Zero tolerance for unlawful profiteering – The Competition Commission takes strong action
04 May 2020
Following hundreds of complaints on social media and to various Governmental Institutions, the Competition Commission recently released a media statement addressing anti-competitive conduct during the state of national disaster. In its statement, the Commission emphasised that both the Competition Act and Disaster Management Act permits the Competition Commission to prosecute abusive behaviour. The Commission explained that these complaints mostly relate to sale of hand sanitisers, face masks, toilet paper, flu medication and other essential products at inflated prices. In its media release, the Commission advised that it has now issued more than 100 letters to suppliers in order to initiate preliminary investigations.
The first case to be heard by the Commission involves Overall Manufacturers & Industrial Supplies CC (“Babelegi”), and the excessive pricing of Babelegi Workwear, especially face masks. “Babelegi’s increased their prices by at least 888% when comparing the prices charged on 9 December 2019 to the prices charged on 5 March 2020”. This resulted in an increase in the selling price of R41 per box of face masks to R500 per box.
Recently, the Competition Tribunal also approved and confirmed its first consent agreement relating to excessive prices. A well-known pharmacy in Gauteng was found to increase their mark-up of essential products by more than 100%. However, the prices for non-essential goods remained unaffected. The Tribunal found the actions of the pharmacy to contravene Section 8(1) of the Competition Act which prohibits dominant firms from increasing its prices to the point where it becomes abusive and detrimental to consumers, and Regulation 4 of the Consumer and Customer Protection and National Disaster Management Act, which also prohibits excessive pricing. Ultimately, the Competition Tribunal ordered the pharmacy to donate hand sanitisers, surgical gloves and face masks to the value of R25 410 to nearby old age homes.
It is important to note that in terms of Section 9 of the Competition Act, material price increases of certain products may only be considered excessive or unfair if the price increase does not correspond with the increase in the cost of providing (cost to manufacture, distribute or delivery cost) those goods and services.
It is clear that the Commission has set out to have a zero-tolerance stance when dealing with companies and firms abusing their temporary dominance in the market, especially when it comes to essential products.
It is important when you are considering increasing the price of your goods or services during the COVID-19 pandemic, that you are cautious and that you base your increase on the increase in the cost of providing those goods and services and not on the lack of competition in the market. Failure to do so could lead to your business being investigated by the Commission and possibly being fined. The penalties for abusive pricing include a fine of 10% of the supplier’s annual turnover for a first-time offence and 25% of annual turnover for a repeat offence.
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