In April 2021, CFTC commenced investigations against six cooking oil manufacturing companies in Malawi on allegations of unconscionable conduct following complaints from the general public that the cooking oil manufacturing companies had been increasing prices of cooking oil without justification.
CFTC, during market surveillances also found that prices for all cooking oil products had indeed exponentially increased. The Commission commenced a two-pronged investigation on the matter: (i) unconscionable conduct through excessive pricing; (ii) collusive conduct. The determination made is pertaining to the allegations of unconscionable conduct. The Commission is yet to make a determination on allegations of collusive conduct.
The Commission investigated the matter under Section 43(1)(g) of the CFTA. The investigation found that the prices of the Respondent’s products had indeed increased. However, there were justifiable economic factors that contributed to the price increase. Prices for crude palm oil on the international market had increased by 66.7% during the period under assessment. Prices for soya bean oil (extracted from soya beans) had also increased, as compared to prices of the soya bean oil between 2019-2020.
The investigations established that the following economic factors have also contributed to the price increase: exchange rate (increased by 7%); freight (shipping) costs had increased; fuel and electricity (increased by around 8%, and 10%); minimum wage (increased by 43%); re-introduction 16.5% VAT on imported crude oil; Prices of imported cooking oil products (e.g. Sunfoil and Delite) also increased exponentially; some of which increased by at least 100%.
The prices for the products by the four Respondents’ increased by between 30% – 42%. There are some key factors of production whose prices increased more than the increase in cooking oil prices. There are also factors whose cumulative or collective impact would justify the prices increases.
The differences in price increments between the companies can partly be attributed to the differences in cost structures.
The Commisison found no conclusive evidence that the four Respondents’ conduct amounted to unconscionable conduct, through excessive pricing, hence the price increases were not in contravention of Section 43(1)(g) of the CFTA.
The Commission deliberated over the matter and resolved as follows:
- The case against the four Respondents should be closed as the price increase in the cooking oil is justifiable.
- The Commission should recommend to Ministry of Trade to take executive action to address the price increases.