Coupons, rewards illegal, but companies doing it anyway

Existing laws – specifically Section 294b of The Penal code and the Competition Act – make it illegal for companies to boost their sales by offering coupons, tickets and rewards to consumers while offering goods and services, but a number of popular companies are doing it anyway.

E-commerce platforms, mobile financial services, ride-sharing and food delivery companies, financial institutions, and super shops are regularly handing out discount coupons, promo codes and rewards to attract consumers, thus violating regulations, lawyers told The Business Post.

For example, the Pathao app – a popular ride-sharing and food delivery platform – shows this advertisement, “Tk 55 off on Pathao Food. Apply Promo DINNER55. Order now and get the fastest delivery!”

While an advertisement of leading telecom company Banglalink says, “500MB free on MyBL app reference. 500MB – 4 days, share the referral number of MyBL app with your relatives. 1GB – 4 days can be availed on first login by using the code.”

According to the Section 294b,  “Whoever offers, or undertakes to offer, in connection with any trade or business or sale of any commodity, any prize, reward or other similar consideration, by whatever name called, whether in money or kind, against any coupon, ticket, number or figure, or by any other device, as an inducement or encouragement to trade or business or to the buying of any commodity, or for the purpose of advertisement or popularising any commodity, and whoever publishes any such offer, shall be punishable with imprisonment of either description for a term which may extend to six months, or with fine, or with both.”

‘Unhealthy competition’

Discussing the issue, Supreme Court lawyer and an expert in company laws Ahsanul Karim said, “Both the Section 294B of Penal Code 1860 and the Competition Act 2012 were introduced in the country to curb consumer fraud and uphold their rights.

“Not only consumers, but many business entities are also suffering due to the unhealthy competition triggered by several giant corporations. These companies have taken over the market, and they are creating strong obstacles for their competitors.”

Commenting on their advertisement policy, the Banglalink’s Head of Corporate Communication Ankit Sureka said, “The offers in question are promotional in nature, and we are promoting those through different digital channels following the process set by our regulatory authorities.”

“Such promotional campaigns are regularly launched by all mobile network operators (MNOs) to encourage people into embracing a digital lifestyle, which is in line with the laws of the land and the vision of digital Bangladesh.”

He added that Banglalink is allowed to provide promotional offers under their regulatory guidelines.

The other MNOs are engaging in similar promotions, but lawyers say such offers too violate relevant laws.

Responding to a query, Supreme Court lawyer Barrister Jyotirmoy Barua said, “The Penal Code does not permit such offers or cash back programmes by using codes, numbers or whatever it is called. Such behavior is a punishable offense under section 294b of penal code.

“Offering discounts for clearing the stock is a lawful practice around the world. But the discounted price cannot be lower than the production cost of a particular product. Our laws need to be amended in accordance with global practices.”

It should be noted that most e-commerce companies have a habit of offering products for very cheap, and sometimes, they even offer two products for the price of one.

He further said, “The Competition Act forbids the practice of reducing or increasing prices inconsistently. It also makes it illegal for companies to make their customers dependent on any particular agent or organisation as a medium for availing products and services.

“For example, when a super shop or any other company offers any amount of cash back for paying bills using a particular mobile financial service provider, or debit/credit card of any particular bank, it becomes a punishable offence under both The Penal Code and Competition Act.”

Foodpanda – a leading food and grocery delivery service – has an advertisement saying, “Up to Tk 250 cash back. LankaBangla credit card holders can get 10% off on all Foodpanda orders over Tk800! Offer valid until 20th October, 2021.”

Till the filing of this report, Foodpanda did not reply to the correspondent’s queries through email.

Many companies currently engage in such practices. Ride sharing companies regularly announce offers that encourage customers to depend on a particular mobile financial service provider.

What about the Competition Act?

According to the section 15 (1) of the act, no person shall enter into any agreement or collusion, express or implied, in respect of production, supply, distribution, storage or acquisition which causes or is likely to cause an adverse effect on competition or creates monopoly or oligopoly in the market.

Meanwhile, section 15 (3) of the same act says, “…the following cases and agreements shall be deemed to anti competition agreement if they have adverse effect on competition, namely ‘tie-in arrangement’ i.e. any agreement or understanding requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods or facilities form any other person or enterprise engaged by the seller.”

If sued by the Competition Commission in a court of law, anyone engaging in such a violation could face fines or imprisonment.

On the issue, Bangladesh Competition Commission’s Chairperson Md Mofizul Islam said, “If any organisation takes this approach, we will take legal action against them. The offending entity will receive a fine. If unpaid, we will file a case next.

“For example, we had sued Evaly about a year ago, and eight months ago, the court delivered an order in this case.”

He continued, “The commission can intervene in case of a conditional sale, when a consumer needs to purchase one product to avail another. A company can give offers to promote their business, but if it exceeds the manufacturing cost, the law will then intervene.”

The Consumer Association of Bangladesh (CAB) too emphasised the implementation of these sections of the law.

SM Nazer Hossain, vice president of CAB, said, “Implementation is more important than formulating new laws. However, finding a case filed under the Section 294b of The Penal code or the Competition Act is almost non-existent.

“Laws need to be implemented equally for all regardless of anyone’s business or political identity. The laws can be amended to set up a margin or limit for offering discounts.”