Lack of Information Regulation, Hefty Price for Consumers




Trading is as old as the history of human civilization. In trade, information plays a pivotal role. Information is key not only for the trader, but also for the consumer. People since the era of bartering want to know where to find resources and items before they trade their valuable asset.

Especially today, information is a crucial tool for individual choices and decisions. People want to grasp information and act based on what information is gathered for their daily lives.

The citizen’s right to information has assumed a considerable importance. Some people have even attempted to endow the concept with a very broad application, to ensure individuals be given access to a wide range of private, as well as public information affecting their lives and welfare. Such a view might justify forcing manufacturers, suppliers and sellers to disclose details relating to their products for consumers.

The flow of information in a market unless duly regulated might result in undesirable consequences. Structuring a market that can facilitate the free flow of information from trade actors to consumers is quite necessary. Economists and lawyers call this information regulation.

Information regulation can be done by obliging sellers and suppliers to disclose information to buyers about their respective prices in an open manner, then consumers will decide rationally. Manufacturers and sellers need to also stick labels on products showing quality and quantity of the product and expiry dates.

Market information if not regulated will result in information asymmetry or deficits which may result in market failures. This is more apparent in underdeveloped markets, like that of Ethiopia. Improving information flow in such circumstances may then increase efficiency and be justified on this economic basis. Otherwise, the market and the overall consumer will suffer lots of problems.

Among the major problems caused by poor information regulations are information deficiencies which occur when the buyer and the seller of a commodity have different amounts of information about the commodity’s attributes. So, if consumers under or overestimate quality, through a lack of information; producers will be obliged to provide information. But they do lack the incentive to do that.

Even if they do, unless their information is legally backed, some consumers might not trust them and no dealing will take place. On the other hand, if due to lack of information, consumers overestimated quality, there will be under-consumption, as no one will be willing to buy an unknown expensive item. This will result in market inefficiency.

Secondly, some products by their nature create risks for consumers, but, particularly where the risks are small, they may not be disclosed by the manufacturer and traders. If the unregulated market does not have adequate amount of information, manufacturers and sellers may persuade consumers to buy these products without disclosing their risks.

The product might affect the consumers’ health or force them to incur extra costs which in turn adversely affect the country’s economy both at micro and macro level.

Lastly, poor information regulation weakens the level of competition between traders in a given market. For a market to be competitive, it is necessary that all consumers know and compare prices and quality. If not, they will be exposed to act on misleading information from traders.

Information gap creates a high degree of misunderstanding and weak bargaining in a transaction. Failure of information regulation can also be a cause for customers to expend more and gain less.

It was in 1960 during the Imperial regime, the country issued its first codified modern Commercial Code. In the code, information regulation was duly addressed: there are rules on goodwill protection and prohibition of unfair competition. The 1974 coup d’état which overthrew the Imperial regime introduced a socialist system that marginalizes the private sector. In 1991, a new government came to power and started to gradually open the market to competition.

Since then, many laws have been passed that aim in fostering competition in a market and protecting the consumer, by regulating the free flow of information in the market. In 2003, the Trade Practice Proclamation was enacted.

However, due to legal and structural limitations in relation to the enforcement of the law and absence of consumer protection provisions, the proclamation was repealed by Trade Practice and Consumer Protection Proclamation in 2010.

And finally, in 2013, the House of People Representatives endorsed the Ethiopian Trade Competition and Customer Protection Proclamation and the bill included the provisions on information regulation in the market. The law was designed for the purpose of enhancing market competition and protecting the consumer from illegal acts of traders.

According to the Trade Competition and Consumer Protection Proclamation, business owners are required to display the price of goods and services visibly by adding the custom duties, taxes, and other lawful fees.

Manufacturers have to also affix labels on goods showing name, gross and net weight, volume, quantity, safety measures for usage, manufacturing, and expiry dates as well as the country of manufacture and the name of the manufacturer, importer, and packer. It is also the business owner’s duty to display their trade names in an overt place and to give relevant information to consumers about goods and services that the latter may want to buy.

Business owners are prohibited from making false or misleading advertisements about the nature, component, and quality of goods. It is also prohibited to wrongly advertise the source, weights, volume, method of manufacturing, date of manufacturing and expiry date of goods as well as the identity of the manufacturer, and supplier.

The rights of the consumer cannot be waived by an agreement. The proclamation also imposes strict penalties on traders who breach these rules.

However, even though the proclamation specifies these detailed rules, traders are reluctant to follow them.

Few traders act accordingly and disclose the price of goods and services they sell in a conspicuous manner, while the majority prefer not to abide.

Even traders who disclose prices are not completely honest about the information they post. They are selling at prices higher than what they reveal.

There is also weakness in the enforcement of the rule on the government’s side. Taking advantage of the people’s lack of information, mainly in times of instability, traders take advantage of consumers with no economic justification.

Much of what is heard from the public about price increments of basic goods fit this. This highly affects the population in general and the economy of the nation. There are dozens of wholesalers and retailers of goods, hotels, and restaurants including pensions, barbers and female beauty shops in Addis and in other major regional cities of Ethiopia that are selling their products without disclosing the price of their products and services.

For the actual working of the law, all stakeholders including the consumer, government, and traders need to work cooperatively. Everybody needs to work together to safeguard the consumer. It is only then that the law can be enforced in a better way. The consumer need also be familiar and informed about these provisions so they can challenge for his/her rights’ to be enforced.

The government should also strengthen its legal and institutional framework to enhance competition among traders for the purpose of safeguarding the rights and interests of the consumer.



By Zena Abera
Zena Abera is a Lecturer of Law. Zena is a Master's candidate for Business and Corporate Law at Bahir Dar University. Zena can be reached at zenanews25@gmail.com

Published on Mar 04,2017 [ Vol 17 ,No 878]


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