Contents
Part I
COMPETITION AND CONSUMER PROTECTION
COMMISSION
1.
Short title and Commencement
2.
Definitions
3.
Basis for issuing fines
Part II
GUIDELINES FOR ISSUANCE OF FINES:
OUTLINING PRINCIPLES AND PRACTICES FOR ISSUANCE
OF FINES UNDER THE COMPETITION AND CONSUMER
PROTECTION ACT, NO. 24 OF 2010
2014
General Provisions
Offences and Penalties
4.
Offences punishable by fines under the Act
5.
Determining the amount of penalty
6.
Calculation of penalty
7.
Aggravating and Mitigating factors
8.
Procedure in imposing a financial penalty and date of payment
COMPETITION AND CONSUMER PROTECTION ACT 2010: GUIDELINES FOR ISSUANCE OF FINES
POLICY OBJECTIVE
The policy objective of these guidelines on the issuance of fines is to;
a. To impose fines which reflect the seriousness of the violation
b. To ensure that fines deter future behavior or others from
contravening the Act; particularly part III, IV, VII and VIII and
ensure compliance with the law.
c. To raise awareness of the law.
PREAMBLE
This Guideline on fines is hereby established to set forth the manner in
which fines to be issued by the Commission will be determined by the
Commission.
These guidelines are not a substitute for the Act and the regulations.
They may be revised from time to time, should need arise. The
examples in these guidelines are for illustrative purposes only and
should not be taken as exhaustive. In applying these guidelines, the facts
and circumstances of each case will be considered. Persons in doubt
about how they and their commercial activities may be affected by the
Act may wish to seek legal advice.
Purpose
These Guidelines are issued subject to the Competition and Consumer
Protection Commission Act, No. 24 of 2010 (the Act) and the
Competition and Consumer Protection (General) Regulation no. 97 of
2011 (the Regulations) made there under and shall apply to the extent
that they are not inconsistent with both as well as any other written law.
The Competition and Consumer Protection Commission (the
Commission) in accordance with Section 84 of the Act is mandated to
issue Guidelines with respect to the effective implementation of
provisions of the Act. Specifically, Section 84 (1) of the Act states that-
PART I
GENERAL
1.
Short Title
Competition &
& commencement
(1)
In the exercise of its functions under this Act,
the Commission may make such guidelines as are
necessary for the better carrying out of the provisions
of this Act.
2.
Definition
These Guidelines may be cited as the
Consumer Protection Commission
Guideline on Issuance of Fines 2014
and shall come into force on the date of
their publication pursuant to section
84(2) of the Competition and
Consumer Protection Act, No. 24 of
2010 (‘the Act’).
Definitions
For purposes of These Guidelines, any
word or phrase to which a meaning has
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COMPETITION AND CONSUMER PROTECTION ACT 2010: GUIDELINES FOR ISSUANCE OF FINES
been assigned in the Act shall have such
meaning.
4.
Offences punishable by fines under the
Act
(i)
3.
Basis for Issuing Fines
(i)
The Commission is empowered by the
Act to remedy any conduct that violates
the Act as determined in its investigations
and in some cases to impose financial
penalties on enterprises or individuals in
violation of the Act.
(ii)
Sanctions or penalties are actions taken to
address a violation of the Act. This
document describes the principles the
Commission will follow in taking both
these different forms of action with
regards to issuance of fines.
(iii)
A fine payable under the Act is deemed
to be a debt due to the state and shall be
summarily receivable as a civil debt.
(iv)
The aim of these Guidelines are to
provide for consistency, fairness and
certainty in the issuance of fines.
(ii)
All offences punishable under the Act
including Section 9, section 10, section
16, section 21, section 37, section 46,
section 47, section 48, Section 49,
Section 50, Section 51, Section 52,
Section 55, all provide for offences
punishable by financial penalties to be
imposed by the Commission without
recourse to any court or arbiter unless on
appeal.
With regard to Cartel activities, the
fines to be imposed will be the highest
due to the seriousness of the conduct,
preceding such fines may be conviction
for criminal culpability by a Court of
Competent jurisdiction. Involvement of
an association of enterprises (e.g. a
trade or professional association) in
violation of section 9 and 10 of the Act
may result in financial penalties being
imposed on such Association, its
members or both. Where the violation
by an Association of enterprises relates
to the activities of its members, the
penalty shall not exceed 10 percent of
the sum of the turnover of the business
of each member of the Association of
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COMPETITION AND CONSUMER PROTECTION ACT 2010: GUIDELINES FOR ISSUANCE OF FINES
enterprises in Zambia, active on the
market affected by the violation.
5.
potential offenders and persons who
might be considering activities contrary
to these sections’ prohibitions. The
assessment of an appropriate penalty to
be imposed for all types of violations will
depend on the facts of each case.
Determining the amount of penalty
(i)
(ii)
The Act empowers the Commission to
impose administrative penalties including
fines up to a maximum of ten per cent of
turnover for specific violations.
(vi)
Turnover will be calculated from the
latest audited accounts or the turnover of
its year in which the violation took place.
Where there are no audited accounts
available, management’s accounts may
be utilised.
(iii)
Where management accounts are used,
the turnover will be adjusted by an
amount not exceeding five (5) per cent
before imposition of the fine.
(iv)
The Commission as a matter of
principle will impose higher fines on
violations of section 9(cartels), Section
10, section 50 and section 52 (public
policy). The violations of other sections
will depend on the prevalence and
negative impact the conduct has on
society.
(vii)
(v)
This is aimed at deterring not only the
infringing enterprises but also other
A financial penalty imposed by the
Commission under the Act will be
calculated taking into consideration the
following:
(a)
the turnover of the enterprise in
Zambia
in
the
last
business/financial year
(b)
Adjustments to reflect other
relevant
factors
such
as
aggravating or mitigating factors
(an upward adjustment for
aggravating factors and a
downward
adjustment
for
mitigating factors)
(c)
A maximum of 10% of the
turnover of the enterprise in
Zambia
in
the
last
business/financial year
Note that the Commission’s leniency
policy provides substantial reductions
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COMPETITION AND CONSUMER PROTECTION ACT 2010: GUIDELINES FOR ISSUANCE OF FINES
in, or complete immunity from,
financial penalties, for enterprises
coming forward with information about
violations related to restrictive
agreements. Details are set out in the
Commission’s Leniency program.
6.
the annual Zambian turnover of each of
the parties.
(iii)
By its clear prohibition of restrictive
agreements and unfair trading, and the
penalty regime in place, the Act
establishes the principle that violations
of the Act are costly to business. A fine
should not be seen merely as part of the
normal costs and risks of doing
business; it should be punitive in
nature. Consequently, the Commission
will normally expect to set a fine at a
level well above any assessment of
damage to customers, or in the case of
collusive agreements, a level above the
excess profits made by the parties to
the collusive agreement.
(iv)
The starting point of each financial
penalty will be the base to be
determined by the gravity of the
offence (which is represented by “B”).
Thereafter, each repeat offence will
carry an additional punitive percentage
of 0.5%. The formula for calculating
the penalty is therefore as follows:
Calculation of penalty
(i)
(ii)
In general, the Commission regards
violations of all Sections of the Act as
serious, however violations of Section 9,
Section 10, Section 50 and Section 52 are
particularly the most serious violations of
the Act. The greater the damage to
customers of the colluding enterprises,
resulting from the increase in price over
levels that would otherwise have
obtained, the larger the penalty to be
imposed by the Commission.
The Commission starts by considering
the scale of the individual enterprise’s
contravention, however, with respect to
mergers, the market coverage of the
enterprises to be merged is not relevant to
the various failures listed in section 37 of
the Act, which are failures of an
enterprise to submit to the relevant
procedures. The Commission considers
that the only reasonable scaling factor is
Bi + 0.005(n-1)
(v)
In the case of unfair trading practices, it
is noted that the majority of offences are
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COMPETITION AND CONSUMER PROTECTION ACT 2010: GUIDELINES FOR ISSUANCE OF FINES
carried out by MSMEs. While it is the
objective of the financial penalty to
punish and deter offenders it is noted that
the use of a baseline percentage would
mean that while one enterprise would be
fined a small amount another would only
be fined a larger amount for the same
offence. This may lead to the failure of
the enterprises especially where the
gravity of harm is minimal i.e. such as in
the case of display of disclaimers under
Section 48 of the Act. The baseline
penalties shall vary depending on the
gravity of the offence and the total fine
applicable shall be capped for specific
offences based on the turnover of
enterprises. Table 2 below illustrates how
fines for offences provided for under Part
VII of the Act will be determined.
Table 2: Determination of Fines for offences under
Part VII of the Act
Offence
Unfair
practice
Baseline Fine
trading
0.5%
turnover
Applicable Cap
of
False or misleading
representation

K1,000
turnover
K10,000

K3,000
for
turnover
above
K10,000 up to
K100,000

K10,000
for
turnover
above
K100,000 up to
K500,000

K30,000
for
turnover
above
K500,000 up to
K1m

A
cap
of
K50,000.00
for
turnover in excess
of K1m
Price Display
Unfair
Term
Display
Disclaimer
Contract
of
Re-introduction of
0.1%
turnover
of
1% of turnover
for
below
K20,000
No cap
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COMPETITION AND CONSUMER PROTECTION ACT 2010: GUIDELINES FOR ISSUANCE OF FINES
ensuring the
violation;
recalled product on
the market
(vi)
7.
(i)
In assessing the amount of financial
penalty to be imposed, the Commission
will consider the following aggravating
and mitigating factors.
(ii)
the
repeated violation (i.e. having previously
violated the same provision of the Act ) by the
same enterprise or other enterprise in the same
group in Zambia
(e)
Prevalence of the alleged offence, i.e. whether
the conduct is widespread and the application
of a sanction is likely to have a wide deterrent
effect;
(f)
Whether the alleged offender has demonstrated
resistance by being obstructive or defiant
towards the Commission ;
(g)
The number of years the offender has been
engaged in the prohibited conduct;
The aggravating factors include:
(a)
role of the enterprise as a leader in, or
an instigator of the infringement;
(b)
involvement in or awareness of the
infringing conduct by directors and
senior management as defined in the
organogram of the party under
consideration who knew or ought
reasonably to have known that conduct
in issue constituted anti-competitive
behaviour.
(iii)
retaliatory or other coercive measures
taken against other enterprises
including leniency applicants aimed at
(c)
of
(d)
Note that for every offence repeated there
will be an addition of 0. 5% of turnover
added to the base fine.
Aggravating and Mitigating Factors
continuation
Mitigating factors include:
(a)
role of the enterprise, for example, that the
enterprise was acting under duress or pressure;
(b)
the alleged offender has not been the subject of
previous enforcement action on similar
conduct;
(c)
the alleged offender is willing to accept lesser
enforcement options e.g. give undertakings,
enter into consent agreement;
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COMPETITION AND CONSUMER PROTECTION ACT 2010: GUIDELINES FOR ISSUANCE OF FINES
(iii)
(d)
the alleged offender has cooperated
with the Commission in providing
information and evidence which enables
the enforcement process to be concluded
more effectively and/ or speedily;
(e)
termination of the violation as soon as
the Commission intervenes.
(f)
Offence/s committed by the offender as
a result of a genuine and/or innocent
mistake.
8.
An appeal against a fine shall not operate
as a stay. Therefore an appeal will not
suspend the obligation to pay the penalty
or to submit necessary information to the
Commission such as financial statements
or volume of sales for purposes of
calculating a fine unless there is a lawful
order to this effect.
Procedure in imposing a financial
penalty and date of payment
(i)
When the Commission makes an order
imposing a penalty on an enterprise, such
order shall be in writing, shall specify the
offence, the factors the Commission took
into consideration in arriving at the
amount to be paid and the date before
which the penalty is required to be paid.
(ii)
The date specified in an order imposing a
penalty shall not be a date before the end
of the period within which an appeal
against the order of Commission may be
brought under the Act.
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