In October of 2017 the Competition and Consumer Protection Commission (CCPC) board of commissioners fined Zambia Sugar PLC the sum of K76,728,650 which is 5% of their annual turnover as at 2013 as reported on the CCPC website. This came about as a result of price discrimination and what they (CCPC) found to be unfair pricing under the CCPC act of 2010. Their website reveals that the decision was reached at the third Special Board of commissioners’ Meeting which was held in lusaka on 25th September 2017. The CCPC Board of Commissioner’s chairperson Mr Kelvin Fube Bwalya stated that the investigations from 2008 to 2012 which they had carried out had revealed that industrial and household sugar consumers alike were being exploited.
Now to break this down, its important to understand what the role of the CCPC is in this country. Their mission statement sums it up quite nicely. The CCPC Mission Statement is “To safeguard and promote a competitive business environment and enhance consumer welfare by prohibiting anti-competitive and unfair trading practices in Zambia”. To further simplify this its basically to make sure businesses behave competitively or in a manner that doesn’t take advantage of consumers and also to directly improve the consumers experiences with businesses. If there is a business that is conducting itself that is deemed to be unfair by the laws and acts of the country, they will have to deal with the CCPC
So going by this, these guys are not out on a witch hunt and in fact are looking out for the everyday consumer, that’s me and you. Now, this is not to say that some companies are actively out there trying to victimize consumers and take all their money. There regulations around certain issues such as price discrimination vary from place to place and are often changing to best suit all stakeholders involved.
To give you an example of what I mean, in the fascinating world of economic theory, there is little said on the legality of price discrimination. If anything, many companies use this as a way to get the maximum benefits for the products that they sell. Let’s break down what price discrimination is.
Price discrimination happens when firms sell the same goods to different groups of consumers are different prices. (Investopedia.com). Economic theory often categorizes it in the following way:
- 1st degree price discrimination- which is charging the maximum price the consumer is willing to pay. A good example of this is an auction. The price of the product depends on who is willing to pay the most for it and the person often bids until the maximum price they are willing to pay.
- 2nd Degree price discrimination- this is charging different prices depending on the quantity of god consumed. This ca be seen when you can get a wholesale price when you buy a lot of 1 good or get a discount when you buy a certain quantity.
- 3RD Degree price discrimination – this is charging a different price for the same good depending on the market segment. So, this is like when you get a special price for something because you are a student or a child or a senior citizen. You can also see it when you get a special price for being a member of a certain program like being a frequent flyer with a particular airline.
This kind of pricing seems fine and fair and has come to be accepted by many countries. The question then is why did the CCPC see need to intervene? Well one thing that I had overlooked when I first saw this news was that Zambia Sugar PLC is the biggest market producer with certain estimates showing they own possibly over 70% of the market share in Zambia. Basically, this indicates that they face very little competition. Again this is not to say that they take advantage of this, but competition is healthy because it makes us re-evaluate ourselves and our positions in any given situation. A lack of if could be detrimental to perspective. According to the CCPC site, the commission stepped in following complaints from industrial sugar users.
The CCPC Report show revealed that some companies that bought large quantities of sugar actually paid higher prices for their sugar than other companies within the same category. This can be likened to getting a student deal, but some students pay higher prices for the same good. The report showed that companies such as Trade kings, Zambia Breweries, California Beverages Limited among other industrial consumers who used sugar as a raw material had been discriminated against in this way.
The investigation also reveled that household consumers paid about 28% more that industrial sugar users. While this can be viewed as 3rd degree price discrimination as these are 2 different groups of people, MR Bwalya stated that “This implied that household consumers paid more per kg of sugar than industrial users. This conduct was also deemed unfair against household sugar users considering that there was no justification for the high price difference”
He concluded by saying “Based on these facts (facts found during the investigation), the Board decided to fine Zambia Sugar PLC five per cent of its annual turnover as of 2013 for having abused its dominant position by discriminating among industrial, export, domestic and household markets in contravention of section 16(1) as read together with 16(2)(c) and unfair pricing in contravention of section 16 (1) as read together with 16(2)(a)of the Competition and Consumer Protection Act no. 24 of 2010.”
It is very important to note however, that at this time, I have not been able to find a statement from Zambia sugar giving their reasons for this kind of pricing. There is usually more at play in a business than is visible to the public eye. The Acting Managing Director of Zambia Sugar stated that the company would be appealing to the Competition Tribunal. In a statement released in lusaka, she stated that “ the matter would only be finalized when the appeal process had been concluded.”