With the threat of rapid spread of COVID-19 across the globe, governments have enforced lockdowns, forcing people to stay inside their homes, shutting down businesses, market places and everything except for the most essential goods and services. People have started panic buying and as a result, suppliers and vendors are taking advantage of the situation through fraudulent price-gouging and black marketing; especially in medical equipment and food products.
Nepali national dailies as well as other various news media have been time and again reporting the cases of firms and enterprises being fined for overpricing and black-marketing; and the number is rising as the lockdown extends. Within a short span of two weeks after the lockdown started, the Department of Commerce, Supplies and Consumer Protection (DoCSCP) of Nepal fined forty firms for price gouging in the sale of masks, an essential commodity required for safety against the coronavirus. One of the latest and a high profile case is the arrest of Shulav Agarwal, vice-chairperson of Shankar Group and the honorary Nepalese consulate to Kyrgyzstan (he has been stripped of this title after this incident), on April 7, 2020 in the charge of black marketing thermometer guns. Also, on April 10, DoCSCP fined I Kalu Meat Center, a renowned butcher shop, two hundred thousand rupees for black marketing.
What Constitutes Black Marketing in Nepal? What are its Possible Legal Implications?
Section 2 of Black-marketing and Some Other Social Offenses and Punishment Act, 2032 (1975) (“Black-marketing Act”) of Nepal considers the following act to constitute the offense of black marketing;
- if any person sells any goods in a price higher than that fixed by the Government, or that determined by the producer, importer or main distributor of goods, in case when the price has not been fixed by the Government.
Such a person is liable for imprisonment of up to one year and fine up to one million rupees. The price of the goods received by such a person shall be returned and the goods be forfeited.
Section 3 of Black-marketing Act prohibits the act of profiteering, according to which except as the price has been fixed under Section 2 of Black-marketing Act based on the various factors including price of goods, freight and rent, custom duties, taxes, enterprise expense, reasonable commission and the profit, in cases where a person trading any goods prescribed by Government of Nepal has taken profit in excess of twenty percent (20%) normally or sell the goods, by receiving undue profit, taking advantage of the shortage, such person may be punished with imprisonment for a term not exceeding one year or with a fine up to two hundred and fifty thousand rupees or with both.
However, if the goods are imported by recovering loss in export, a person may receive profit in a manner to recover the loss sustained. It is also compulsory for wholesaler or retailer to display a price index of the goods as prescribed by Government at the place of sale in a manner which is visible to all. Failing to do so attracts the punishment of imprisonment for a term not exceeding one year or with a fine of up to two hundred and fifty thousand rupees or both. Section 17 of The Consumer Protection Act, 2075 (2018) (“CPA”) also prohibits distribution, transportation or causing hindrance in sale and distribution of any goods by charging profits above the designated limit.
Black-marketing Act further under section 5 prohibits hoarding or creating artificial shortage of goods with intention to sell them in market by receiving undue profit, and sanctions a punishment of fine upto two hundred and fifty thousand rupees and/ or an imprisonment of upto one year. However, if such an act is committed in context of essential goods, such person shall be punished with imprisonment for a term not exceeding one year or with a fine up to one million rupees or with both.
National Criminal Code, 2017 (“Criminal Code”) of Nepal has also prohibited increasing the price of consumable goods by creating shortage in the market or selling such goods at high prices or storing such goods with an intention of earning undue profits from it. Persons conducting such an offense shall be liable for imprisonment of up to five years and fine up to fifty thousand rupees, according to Section 110 of the Criminal Code.
Black-marketing Act under Section 6 restricts selling substandard goods or any products by deceiving the consumers of their quality or identification. Such acts will be punished with a fine of up to two hundred thousand rupees and/ or an imprisonment of up to nine months. Similarly Section 7 prohibits adulteration in medicine and medical products and are sanctioned with fines and imprisonment ranging from five years to life imprisonment.
Since black marketing directly affects consumer rights, CPA in its section 4 has vested the Government of Nepal with the duty to regulate the supplies, price, quality, measurement, label, advertisement of the goods and services regularly in order to protect the rights of the consumers. The Ministry of Industry, Commerce and Supply of Nepal shall regulate the sale and distribution system of goods, and control the act of creating scarcity or black-marketing in an inappropriate manner or the unfair business activities. In this regard, the Government can also, in order to protect the rights of the consumers, regulate the supply system and control the price and quality of the goods and services, make necessary policy and institutional provisions from time to time.
Pursuant to Section 36 of CPA, any person who gets the information about any goods or service provider who performs any act against the consumer interest or contrary to this Act or any rule framed under this Act, can make a complaint in writing or orally or even through electronic means to the Central Market Monitoring Committee, Department or Inspection Officer, along with the information and evidence. Such people making complaints can keep their name confidential.
What should be done if one witnesses black marketing or similar crime?
One should report such cases to the police office, or one can report to the government by calling the Department of Commerce, Supply and Consumer Protection Management toll free on 1137. However, one should make complaints within ninety days of the commission or disclosing of the offense. The police officer and Chief District Officer (“CDO”) or even other officials designated by the government have authority to make arrests and can search any village, house/building or vehicle reasonably suspected of having stored the goods related with the offense under the Black-marketing Act or the person to be arrested is hiding therein. The goods, vehicles, documents and cash related with the offense may be seized while making such search (Section 13).
After police investigation, cases under Black-marketing Act adulteration in medicine or medical products shall be prosecuted by state attorneys and the adjudicating authority shall be District Court; whereas rest shall be adjudicated by CDO. Cases shall be tried under Special Court Act, 2059 (2002). Appeal may be filed within 35 days of the decision.
One of the remarkable features of Black-marketing Act is it allows condemning the offender publicly. Section 16 of the Act provides that, the authority making its final decision can give direction to condemn the offense publicly by allowing to publish it in a newspaper or by any other means, if it is necessary for comprehensive public interest to publish the following details of the convicted person: name, address, and nature of the offense and punishment.
To control black-marketing and promote the greater interest of the consumer, Black-marketing Act has also made the provision of rewarding the person who informs the concerned official regarding the offense which is already committed or is about to be committed. If such an accused is found to be guilty, the informant then receives twenty five percent of the fine imposed to the offender as a reward.
Black marketing is a catalyst to intensifying pains of consumers during the excruciating periods such as the ongoing COVID-19 pandemic. Government should take effective measures by facilitating consumer protection in collaboration with the local level government and encourage ethical conducts in those engaged in the production and distributions of goods and services to consumers. It is also necessary to take immediate actions to curb the abusive business practices by the enterprises which adversely affect the consumers. Not just the government, the traders and suppliers should play their part well to minimize the sorrows of the crisis, rather than increasing the pain.
It is often said that the autocratic ruler Jang Bahadur Rana directed the public to punish anyone found to be indulging in black marketing practices by death in front of three witnesses in order to curb the surge in black marketing during the devastating 1934 earthquake. Though such extreme punishment without following the due process of law is not desirable, sanctions for black marketing need revision, and the public should also be proactive to safeguard their own rights.