Blow for telcos as court bars setting expiry of reward schemes

Peter Ndegwa, CEO Safaricom PLC speaking during an event held at Safaricom Headquarters in Nairobi. [File, Standard]

Companies will have to rethink how they reward their customers for loyalty or sink in billions gifted over time.

This is after the High Court declared that companies do not own rewards once passed to customers and cannot expire.

At the same time, Justice Chacha Mwita declared that companies have no say on when and how customers can redeem the rewards they accumulate. He said that companies cannot change the rules of the game midstream nor can they move the goalposts whenever a customer joins the programme.

 The Judge was determining a case filed by Nakuru-based surgeon Magare Gikenyi against Safaricom, the Communication Authority of Kenya (CA), and the Attorney General regarding Bonga Points awarded to customers after spending airtime purchased from the telco.

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“Once Bonga Points are awarded, the points become the customers’ property and the first respondent ceases to have any rights over them. The customers as consumers are entitled to the rights and privileges accruing therefrom. The first respondent has no right to change or introduce new terms on the points already earned, including an expiry date,” he said.

“The representation by the first respondent to customers that they would earn Bonga Points if they joined the programme conferred on the consumers a legitimate expectation, which binds the first respondent and from which it cannot turn away to the disadvantage of the consumers,” he continued.

On October 28, 2022, Safaricom announced that customers who had not redeemed their Bonga Points for more than three years would lose them as they would expire. By the time it was announcing the changes, the unclaimed rewards had hit the Sh4.5 billion mark.

Nevertheless, Dr Gikenyi moved to court arguing that it did not involve its customers while making the decision. He also argued that the company did not also inform them that the points would expire at some point before they enrolled for the same.

The surgeon asserted that subscribers who are loyal to the company and accumulated Bonga Points acquired an economic interest.  According to him, they could then redeem their Bonga Points as and when they deemed it necessary without being forced to redeem the points immediately, or they risked losing the points. He said that the notice was discriminatory as there were persons who were visually impaired who could not read it.

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Gikenyi accused CA of failing to protect customers. He said it had failed to intervene regarding the announcement and, hence, was complacent.

In its response, Safaricom argued that the court had no powers to entertain the case. It asserted that Gikenyi had not exhausted all the dispute resolution mechanisms. It also stated that that in the spirit of innovation and customer appreciation, it resolved to award its customers loyalty points (Bonga Points) as part of customer loyalty programme available to all pre-pay and post-pay subscribers.

According to the mobile services provider, Bonga Points would be redeemed for rewards, such as minutes of talk time, data bundles, MMS and SMS bundles, and goods and services redeemable at select retail outlets.

It also argued that customers participating in the scheme consented to and expressly accepted to be bound by the terms and conditions of the Bonga Loyalty Programme and Non-Merchandise Bonga Redemption service, which might be updated occasionally. It stated that the low usage of the points prompted it to explore ways of ensuring they are used, arguing that it acted within its legal and contractual rights.

 Retailers, including supermarkets and airlines majorly run the consumer reward programme.