Changes in legislation in the field of consumer protection and trade regulation in 2019
The review was prepared by Manshuk Kiyabaeva, Advisor to the Chairman of the DKA on Legal Issues.
During 2019, work was carried out to improve the legislative framework for regulating trade activities and protecting consumer rights in the Republic of Kazakhstan.
The changes are aimed at expanding the powers of the authorised bodies, including equalising the principles of regulating trade and e-commerce activities, working within the WTO and EAEU, consolidating the responsibilities of domestic trade entities, legislative regulation of the activities of electronic commerce entities, additional measures to stimulate foreign trade entities in the form of tariff concessions and preferences, and measures aimed at increasing the competitiveness of domestically produced goods, namely:
The changes are aimed at expanding the powers of the authorised bodies, including equalising the principles of regulating trade and e-commerce activities, working within the WTO and EAEU, consolidating the responsibilities of domestic trade entities, legislative regulation of the activities of electronic commerce entities, additional measures to stimulate foreign trade entities in the form of tariff concessions and preferences, and measures aimed at increasing the competitiveness of domestically produced goods, namely:
- The competence of authorised bodies in the field of labelling and traceability of goods has been expanded.
- The procedure for interaction between state bodies on issues related to the World Trade Organisation (WTO) has been regulated.
- Exceptions to the application of customs tariff, non-tariff and trade measures for the provision of humanitarian aid have been added.
- The law has been expanded to include fulfilment centres for the purpose of developing e-commerce.
Amendments were made to:
− Law of the Republic of Kazakhstan No. 544-II dated 12 April 2004 ‘On the Regulation of Trade Activities’ (hereinafter referred to as the Law on the Regulation of Trade Activities).
− Law of the Republic of Kazakhstan No. 274-IV dated 4 May 2010 ‘On Protection of Consumer Rights’ (hereinafter referred to as the Law on Protection of Consumer Rights).
The amendments were made by the following laws:
− Law of the Republic of Kazakhstan No. 215-VI dated 8 January 2019 ‘On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Advertising’.
− Law of the Republic of Kazakhstan No. 241-VI dated 2 April 2019 ‘On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Business Environment Development and Trade Regulation’.
− Law of the Republic of Kazakhstan No. 268-VI dated 28 October 2019 ‘On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on the Regulation of the Agro-Industrial Complex’.
In this article, we would like to review the most important and interesting changes in the laws on the regulation of trade activities and consumer protection.
− Law of the Republic of Kazakhstan No. 544-II dated 12 April 2004 ‘On the Regulation of Trade Activities’ (hereinafter referred to as the Law on the Regulation of Trade Activities).
− Law of the Republic of Kazakhstan No. 274-IV dated 4 May 2010 ‘On Protection of Consumer Rights’ (hereinafter referred to as the Law on Protection of Consumer Rights).
The amendments were made by the following laws:
− Law of the Republic of Kazakhstan No. 215-VI dated 8 January 2019 ‘On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Advertising’.
− Law of the Republic of Kazakhstan No. 241-VI dated 2 April 2019 ‘On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Business Environment Development and Trade Regulation’.
− Law of the Republic of Kazakhstan No. 268-VI dated 28 October 2019 ‘On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on the Regulation of the Agro-Industrial Complex’.
In this article, we would like to review the most important and interesting changes in the laws on the regulation of trade activities and consumer protection.
Amendments to the Law on Regulation of Trade Activities
1. In the text of the Law on Regulation of Trade Activities, the phrase ‘trade activities’ has been replaced with ‘domestic trade’.
It is also noteworthy that the changes have affected the structure of state bodies. In 2019, the Decree of the President of the Republic of Kazakhstan ‘On measures to further improve the system of public administration of the Republic of Kazakhstan’ established a new Ministry of Trade and Integration. The functions of certain departments and committees for consumer protection and trade regulation were transferred from the Ministry of National Economy to the Ministry of Trade and Integration: the Committee for Consumer Protection, the Department of Domestic Trade and the Department of Foreign Trade.
This change is aimed at distinguishing between trade activities within the Republic of Kazakhstan and export-import operations.
2. Article 6 of the Law on the Regulation of Trade Activities expands the competence of the Government of the Republic of Kazakhstan, allowing it to cooperate with foreign organisations in the field of trade activities, in cases where sellers participate in international exhibitions or export goods.
3. Article 9 of the Law on the Regulation of Trade Activities has been supplemented with a second paragraph, which specifies pricing for domestic trade, i.e. prices for goods sold in the territory of the Republic of Kazakhstan must be indicated in tenge (under the terms of a public contract). Whereas previously there was no specific provision on trade and this rule applied to any commercial activity, now this rule applies only to domestic trade, meaning that for sellers exporting goods, this rule does not apply based on the context.
This change also stems from the practical problem that sellers on internet resources continue to indicate the cost of goods in foreign currency. Since transactions are mainly carried out between residents of the Republic of Kazakhstan, payments must also be made in tenge.
1. In the text of the Law on Regulation of Trade Activities, the phrase ‘trade activities’ has been replaced with ‘domestic trade’.
It is also noteworthy that the changes have affected the structure of state bodies. In 2019, the Decree of the President of the Republic of Kazakhstan ‘On measures to further improve the system of public administration of the Republic of Kazakhstan’ established a new Ministry of Trade and Integration. The functions of certain departments and committees for consumer protection and trade regulation were transferred from the Ministry of National Economy to the Ministry of Trade and Integration: the Committee for Consumer Protection, the Department of Domestic Trade and the Department of Foreign Trade.
This change is aimed at distinguishing between trade activities within the Republic of Kazakhstan and export-import operations.
2. Article 6 of the Law on the Regulation of Trade Activities expands the competence of the Government of the Republic of Kazakhstan, allowing it to cooperate with foreign organisations in the field of trade activities, in cases where sellers participate in international exhibitions or export goods.
3. Article 9 of the Law on the Regulation of Trade Activities has been supplemented with a second paragraph, which specifies pricing for domestic trade, i.e. prices for goods sold in the territory of the Republic of Kazakhstan must be indicated in tenge (under the terms of a public contract). Whereas previously there was no specific provision on trade and this rule applied to any commercial activity, now this rule applies only to domestic trade, meaning that for sellers exporting goods, this rule does not apply based on the context.
This change also stems from the practical problem that sellers on internet resources continue to indicate the cost of goods in foreign currency. Since transactions are mainly carried out between residents of the Republic of Kazakhstan, payments must also be made in tenge.
As a member of the Eurasian Economic Union (EAEU), Kazakhstan has certain obligations, including bringing its national legislation into line with the provisions of the EAEU Treaty.
4. In order to further integrate the provisions of the EAEU Treaty into the legislation of the Republic of Kazakhstan, new provisions from the EAEU Treaty have been introduced, such as:
− compensatory measures (Article 22-1). The procedure for applying compensatory measures has been defined. The authority to make decisions on the application of compensatory measures has been assigned to the Government of the Republic of Kazakhstan.
− means of identification (Article 1, paragraph 31). The provision on means of identification has been introduced as part of the provisions on the labelling of goods. The labelling of goods has also been introduced with a view to further combating the sale of counterfeit products in Kazakhstan and increasing the flow of payments and taxes to the budget.
− National catalogue of goods (Article 1(45)). In accordance with Article 32(3)(3-1) of the Law on the Regulation of Trade Activities, the sale of unlabelled goods is prohibited if such goods are subject to labelling. For these purposes, a definition of the national catalogue of goods has also been introduced.
− Tariff concessions (Article 16-2) and tariff preferences (Article 16-3). The introduction of tariff concessions and preferences is aimed at promoting and stimulating the development of trade in the Republic of Kazakhstan. Tariff concessions provide for exemption from import customs duties or a reduction in the rate. The norm is aimed at improving the conditions for foreign trade activities. Tariff preferences provide for a reduction in customs duties for goods imported from countries with which the Republic of Kazakhstan has concluded free trade agreements, as well as goods imported from developing countries.
5. The objectives of trade regulation specified in Article 3 of the Law on Trade Regulation have been supplemented with another objective: ‘to increase the competitiveness of domestic goods.’ This provision has been introduced with a view to promoting the production of domestic goods and competition with foreign goods by supporting trade activities by local executive bodies of regions, cities of republican significance, the capital, districts and cities of regional significance.
− compensatory measures (Article 22-1). The procedure for applying compensatory measures has been defined. The authority to make decisions on the application of compensatory measures has been assigned to the Government of the Republic of Kazakhstan.
− means of identification (Article 1, paragraph 31). The provision on means of identification has been introduced as part of the provisions on the labelling of goods. The labelling of goods has also been introduced with a view to further combating the sale of counterfeit products in Kazakhstan and increasing the flow of payments and taxes to the budget.
− National catalogue of goods (Article 1(45)). In accordance with Article 32(3)(3-1) of the Law on the Regulation of Trade Activities, the sale of unlabelled goods is prohibited if such goods are subject to labelling. For these purposes, a definition of the national catalogue of goods has also been introduced.
− Tariff concessions (Article 16-2) and tariff preferences (Article 16-3). The introduction of tariff concessions and preferences is aimed at promoting and stimulating the development of trade in the Republic of Kazakhstan. Tariff concessions provide for exemption from import customs duties or a reduction in the rate. The norm is aimed at improving the conditions for foreign trade activities. Tariff preferences provide for a reduction in customs duties for goods imported from countries with which the Republic of Kazakhstan has concluded free trade agreements, as well as goods imported from developing countries.
5. The objectives of trade regulation specified in Article 3 of the Law on Trade Regulation have been supplemented with another objective: ‘to increase the competitiveness of domestic goods.’ This provision has been introduced with a view to promoting the production of domestic goods and competition with foreign goods by supporting trade activities by local executive bodies of regions, cities of republican significance, the capital, districts and cities of regional significance.
Kazakhstan has set itself the task of increasing the share of e-commerce in total market turnover. The first step towards achieving this goal was the introduction of tax incentives for businesses engaged in e-commerce in 2018. The amendments made to the Consumer Protection Act in 2019 are the next step.
6. A new principle has been introduced into Article 2-1 of the Consumer Protection Act to ensure that the legitimate interests of consumers in e-commerce are protected to at least the same level as in other forms of trade. This provision ensures equal opportunities for the protection of consumer rights when making electronic purchases and purchases in other forms.
7. Certain obligations have been imposed on sellers in electronic commerce and electronic trading platforms. These obligations have been introduced for the purpose of legislative regulation of the obligations of sellers in electronic commerce, in connection with the development of electronic commerce in the Republic of Kazakhstan and the emergence of new electronic trading platforms:
− Before concluding a sales contract, an e-commerce seller is obliged to provide the consumer with information about the payment procedure and the cost of the goods (part 5 of Article 24 of the Law on Consumer Protection).
− When a seller sells goods in e-commerce, the consumer must be given the opportunity to evaluate or comment on (leave a review of the goods and the seller) the goods and the seller (clause 5 of Article 28).
− The seller is obliged to provide information about the cost and delivery of goods before concluding a contract with the buyer (clause 8-1 of Article 30 of the Consumer Protection Law).
− Trading platforms must have internal procedures in place to prevent sellers from acting improperly and providing inaccurate information in order to prevent illegal trade (clause 1 of Article 33-1 of the Consumer Protection Law).
− Trading platforms are required to operate through secure communication channels (clause 2 of Article 33-1 of the Law on Consumer Protection).
Changes in internal security measures require electronic trading platforms to verify and admit sellers to such electronic trading platforms only after verification and completion of security procedures by the seller. By introducing these rules, the legislator is taking measures to protect all participants in the electronic trading platform, including resolving issues related to the prompt consideration of consumer/buyer complaints. And establishing the procedure for the effective operation of such a platform.
8. In accordance with subparagraph 6 of paragraph 1 of Article 30 of the Law on the Protection of Consumer Rights, a rule has been introduced on the non-return of ‘cellular communication subscriber devices’. This rule has been widely discussed in the media. Now, after purchasing a mobile phone, it is not possible to return it within 14 days.
9. Paragraph 56 of Article 1 of the Law on the Regulation of Commercial Activities introduces the concept of ‘e-commerce’, which aims to distinguish between the purchase and sale of goods and services on electronic trading platforms, as well as in connection with the development of opportunities for selling services on the Internet and the need for legal regulation of such activities.
Based on an analysis of all the changes introduced, the following conclusions can be drawn:
1) The state aims to expand the powers of state bodies in the areas of e-commerce, product labelling and cooperation within the WTO;
2) A policy is being developed to regulate e-commerce, product traceability and the activities of persons involved in the storage, packaging and delivery of goods.
7. Certain obligations have been imposed on sellers in electronic commerce and electronic trading platforms. These obligations have been introduced for the purpose of legislative regulation of the obligations of sellers in electronic commerce, in connection with the development of electronic commerce in the Republic of Kazakhstan and the emergence of new electronic trading platforms:
− Before concluding a sales contract, an e-commerce seller is obliged to provide the consumer with information about the payment procedure and the cost of the goods (part 5 of Article 24 of the Law on Consumer Protection).
− When a seller sells goods in e-commerce, the consumer must be given the opportunity to evaluate or comment on (leave a review of the goods and the seller) the goods and the seller (clause 5 of Article 28).
− The seller is obliged to provide information about the cost and delivery of goods before concluding a contract with the buyer (clause 8-1 of Article 30 of the Consumer Protection Law).
− Trading platforms must have internal procedures in place to prevent sellers from acting improperly and providing inaccurate information in order to prevent illegal trade (clause 1 of Article 33-1 of the Consumer Protection Law).
− Trading platforms are required to operate through secure communication channels (clause 2 of Article 33-1 of the Law on Consumer Protection).
Changes in internal security measures require electronic trading platforms to verify and admit sellers to such electronic trading platforms only after verification and completion of security procedures by the seller. By introducing these rules, the legislator is taking measures to protect all participants in the electronic trading platform, including resolving issues related to the prompt consideration of consumer/buyer complaints. And establishing the procedure for the effective operation of such a platform.
8. In accordance with subparagraph 6 of paragraph 1 of Article 30 of the Law on the Protection of Consumer Rights, a rule has been introduced on the non-return of ‘cellular communication subscriber devices’. This rule has been widely discussed in the media. Now, after purchasing a mobile phone, it is not possible to return it within 14 days.
9. Paragraph 56 of Article 1 of the Law on the Regulation of Commercial Activities introduces the concept of ‘e-commerce’, which aims to distinguish between the purchase and sale of goods and services on electronic trading platforms, as well as in connection with the development of opportunities for selling services on the Internet and the need for legal regulation of such activities.
Based on an analysis of all the changes introduced, the following conclusions can be drawn:
1) The state aims to expand the powers of state bodies in the areas of e-commerce, product labelling and cooperation within the WTO;
2) A policy is being developed to regulate e-commerce, product traceability and the activities of persons involved in the storage, packaging and delivery of goods.
What can we expect in the coming years in terms of e-commerce development policy:
- Entry of Kazakh companies into national electronic trading platforms, ensuring subsequent entry into international electronic trading platforms (support, consultation, promotion, protection);
- Differentiation of consumer/business protection levels depending on the format: B2B, B2C, C2C;
- Simplification of procedures for registering intellectual property rights for software;
- From restrictions → to stimulating e-commerce;
- Priority promotion of agricultural products in e-commerce.
