The Competition and Fair Trading Commission (CFTC) has unveiled a new penalty framework designed to ensure compliance with the CFT Act by calculating penalties based on the gross annual turnover of enterprises or gross annual income of individuals who violate the Act.
The strategic timing of these guidelines, which coincide with the implementation of the new CFT Act following Parliament’s passage of the Act in 2024, which became effective in July 2024, representing a significant modernisation of the regulatory framework.
According to the new guidelines, penalties will be calculated based on the latest audited gross turnover of an enterprise or the income of an individual, including any capital gains.
For clarity, the turnover or income considered will be from the immediate preceding year to the year the investigation started. If this data is unavailable, the Commission will use the most recent audited figures, adjusted as necessary.
In determining the amount of financial penalties, the Commission will consider various aggravating and mitigating factors on a case-by-case basis. Aggravating factors such as the nature and gravity of the infringement, the damage caused, and the history of compliance will increase the penalty.
Conversely, mitigating factors like cooperation during the investigation and being a first offender may reduce the penalty. The Commission aims to apply these factors fairly, equitably, and consistently.
Among the new guidelines, the commission has set base penalties at two percent of annual turnover for enterprises involved in restrictive trade agreements while individuals face a one percent penalty rate.
More severe sanctions have been established for abuse of market dominance, with enterprises facing penalties of four percent of their annual turnover Individual perpetrators in such cases will be subject to a two percent penalty rate.
The commission has reserved its strictest measures for cartel activities, implementing a seven percent penalty for enterprises and 4 percent for individuals involved in such practices. Furthermore, enterprises with turnovers not exceeding K50 million will face penalties of one percent, with a ceiling of K2.5 million.
For the same category, individual traders will be subject to a 05 percent penalty, capped at K1.2 million. A more stringent penalty structure applies to larger enterprises operating within the K250 million to K500 million turnover range. These businesses face potential fines of 1 percent of turnover. With a maximum penalty of K25 million.
Individual traders within this bracket will be subject to a 0.5 percent penalty, not exceeding K12.5 million.
Meanwhile, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) Chief Executive Officer Daisy Kambalame has since emphasized the critical need for equitable enforcement.
“While we recognise the necessity for penalties to reflect current market realities and serve as effective deterrents, it is paramount that all stakeholders have a clear understanding of the rules
“Consistent application of these penalties is fundamental to fostering equality, fairness and healthy competition in our business environment,” said Kambalame.
