Roofing products manufacturer Royal Mabati will have to pay a Ksh2.65 million fine after losing an appeal to overturn the penalty at the Competition Tribunal. The firm was slapped with the fine for defrauding customers – including by advertising free delivery countrywide only to turn around and demand hefty fees.
On top of the fine, Royal Mabati was ordered to pay outstanding refunds for cancelled orders within 60 days or deliver roofing materials to complainants within 30 days. It was further ordered to pull down the misleading advertisements in print and electronic media from as far back as January 2019.
The Competition Tribunal found the firm g****y of publishing misleading advertisements, forcing buyers to change product specifications after receiving payments, and lengthy delays in completing refunds for customers with cancelled orders.
Section 55 of the Competition Act outlaws misrepresentation of product features, including pricing. Some customers saw deliveries delayed by as long as four months. Those who cancelled orders struggled to obtain refunds.
Welcoming the ruling, the Competition Authority of Kenya (CAK) stated that the decision “will deter suppliers of goods and services from engaging in conduct that misrepresents the terms of a transaction to consumers and encourage implementation of robust and fair complaints redress mechanisms”.
The ruling followed an appeal filed by Royal Mabati after they were first hit with the cash penalty. CAK hit Royal Mabati with the fine in May 2020 after investigating complaints from customers.
According to CAK, the figure was based on six percent of Royal Mabati’s gross annual sales revenue for 2017 considered alongside other factors such as the impact of Covid-19 on the business.
In their ruling, the tribunal noted that Royal Mabati defied a cease-and-desist order issued by CAK to the firm on January 19, 2019 on the misleading advertisements.
“Uncontroverted evidence on record shows that despite having been issued with a cease-and-desist order, the appellant [Royal Mabati] continued to offend the said order and provisions of the Act.”
“The respondent [CAK] continued to receive new complaints in the course of the investigations and after the issuance of the cease-and-desist order,” the tribunal noted.