The domestic trade and consumer affairs ministry is coming down hard on registered direct-marketing companies that stand accused of profiteering.

These companies are said to be selling low-quality products at high prices, mainly by holding out the lure of grand prizes in bogus lucky draws.

The ministry's Penang director Fahmi Kasim said about 10 cases have been heard by the state consumer tribunal over the past two years.

It ordered the companies to refund the full amount to aggrieved parties and fined them between RM20,000 and RM30,000 per case as well.

Fahmi said action has also been taken against such companies for various offences under the Trade Description Act 1972, Direct Sales Act 1993 and Consumer Protection Act 1999.

His department is empowered to recommend the revocation of their operating licences and to initiate court action against the directors.

Under Section 14 of the Consumer Protection Act, a company or director can each be fined up to RM100,000, while the director can be jailed up to three years upon conviction.

Over the past two years, about five company directors charged in Penang courts had pleaded guilty and paid fines ranging between RM20,000 and RM30,000.However, they were not jailed.

Several cases are still pending in court.

Modus operandi

Fahmi said the department is prepared to recommend the revocation of the companies' licences if they are repeat offenders.

Although no such action has been taken in Penang to date, at least five companies have lost their licences nationwide over the past two years.

Fahmi also said enforcement alone would not eliminate the problem and said that consumers would have to play their part. The department is assisting the process by conducting public seminars and forums.

He said most of the companies involved in such activities in the northern region are based in Seberang Perai, but that their operations stretch from Ipoh to the border towns of Padang Besar and Bukit Kayu Hitam.

"These companies may operate under different names and deal in various products, mainly electrical appliances, but use a similar modus operandi," he told malaysiakini.

An agent usually phones a consumer to say that he or she has won a grand prize in a lucky draw - such prizes include locally-made cars and motorcycles. The consumer is told to go to the marketing company's office to collect the prize.

At the office, the consumer is first persuaded to buy the company's products, offered on 3+1 promotion sale, to qualify for the lucky draw. Home theatre sets are the main products on sale.

In most cases, consumers end up paying more than RM3,000 for three electrical products, with another appliance offered free of charge, in the hope that they will win the grand prize. The agent even shows photographs of 'winners' in non-existent lucky draws.

It is only when the consumers use the products that they realise these are of low-quality. Often, within a month, they also find out that they have not won the grand prize either.

Consumer Association of Penang president SM Mohamed Idris criticised the situation, which he blamed on lax enforcement.

Calling on the department and local authorities to revoke the trading and operating permits of such companies, he supported the proposal to take offenders to court.

ATHI VEERANGGAN is malaysiakini's Penang-based stringer.