New law makes the Kenyan consumer king

Daily Nation, March 26, 2013

In Summary

Among other dictates, rule requires that all regulators include a rights agent in its board

The Central Bank of Kenya will be required to reconstitute its board before the expiry of the current members’ term to comply with a new law.

The Consumer Protection Act, 2012, which came into effect two weeks ago, provides that all regulators must appoint a representative of consumer rights bodies to their board of directors.

This requirement has been the subject of a running battle between the Consumer Federation of Kenya (Cofek) and the Communications Commission of Kenya, the regulatory authority for the communications industry in Kenya, with the federation suing to have the court compel the commission to appoint its representative to its board. It now has legal backing.

“There shall be consumer representation on all regulatory bodies and the respective appointing authorities shall have due regard to accredited consumer organisations and the Advisory Committee in making such appointments,” reads the Act.

The other organisations required to reconstitute their boards are the Energy Regulatory Commission (ERC), the Capital Markets Authority (CMA), the Communications Commission of Kenya (CCK), and the Insurance Regulatory Authority (IRA). They have been accused of ignoring consumers’ concerns in favour of pursuing business-friendly policies. Consumer representation is expected to change this.

But that is just one facet of a law that is designed to turn the doing of business in the country on its head; from advertising, how banks treat their customers, to mechanics’ duty in repairing motor vehicles. It seeks to end an era where consumers and their concerns were relegated to footnotes to making them the kings.

“There has been a definite vacuum in the regulation of consumer matters. This will remedy that,” said Prof Joseph Kieyah of the Kenya Institute of Public Policy Research and Analysis (KIPPRA).

The first beneficiaries, though, seem to be the mushrooming consumer rights groups which, by the publication of the gazette notice, were turned from hecklers of anti-consumer decisions made by the government to an integral part of national policy formulation and regulation.

“In the past, we have been left on the sidelines and often end up reacting to decisions instead of helping to formulate them. This will change,” said Cofek secretary general, Mr Stephen Mutoro.

Not a smooth ride

However, acquiring and keeping seats in the regulatory boards will by no means be a smooth ride. For one, consumer organisations in Kenya are a fragmented, poorly funded, and sometimes shadowy lot.

In a 2012 report titled The State of the Kenyan Consumer, the Consumer Unity & Trust Society (CUTS), noted that civil society groups and consumer organisations had limited capacity to carry out their mandate and often had little or no government cooperation and support.

“(There is) lack of long-term support from government departments for consumer organisations. (Another challenge is) uncooperative regulators and a lack of consumer support,” says the CUTS report.

Dissenting voices have also warned that the new Act may simply be used for profiteering even among the “legitimate” consumer rights associations.

“By proceeding to place ‘vetted’ associations at state regulatory bodies, the new legislation has been criticised on social media as being an avenue for job seekers wearing consumer protection clothes. But time will tell,” said ICT Consumers Association chairman, Mr Alex Gakuru.

While acknowledging these challenges, Mr Mutoro said the newly effected law makes explicit provisions for the regulation of consumer rights associations.

Only those organisations registered under the Societies Act for purposes of consumer protection will be allowed to nominate members to the nine-member Advisory Committee that is tasked with spearheading consumer-friendly policies.

The Advisory Committee has also been granted the power to monitor the development of consumer associations as well as create industry standards for the conduct of such bodies.

“We have seen people say that they are fighting for consumer rights but they have not always been legitimate. The Act offers this legitimacy,” said Mr Kieyah.

Even so, there is the inescapable fact that providing consumer lobbies platforms in regulatory bodies may in some cases create strange bedfellows. The associations have often collided with government regulators over fundamental issues and if they are unable to reconcile their differences, it could result in lags in the implementation and enforcement of government regulations.

Cofek, in particular, has expressed disdain over the manner in which the CCK has handled the matter of digital migration, even going to the courts to challenge the commission. Last week, Mr Mutoro publicly chided the ERC for increasing the price of fuel.

Once the members of the Advisory Committee are appointed and consumer rights representatives seconded to regulatory bodies, they will have the formidable task of bringing the rights of the customer into focus in a market where these rights have been consigned to the back burner for years.

Before the gazettement of the Act, the rights of Kenyan consumers were addressed in no less than nine pieces of legislations implemented by as many agencies.

Although not necessarily incompetent, these agencies were often unable to deliver their consumer protection mandate due to overlapping responsibilities and competing priorities.

Empowered to seek redress

“They have other priority objectives apart from consumer protection and the latter is often a secondary role, which faces implementation challenges,” notes CUTS.

The new law will, therefore, consolidate the breadth of consumer protection provisions from myriad sectors under one overarching regime.

Further, the new law provides Kenyan consumers with unprecedented protection and empowers them to seek redress.

In line with provisions made in the Constitution, consumers will now be free to pursue class action suits without first seeking the approval of the courts.

Class suits are those in which a group/class of people can bring a claim to a court against one or more parties. This is bound to be a game changer locally. As the ease of filing such suits increases, companies are likely to be wary of sparking the wrath of consumers and risking heavy fines in damages.

There have been fears that the tightening of these regulations could potentially harm Kenya’s business environment. Mr Kieyah, however, argues that the private sector is equally empowered and that the co-existence of robust lobbies on behalf of both businesses and consumers will create the ideal operating environment.

“The interests of consumers and businesses are antithetic to one another. In the process of both these forces pulling in opposite directions, we are likely to see more balanced government policies,” he said.

Go back to drawing board

Nevertheless, Kenyan businesses will have to go back to the drawing board on some of their strategies, especially in marketing, as a consequence of the new regulation. The Act elaborates on deceptive advertising and proposes fines of up to Sh10 million for some of these practices.

Commentators have, however, warned that the Act will not be a panacea for all that afflicts the Kenyan consumer. Mr Gakuru notes that as long as a culture of impunity when it comes to economic crimes persists, the Act will do little to change the current situation.

Further, although the law might be in place, Kenya’s consumer base remains unaware of its rights and might, therefore, need aggressive public education before it can start taking corporates to task.

“One hopes that the body charged with consumer protection under this Act does not turn out to be like the moribund Monopolies and Prices Commission of Kenya, occasionally popping up with sweet comments, but whose market and consumer protection effects were rarely felt,” said Mr Gakuru.

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