Wednesday, February 21, 2024
In DepthWeak trade competition, consumer protection frameworks stifle business, imperil public

Weak trade competition, consumer protection frameworks stifle business, imperil public

Until a few months ago, business was going as usual for Sebeta Agro Industry Plc, producer and distributor of the ‘Mama’ milk brand for three decades.

A household name, Mama is one of the oldest consumer brands still available on shelves in Addis Ababa and its surroundings, but Sebeta Agro Industry has recently run into problems that have damaged its image and hurt its business.

Tips from loyal customers and information gathered by its data personnel informed the company of the widespread sale of low-quality and low-quantity milk products using Mama’s trademark packaging.

“Even the phone numbers and the contents of the packages are identical [to the original],” said Mulugeta Yimer, CEO of Sebeta Agro Industry. “We could only confirm whether the product was genuine by checking the quality of the milk inside.”

If the producer of Mama had trouble telling the difference between the counterfeit packaged milk and its own product, it would not be a stretch to say that it would have been impossible for consumers to do the same.

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The sabotage forced the heads of Sebeta Agro Industry to rework their packaging, and the new and improved version of their Mama milk was made public on January 13, 2024.

The color of the packaging has changed from the familiar green to a new bluish hue, and the new packages all feature barcodes.

Mulugeta and his team are hopeful the rework can help turn things around. He disclosed a 14 percent increase in sales volume since the branding change.

Still, the company is far from its glory days, when it would sell as much as 150,000 liters of milk a day. A damaged brand image, production cost and supply issues, and the country’s general economic malaise have shrunk its output to 60,000 liters a day.

Though problems with production inputs plague virtually every industry in Ethiopia, Sebeta Agro Industry might have at least been able to curb losses from the duplicate scam with the help of the government.

However, the CEO says the company did not approach either the Ministry of Trade or the Addis Ababa Trade Bureau, despite the counterfeit products being in the market for months.

Muluget said he did not have much confidence in the authorities’ regulatory capacity.

“We didn’t take the case anywhere,” he said. “Even if we had, we couldn’t have been sure it would have brought the change we needed. What we could do was instead change the branding and [introduce] barcodes.” 

A few years ago, Sebeta Agro Industry would have been able to seek help from the Trade Competition and Consumer Protection Authority. But the Authority has since been dissolved, and its responsibilities scattered among various government offices.

During the executive reshuffle in October 2021, the former Authority’s consumer protection and merger and acquisition responsibilities were embedded within the Ministry of Trade and Regional Integration. A judicial bench within the Authority was also transferred to the Arada First Instance Court under the watch of Justice Ministry.

Ermias Tesfaye is a senior expert at the Trade Ministry in charge of consumer protection affairs. His office is in charge of taking administrative measures against illicit trade activities, and forwarding criminal issues to the Ministry of Justice.

The Consumer Protection Desk has overseen a few cases, some related to trademarks, since integration into the Trade Ministry. The Desk penalized a company 17 million birr last year for breaching anti-competition laws.

However, the Desk sees a smaller number of cases than the Authority used to, according to Ermias.

“The main task at the Authority was in awareness creation and in enforcement line departments,” he said. “Except the court, most activities are now under the Trade Ministry, but I doubt the public is aware.”

The case flow is shrinking at the Ministry, Ermias revealed. He suspects a decline in tip-offs is caused by a lack of awareness on the part of the public that the Desk is under the Ministry.

“We used to work on up to 70 cases a year. But this year, we’ve worked on around 11 so far, which ended in arbitration and settlements valued at 381,000 birr,” he said. “There are now seven pending cases in our office, barring those in court.”

Erimas observes the establishment of a consumer protection desk under the Addis Ababa Trade Bureau is also contributing to the fall in cases deal with by his office. The Authority used to handle cases in the Addis Ababa jurisdiction as well.

Ermias tells of his experience in Kenya, training for two months with the Competition Authority of Kenya (CAK). He notes the large size of CAK, and how effective it is at enforcing trade laws.

Weak trade competition, consumer protection frameworks stifle business, imperil public | The Reporter | #1 Latest Ethiopian News Today

Last month, CAK fined Carrefour, the French multinational retailer, a record 1.1 billion Kenyan shillings (USD 7.1 million) for abusing its buying power. A few months prior, CAK sanctioned a cartel in the Kenyan steel industry, laying a fine on nine manufacturers close to 340 million shillings (USD 2.2 million).

The CAK website offers clear and concise information on consumer protection, trade laws, and mergers and acquisitions in Kenya.

“If we dream of more foreign investment in the country, we have to make sure that there is this kind of capable institute working on competition,” Ermias said.

It is a view shared by professionals such as Biruh Gage, a trade policy expert with over a decade of experience including as a judge at the bench of the former Trade Competition and Consumers Protection Authority.

He stresses the need for an independent body to oversee the market, especially for a country that is looking to build its market economy and attract investments. It is particularly more pressing in light of Ethiopia’s renewed efforts for World Trade Organization (WTO) accession.

Biruh backs the idea of an institution that can take full custody of tasks currently distributed among offices in the Trade and Justice ministries, among others.

“They aren’t the custodians,” he said. “I don’t see much being done in terms of advocacy, awareness creation, negotiation and arbitration. There should be an institute taking the full responsibility to work on these. This was part of my previous job so I follow up, but I am not completely sure if they are working on it.”

Biruh observes that independence is a crucial aspect of any institution for trade protection. He recalls the director, deputy-director, as well as judges, at the former Authority were all assigned by the Prime Minister, giving them a sense of freedom in decision-making. 

Million Kibret is a veteran financial expert and managing partner at BDO Ethiopia. He observes embedding the body in charge of trade competition within the Trade Ministry robs the issue of the attention it deserves.

Capitalistic economies require strong consumer protection authorities, believes Million.

“If the countries allow the market to run independently, the government must find a way to protect consumers,” he said.

He sees a lack of adequate planning and execution, as well as issues with awareness on the side of the government, consumers, and traders, are negatively affecting the market.

Million mentioned the troubled cement distribution network as an example, saying the authorities often “engage in campaign-like activities” when it comes to trade and consumer protection.

A recent investigation by The Reporter revealed that one of the country’s oldest breweries, Meta Abo, was acquired by BGI Ethiopia for a total of 64 birr.

Although BGI and Diageo, who sold the brewery, made the deal public way back in January 2022, details of the transaction were kept sealed until recently.

Diageo, a beverage multinational headquartered in London, bought Meta Abo from the Ethiopian government over a decade ago for a sum of around USD 225 million. It sold more than 11.5 million shares in Meta Abo to BGI Ethiopia for a total of one euro two years ago.

Deep tax debts are reportedly behind the tiny buying price, and while the numbers raise eyebrows, the Trade Ministry has approved the acquisition.

This brings the total number of breweries operating in Ethiopia down to six. Data indicate three breweries – BGI, Heineken, and Habesha – control more than 57 percent of market share, with BGI accounting for 31.8 percent.

Million argues that adequate information on all merger and acquisition cases must be made public.

“The public has the full right to be informed of such mergers as it may entail some public interest. The brand is a well-known one,” he said. “The parties merging don’t have the liberty to choose what to include and what not to include in the information.”

Million wants to see legislation that would clarify what details of a trade deal must be disclosed to the public, and which would be kept confidential.

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Video from Enat Bank Youtube Channel.

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