Competition enforcement and consumer protection in a digital economy

Competition Agencies the world over face similar challenges; the regulated often accuse them of being quick to punish but slow to sensitize them about the relevant laws in order to enhance compliance. On the other hand, many consumers (the ultimate beneficiaries of regulation) are unaware of their wide-ranging rights in a commercial transaction or the remedies available to them when their rights are infringed upon.

Indeed, for markets to operate efficiently, driven singularly by forces of supply and demand, all stakeholders (producers and consumers) need a good understanding of Competition Law and the benefits accruing from its effective application.

It is with this need in mind that the Global Competition Community set aside December 5th as the World Competition Day (WCD).

The key objective of this Annual event is to spur discussions -- and disseminate thematic information -- on competition and consumer protection and gain stakeholder support on the need and benefit of a fair market.

The theme for the 2018 event is “Digital Economy, Innovation and Competition.” This theme resonates with Kenya since, over the past decade, the country has experienced unprecedented expansion of its digital economy.

 Internet penetration in Kenya is at its highest ever. Official statistics indicate that there were 41.1 million data users in the country as at June 2018 which is a significant increase from the 12.4 million subscribers as at June 2013.

This has precipitated innovation on a massive scale as entrepreneurs look to cash in on the opportunities presented by this connectivity.

With just a few taps on a mobile phone, you can hail a taxi, buy clothes, book holidaying space in Diani, pay school fees, order a meal, or transfer funds between bank accounts.

Innovation increases efficiency, spurs competition, lowers cost of doing business, encourages expansion to new markets and, most importantly, satisfies customers’ evolving needs through production of better quality goods and services.

However, it also exposes consumers to new challenges including data breaches and identity theft. Some unscrupulous businesspeople don’t disclose critical information like product quality or charges for a service. Others are digital conmen.

It is critical that consumers understand their rights.

Regulators, like the Competition Authority of Kenya (CAK), are forced to walk a tightrope of ensuring that markets function fairly and competitively, that consumers are protected, but all the while being pro-innovation.

For instance, the country has over the past two years witnessed a proliferation of app-based money lenders who readily disburse funds minutes after users sign up to their services.

A study conducted by the FSD Kenya has revealed that about 6.5 million Kenyans have borrowed money through these platforms, sometimes at high rates which lock consumers in a cycle of debt.

While these applications have opened up Kenya’s financial space, they should not be embraced to the detriment of consumers who often times are unaware of the terms and conditions of the loans. A consumer can only be deemed to have made an informed purchasing choice if they had access to all relevant information prior to the transaction.

An example of the Authority’s intervention to remedy such occurrences in the Kenyan digital financial space happened when it ordered all mobile-based financial service providers to disclose their charges prior to customers completing transactions.

Today, when sending money through a mobile money app, or paying for electricity tokens, customers are notified of the expected cost of the transaction in advance, giving them a chance to decide whether to proceed or not.

Additionally, the Authority has been instrumental in the growth of app-based taxi services in the country. The Authority last year investigated allegations that an international e-hailing taxi company was undercutting its competitors.

The Authority determined there was ease of entry and exit in this industry as players could move from one platform to another as well as from traditional taxis to app-based cab services. As a result, customers are enjoying competitive prices.

These interventions exemplify how regulation can promote innovation (and its raft of benefits) while ensuring that innovators do not trample on the rights of the very consumers they serve.

Stellah Onyancha, Director, Competition and Consumer Protection at the Competition Authority of Kenya (CAK).

info@cak.go.ke