Royal Mabati Factory lost an appeal to reverse a Sh2.65 million fine for misleading clients by claiming that they would deliver purchased roofing supplies for free across the country.
The Competition Tribunal also found the troubled roofing materials company guilty of pushing purchasers to change product specifications after collecting payments and delaying refunds for cancelled orders.
The tribunal has also ordered Royal Mabati to pay outstanding refunds for cancelled orders within 60 days or supply roofing materials to complainants within 30 days, in addition to the monetary penalty.
The beleaguered firm has also been ordered to remove and stop additional deceptive advertisements in print and electronic media dating back to January 2019 offering free nationwide delivery of roofing materials.
It must also educate sales and customer service representatives about Section 55 of the Competition Act, which prohibits misrepresenting product attributes, including pricing, to customers.
The Competition Authority of Kenya (CAK) said on Tuesday the tribunal’s ruling “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”.
Royal Mabati’s appeal against the competition watchdog’s financial penalty, which was levied in May 2020, was dismissed with costs.
The penalty was calculated based on 6% of Royal Mabati’s gross annual sales income in 2017 and other mitigating factors, including but not limited to the impact of Covid-19 on the company, according to the CAK.
After receiving complaints from clients, the CAK issued a cease-and-desist order to the firm on January 19, 2019, for misleading ads.
“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 tribunal noted in the ruling.
“The respondent [CAK] continued to receive new complaints in the course of the investigations and after the issuance of the cease-and-desist order.”
On Tuesday, a social media check showed a slew of complaints from Royal Mabati customers citing delayed order delivery, some of which were more than four months late.
Following the conclusion of an examination into allegations from 13 clients who had been short-changed by a roofing material manufacturer, the CAK sanctioned the firm.
The examinations, which took place between March 2018 and April 2020, found the company guilty of late delivery and a “prolonged wait” for refunds for failed orders.
Royal Mabati was also found guilty of pushing consumers to change the “profile of the iron sheets from the initial order” and charging for deliveries that were supposed to be free.
The firm, however, notified the tribunal of its intention to appeal the decision in June 2020 but filed its appeal more than a year later in September 2021 after successfully applying to be allowed to do so out of stipulated time.
It argued that it was not given a fair hearing because it was not involved in the investigations, it met its obligations to complaining customers before the penalty was imposed and that the unfulfilled obligations for refunds were due to circumstances beyond its control.
The tribunal held that the CAK notified Royal Mabati of its investigations and that the firm failed to provide evidence against the imposition of the financial penalty.
“The appellant [Royal Mabati] neither provided any evidence to support its said ground of appeal nor made submissions on the same. We do not, therefore, agree with the appellant’s submissions that the respondent erred by imposing a financial penalty of Sh2,652,363.47,” the tribunal said in the ruling dated April 12.
“We accordingly arrive at the ineluctable conclusion that the appeal herein is for dismissal.”
This is the latest scandal involving the growth-hungry roofing materials firm, which was founded in 2005.
Royal Mabati’s managing director, Moses Ikinya Kang’arua, in September 2019 denied 12 counts of charges, ranging from fraud in relation to tax to altering statements in income tax returns, omitting to declare income taxes and value-added taxes, under-declaring imports and substituting and removing goods in a bonded warehouse.
A year earlier in March 2018, the firm was sued by Manu Chandaria-owned Mabati Rolling Mills over alleged infringement on the latter’s trademark for Versatile brand, leading to confusion in the market.
