Competition commission clears RedForce of favouritism in tenders

The Namibian Competition Commission (NaCC) has found no favouritism in RedForce Debt Management’s debt-collection tenders, but has highlighted concerns over unregulated fees.

The competition watchdog made this finding following allegations on social media that the debt-collection agency had secured the majority of municipal debt-collection tenders due to favouritism.

The commission submitted its findings to the Walvis Bay Municipality, which lost a court case last year after terminating RedForce’s services.

The commission sought to determine whether RedForce and local authorities had entered into agreements that restricted competition by limiting or controlling production, market outlets, or access.

“The awarding of the debt-collection tenders to RDM (RedForce) for the provision of debt services to local authorities was carried out in a transparent manner and in accordance with procurement laws,” the commission says.

RedForce was found to have met all the requirements outlined in the tender invitations.

Additionally, the company’s financial proposal to local authorities was deemed by the commission as being more favourable than those of its competitors.

The commission also investigated whether RedForce held a dominant position in the market, given the number of tenders it had won with local authorities.

Furthermore, it found that the company does not overcharge clients in terms of the Competition Act.

“Debt related to essential services should not be subject to high interest rates or penalties, as this creates an unfair burden on the most vulnerable populations who are already struggling to make ends meet. The focus should be on providing support and enabling these debtors to pay off their debts over time, not penalising them further with high interest rates, which could lead to even more financial consequences,” the commission says in its report.

It further established that RedForce charges a commission fee of between 10% and 12% of the total debt handed over by local authorities, as per their agreements.

“This fee is passed directly to the debtors, increasing the amount owed by residents. Furthermore, RDM charges a monthly compounding interest on the outstanding debt, significantly increasing the total repayment amount,” the commission says.

Although the commission acknowledges that requiring debtors to pay municipal debts plus the additional 10% to 12% fee to RedForce is generally detrimental, it concludes that this fee cannot be classified as a price.

“There is no service being rendered to the debtors for this amount. RDM’s charge does not factor into the amount that local authorities charge their residents for services. This is a debt-collection fee that is currently unregulated.”

The commission has thus determined that these collection fees do not fall within the scope of overcharging under competition law, specifically the section which addresses unfair pricing.

Consequently, the commission says it could not probe this aspect of the complaint further.