COVID-19, excessive pricing, South Africa

Competition Commission makes good on its promise to clamp down on excessive pricing amid COVID-19 outbreak

Despite the overwhelming amount of excessive pricing complaints being referred to the South African Competition Commission (“the Commission”), it has remained unwavering in its commitment to prioritize and follow-through on bringing the full might of the law down on suppliers and retails who have used the prevailing circumstances to take advantage of consumers by increasing prices on essential goods and services with no cost increase justification.

This is illustrated in a media statement released by the Commission on 15 April 2020, wherein the particulars of the Commissions first referral to the Competition Tribunal (“the Tribunal”) for price gouging on facial masks was expanded upon, and which is due to be heard on 24 April 2020.

Babelegi Workwear Overall Manufacturers and Industrial Supplies CC (“Babelegi”) allegedly engaged in price gouging through its 500% mark-up on facial masks, which is considered as an essential good, for the period 31 January 2020 to 5 March 2020. Babelegi’s supplier is also under investigation by the Commission for allegedly engaging in excessive pricing after it subsequently came to light that the said supplier purportedly increased its input prices.

In a media statement issued on 31 March 2020, the Commission aired its concerns  in and prioritization on suppliers and retailers who charge excessive prices on COVID-19 essentials, as well as complainants who are considered essential service professionals (such as doctors, policemen etc). The Commission also outlined the expedited preliminary investigations it will undertake in complaints. In this respect, respondent firms have 48 hours in which to confirm or rebut the allegations brought against it. Importantly, the Commission has showed that some complaints may indeed be justified where firms provide a valid cost increase justification. Accordingly, not all acts of price increases will be condemned as price gouging.

As highlighted by the Commission, firms can expect to see a wave of prosecutions in the coming days. The Commission has already concluded (but not yet referred) numerous price gouging complaints, to name a few:

  • A pharmacy has increased its mark-up on face marks and sanitizers by more than 300%;
  • A hardware store has allegedly increased the price of surgical gloves from R99.99 to R170.00 within one week absent any cost increase justification; and
  • A wholesaler of chicken has marked-up chicken pieces by up to 50%, also absent any cost increase justification.

It is important to keep in mind that firms engaging in excessive pricing, price fixing, allocation of markets and market shares and bid rigging risk facing a fine of up to 10% of their annual turnover, and risk a fine of up to 25% of their annual turnover in respect of repeat offences. Furthermore, complaints regarding price fixing, the allocation of markets and market shares and bid rigging could result in certain directors who engage in or initiate such contraventions with imprisonment of up to 10 years.

The spike in competition law contraventions amidst the COVID-19 outbreak is not unique to South Africa, the Ministry of Trade in Rwanda has itself imposed fines on 178 companies to the amount of RwF of 15 850 000 to date. Furthermore, the Competition Authority of Kenya (“CAK”) has shown its determination in prosecuting exploitative conduct during the outbreak in the remedial order it issued to Cleanshelf Supermarkets for unconscionably adjusting prices of sanitizers.  Cleanshelf was ordered to find and refund all consumers who purchased the sanitizers above the usual selling price.

There is little doubt that the Commission will continue its endeavor in prosecuting COVID-19 related competition complaints, it may very well be slowed down due to the sheer explosion of complaints, but firms should not be quick to translate this voluminous burden as a gap in competition law enforcement that can be taken advantage of. Akin to his observation, Tembinkosi Bonakele, Commissioner of the Competition Commssion said “The Commission has now gone past the stage of moral suasion and appeals to patriotism to stop abuse of market power by those seeking to exploit consumers at the worse possible time – the law must take its course – we will see a wave of prosecution of firms in the next coming days.”

 

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