monopoly which raises prices above the market rate that would otherwise prevail in a competitive environment.

Alternatively, it may refer to suppliers’ benefiting to excess from a short-term change in the demand curve.

In case of countries not having a specific law on anti-gouging, such conduct is combined with anti-hoarding measures or other forms of unfair and/or restrictive trade practices.

In Fiji cases of price gouging will be investigated under Section 66 on Abuse of Market Power, Section 76 on Unconscionable Conduct, Section 87 F on Adulteration and Section 87 G on Hoarding or any other relevant sections on a case by case basis.

 

Unconscionable Conduct

Unconscionable conduct as contained under Section 76 of CCD2010 is generally understood to mean conduct which is so harsh or oppressive that it goes against good conscience.

 

The Common factors included under Section 76 of CC2010 are:

The relative bargaining strength of the parties;

Whether any conditions were imposed on the weaker party that were not reasonably necessary to protect the legitimate interests of the stronger party;

The use of undue influence, pressure or unfair tactics by the stronger party;

The extent to which the parties acted in good faith.

 

During the natural disasters or a period of civil emergencies if merchants, wholesalers or retailers sell or offer to sell any essential consumer goods or services for an amount that is unconscionably excessive during a declared abnormal disruption of the market, the conduct is deemed to be Unconscionable under Section 76 of CCD2010 and will be investigated by the Commission. This is to ensure that the necessities are priced out of reach for many people.

 

Fijian traders must note that currently a lot of the affected Fijian’s are struggling to acquire the necessities and the conduct of price gouging will result in investigations and prosecutions under CCD2010.

 

False and Misleading Representations

False and Misleading Representations are covered under Section 77 of CCD2010 and restrict business conduct of making statements which are incorrect or likely to create a false impression.

 

Some of the conducts that may amount to misleading and false representations during the periods of natural disasters or civil emergencies are:

 

False or misleading representation by an electrician that they are licensed , when they do not have a licence;

False representation by individuals or entities that they or the business is/ are a licensed/registered construction contractor/entity when they are not;

Claims by traders that the freezer goods where not affected during the power outrages when they were. Such representations can also be made by leaving these goods at the normal place of trade without notifying the customers that there are items affected by the power outrage and is not for sale.

Claims by traders that the goods are new when the same has been damaged or affected by the cyclone or flood;

Claims by traders that the goods have a warranty when they do not have;

Claims about the availability of repair facilities or spare parts and they do not have;

Claims about the quality, style, model or history of a product or service which they do not have;

The sponsorship, performance characteristics, accessories, benefits or use of products and services which they do not have ; and;

The need for the goods or services. For example a hardware company wrongly advising a customer on the need for a particular type of timber which is not needed by a customers;

A trader advertises that a product’s price   ‘was’ $300 and is ‘now’ $150 when the store never sold the item for $300.00.  So keep an eye on the “was” and “now” prices for the items placed on special as a form of benefit to customers.

False and misleading representation is an offence under Section 77 of CC2010.

 

Adulteration

Adulteration is to (illegally) add impure or un-allowed ingredients to a product or to substitute a cheaper ingredient for a more expensive one without proper labelling.

 

Under Section 87F of CCD 2010 goods are deemed to be adulterated:

If any valuable constituent has been in whole or in part omitted or removed from them;

If a substance has been substituted wholly or in part for another substance;

If damage or inferiority has been concealed in any way; or

If any substance has been added to the goods or mixed or packed with the goods so as to increase their bulk or weight reduce their quality or strength or make them appear better or of greater value than they are.

Some of the conducts that may amount to adulteration during the periods of natural disasters or civil emergencies are:

Damaged or inferiority of the goods has been concealed. Example damaged water tanks have been repaired and this fact not advised to the consumer and he is made to believe that he is buying a new tank.

Adding less or inferior quality raw  materials for the production  of blocks and beams etc;

Adding ingredients to the bread to make it look bigger , but not meeting required weights;

Reduce the quality or strength of hardware items such as roofing iron, blocks, wires,  timber, paints, etc;

Flood/cyclone  damaged  goods concealed and sold.

 

Hoarding

Hoarding refers to the conduct when a person refuses to sell, destroys the goods or services which tends to raise the cost of similar goods or services in near future.

That is either:

Intentionally damaging the stock to create an artificial  shortage to inflate prices;

Intentionally holding back stock to create an artificial shortage to increase prices. Example intentionally holding back the supply of timber, roofing iron to create a shortage and increase prices;

Intentionally hold back stock to maintain the market price;

Refusing to sell the goods or make them available for sale, if the refusal raises, or tends to rise or maintains the market price of the goods.

Either of the conduct above done in order to charge a price higher than the price it is normally sold at a time convenient to the person or immediately before the higher price is fixed.

During the period of natural disasters, hoarding may become common for items such as food items, hardware items, medicinal items, clothes and other items such as candles, lamps, tarpaulins, tents, etc.

This may be done with the intention to restrict supply, create an artifice shortage and increase the prices. Such conduct is restricted under section 87 G of CCD2010.

 

Key Facts:

For period 22-25  February 2016 , the Commission:

Has Spot Fined three hardware companies $3000.00 each for increasing prices of hardware items;

Has Spot fined on grocery seller $3000.00 for increasing prices of grocery items;

Is investigating a number of hardware and supermarkets for suspected cases price gouging, hoarding and unconscionable conduct in relation to their conduct post TC Winston.

 

Advice to Traders/Consumers:

  • Do not sell/buy damaged freezer goods;
  • Do to sell/buy damaged goods not fit for human  consumption  or usage;
  • Any sale of damaged goods to the members of the public at diminished prices , the condition of the goods and any other relevant information that is /will affect the decision of a consumer should be fully discussed to the consumer in writing;
  • Do not engage the services of an entity that is not licensed e.g. for electrical or construction work ;
  • Traders should not limit supply to the reasonable demands of a consumers without a reasonable cause;
  • Do not hoard goods and inflate prices;
  • Do not engage in price gouging; and
  • Report any suspected cases of price gouging, adulteration or hoarding to the Commission.

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