African antitrust authority edges closer to becoming price regulator

The South African Competition Commission warns against unjustifiable price increases of basic foods, particularly edible oil

By Gina Lodolo and Nicola Taljaard

Recent increases in the prices of edible oils have been the focus of news reports. Some retailers have been garnering particular attention for limiting the amount of oil that can be purchased per consumer.

The Chief Economist of the South African Competition Commission (“SACC”), James Hodge, highlighted the price of oil increasing by 42% over a year. This is significant as it reflects 3%-5% of poorer households’ food budget. It has been reported that, although there were already market factors last year affecting the price of oil, the Russia-Ukraine war has certainly exacerbated the situation. Hodge warns, however, that retailers and edible oil companies alike should not unreasonably use the Russia-Ukraine war to raise prices to unjust levels by inflating their price increases more than necessary, thereby seeking to earn ‘excessive profits’.

The SACC will look into the issue more closely. If and when the SACC comes to the conclusion that companies profiteer from their customers, they will act accordingly.

Where costs go up, there may be justifiable increases in prices, however, its recent warning against unjustifiable increases indicates that it will act where prices increase beyond justifiable cost-increase levels. Accordingly, the SACC is considering items that indicate unusual increases, even when taking into consideration the prevailing inflationary environment.

To this effect, Hodge emphasised that the SACC makes use of its ‘monitoring unit’ which tracks price increases by comparing increases in wholesale prices to increases in retail prices.

The work of the monitoring unit is particularly timely in light of its recent Report on Essential Food Pricing Monitoring, which was released on 1 March 2022. The Report clearly communicated the SACC’s intention to start tracking price increases and monitoring dynamics prevalent in the South African food value chain, which made it apparent that the SACC is cognizant of the impact of the significant disruptions and events which have characterized the pandemic years. The SACC has identified this impact to reflect particularly through supply chain disruptions, trade restrictions, border closures and the like.  

Should the SACC suspect that retail price increases have surpassed wholesale price increases, complaints may be initiated by the SACC in terms of Section 49B of the Competition Act 89 of 1998. Thereafter, the complaint will be investigated in terms of Section 49B(3) of the Act to determine whether it will be referred to the Competition Tribunal for adjudication.   

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