15 April 2018

Ethiopia: Faffa Faces a Charge for Alleged Price Gouging

Faffa Food S.C, the half a century old and pioneer of the food processing industry in Ethiopia, faced a legal suit by the Trade Competition & Consumer Protection Authority (TCCPA) for allegedly gauging prices.

Federal prosecutors at the Authority, who have been investigating the company, filed the lawsuit against Faffa on March 23, 2018. Filed before judges at a tribunal under the Authority, prosecutors argue that the defendant deliberately made price adjustments on its products. The company took advantage of consumers who buy its products, hiking prices since last October 2017, by 30pc to 50pc on all of its products, reads the charge.

Arguing that prices were jacked up without legitimate economic reasons, federal prosecutors appealed for an injection, penalty and declaratory judgement, hoping to stop other operators in the marking from price gouging. The latest case is just one among series of litigations prosecutors have opened before the tribunal against importers of milk powder, steel, pharmaceutical and veterinary medicine.

Investigators at the Authority have launched a series of probes on importers after the central bank announced in October last year the devaluation of the Birr by 15pc, against a basket of major currencies. Close to 14 importers and manufacturers in vet medicine, steel and pharmaceuticals are fighting legal suits, accused of price manipulation and distortions.

Faffa, with its plant located on Sierra Leone Street, in Nifas Silk Laphto District, was established as an Ethio-Swedish joint venture, in 1962. It had the social objective of reducing the risk of malnutrition among children in Ethiopia, providing low cost high protein weaning food. Re-established as a share company in 1999, and privatised to Petram Plc, its current owners, 10 years later, Faffa's current production capacity has reached 22,000tn a year, in seven merchandises.

In September 2015, Faffa partnered with Fonterra Co-operative Group Limited, the New Zealand multinational dairy co-operative owned by over 10,000 New Zeland farmers, to process and package Anchor powdered milk in Ethiopia, replacing Faffa's Abay Milk.

The former United States President, Barack Obama, had also visited the company three years ago as it produces fortified milk and baby formula that can help the nation reduce and end child malnutrition. Prevalence estimate of stunting underweight and wasting in Ethiopia was 42pc and 15pc, respectively, according to the Ethiopian Journal of Health Science's (EJHS) study, conducted in March 2017.

Federal prosecutors have appealed for the Tribunal to issue an injunction to Faffa to stop jacking up prices with a penalty amounting to 10pc of its annual turnovers. Lawyers of Faffa are expected to appear before the Tribunal on April 20, 2018, with a statement of defence.


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