Fuel crisis: consumers need stronger protection

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Fuel crisis: consumers need stronger protection


People line up with jerry cans at a gas station in the town of Eldoret, Uasin Gishu County, which had the precious commodity on Monday, April 04, 2022. PHOTO | JARED NYATAYA | NMG

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Summary

  • Due to their position and their unbalanced negotiating positions vis-à-vis the consumer, the dominant can abuse their market power to the detriment of consumer interests.
  • The long queues and the long wait for fuel for several hours was not only an inconvenience, but also hurt the economy.
  • Studies have shown that traffic jams and traffic jams hurt the economy because they slow down production.

The recent fuel shortage in Kenya highlights the need to protect consumers from arbitrary actions by companies that hold a large market share, otherwise known as dominant.

Due to their position and their unbalanced negotiating positions vis-à-vis the consumer, the dominant can abuse their market power to the detriment of consumer interests.

The unprecedented fuel shortage lasted about three weeks. While normalcy is slowly returning, the shortage has hurt the economy. The consumer suffered the most from the shortage.

Consider those who depend on fuel for their business, such as carriers and manufacturers. The long queues and the long wait for fuel for several hours was not only an inconvenience, but also hurt the economy.

Studies have shown that traffic jams and traffic jams hurt the economy because they slow down production.

There was a lot of misinformation as to the exact cause of the shortage. Initially, reports linked the shortage to the Russian-Ukrainian war. There has indeed been a shortage of fuel in other parts of the world due to the war.

For example, the UK suffered from a war-related fuel shortage.

Other reports attributed Kenya’s fuel shortage to a disagreement between fuel distributors and the government over the payment of subsidies.

According to the sellers, the government has delayed the payment of subsidies. The government provided a significant portion of the subsidy at the start of the shortage, but the shortage persisted.

Benefits, well-being

The regulator said the shortage was artificial. According to reports, the government has accused some fuel traders of hoarding the product ahead of monthly price reviews.

Additionally, some fuel sellers have been accused of exporting what was destined for the local market.

The regulator’s stance against fuel traders appeared to be “profits before consumer welfare”.

The government has promised to take action against fuel traders found guilty of malpractice. The sale and distribution of fuel and other petroleum products is heavily regulated. For example, the commodity cannot be sold above the price caps.

Malpractices such as hoarding are offenses under the Petroleum Act and are punishable. As investigations into the fuel crisis continue, it should be noted that the Autorité de la concurrence is also mandated to prevent the abuse of market power by a dominant.

The law prohibits actions such as hoarding when the business entity has a large market share.

Fortunately, the Petroleum Act contains specific provisions to regulate the market and protect consumers. However, not all goods and services are regulated with respect to the use of market power.

For example, transport, health and others may not contain specific provisions protecting the consumer against the abuse of market power by a dominant position.

The fuel crisis is therefore a warning signal for the protection of the consumer and even of the economy against the abuse of power by the dominant.

Competition regulator

Not only does the Competition Act 2015 give the regulator a mandate to protect the consumer, but the Competition Act Amendment Act 2019 gives the authority a specific and detailed mandate to tame the abuse of market power by the dominant ones.

The Competition Tribunal ruled in favor of suppliers who alleged abuse of a dominant position by a large distributor. It was the first such decision.

The regulator has the power to investigate, research and decide on abuses of market power. The public can participate in any suspicion of abuse by filing a complaint with the Authority.

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