International Development Law Organization

Mongolia: protecting consumers from unfair pricing during COVID-19

Wednesday, April 29, 2020

The effects of the social and economic fallout from the current COVID-19 crisis will be felt long after the pandemic itself has ended. In some countries, however, there are already encouraging signs of government efforts to mitigate some of the negative impact.

In Mongolia, IDLO has been working since February 2019 with the European Bank for Reconstruction and Development (EBRD) to strengthen the capacity of the government agency in charge of competition, the Authority for Competition and Consumer Protection (AFCCP).  Steps are already being taken by the AFCCP to try and protect consumers against price hikes being introduced by companies taking advantage of the COVID-19 crisis.

On 12 February 2020, the Government of Mongolia passed a resolution, tasking the AFCCP to take measures to prevent and combat excessive pricing, creating artificial scarcity, misleading advertisements, commodity overstock and speculation in an emergency situation.

 “The AFCCP has established taskforces to conduct inspections for commodities supplies and sales at trade centers, food factories, local markets, grocery stores and pharmacies in Ulaanbaatar. Inspectors investigate breaches and issue warnings for companies and traders to not exploit the current situation to take advantage of people. Most importantly, the public should stay calm and not believe misleading advertising,” said Mr. Lkhagva Byambasuren, the Chairman of the AFCCP at a press conference on 17 March 2020.

A number of companies have been fined under Mongolia’s competition laws for adopting anti-competitive practices while the AFCCP has taken legal action and is making sustained efforts to raise awareness among the public of the dangers of price hiking for essential goods.

Two nationwide supermarket chains were fined 20 million MNT (US$7,185) each for more than doubling their prices for lamb and beef from 1,500 MNT (53 cents) per kilo to 3,500 MNT (US$1.20) between 10-20 March 2020. For citizens of a country like Mongolia, with a relatively small population of just 3.3 million, large livestock supplies and per capita meat consumption of 16.4 kilos, such increases are seen as particularly unjustified.

Other companies under scrutiny were in the pharmaceutical sector, with one large chain of pharmacies being fined 6 million MNT (US$2,155) for illegally selling “N95” face masks, amid accusations of price fixing, non-transparency, and discrepancy between cash receipts and income statements. Several others were also fined for almost tripling their prices for hand sanitizers from 4,500 MNT (US$1.60) to 11,500 MNT (US$4.10).

The AFFCP has now asked license issuing state authorities to improve their oversight of compliance requirements and to revoke the licenses of business entities found to be non-compliant with Article 13 of Mongolia’s Law on Licensing and Article 13.4 of the country’s Competition Law.

 “When the Mongolian Government first declared a state of high alert on 13 February 2020 closing universities and schools, restricting public gatherings and movements at border crossings with the People’s Republic of China, and when the first coronavirus cases were confirmed in the country on 10 March 2020, the price of commodities rose more than 50% within 1-2 days, creating panic and artificial demand. The AFCCP took immediate action by informing the public about sufficient reserves of products and resolved the issue quickly. Providing accurate information through a single channel to the public is vital,” said Ms. Tserendulam Shagdarsuren, Head of the Consumer Protection Division of the AFCCP.

On 15 March 2020, on the occasion of World Consumer Rights’ Day, the AFCCP also established a free customer service hotline for people to report complaints. Since then more than 1,600 calls have been received and the AFCCP is working to resolve the issues identified.

As part of its efforts to combat the COVID-19 crisis, and in light of its 4,700 km shared border including 13 crossing points with the People’s Republic of China, the Mongolian Government declared a state of high alert on February 13, 2020 and introduced strict measures to prevent and control the spread of the virus. As of 29 April 2020, the country had 38 confirmed cases of COVID-19 and no confirmed fatalities.

In February 2019, IDLO began implementing the project, “Competition in Mongolia: Legal Reform and Institutional Capacity Building”, with the support of EBRD. The overall aim of this three-year project is to foster free market competition by providing technical assistance to the AFCCP to draft amendments to the Advertisement Law, develop a digitized decisions database, build capacity of senior managers and inspectors, strengthen internal advocacy and increase cooperation between the AFCCP, sector regulators and the judiciary to enhance the competition framework in Mongolia.