By Megan Armstrong and Matthew Freer

South African consumers have received warning to expect oil price hikes from 1 April 2026, at a time when households are already price-constrained and cost-conscious. Naturally, as oil prices increase, consumers can reasonably expect these hikes to be passed down through corresponding price increases on the respective goods and services. The question to business is how much of an increase is reasonably permitted within the ambit of competition law, and what should the timing of such an increase be?

The Commission’s Warning

In response to the anticipated price volatility, the Competition Commission of South Africa (the “Commission”) has issued a media statement warning of heightened risks of price gouging across several sectors. The Commission stated the following:

“The risk is prevalent for unregulated fuels such as diesel retail prices and jet fuel; oil-based products such as nitrogen-based fertilisers and plastics; fuel-intensive services such as air, land and sea transport and logistics; and all other products and services that rely on these inputs, particularly food products and delivery services.”

Additionally, the Commission set out clear rules for businesses navigating the looming price increase:

• “Businesses may not increase prices in anticipation of future fuel cost increases; they may only increase prices once they experience actual fuel cost increases.
• Businesses that experience fuel cost increases may only increase their prices in proportion to the actual fuel cost increases they experience.
• In effect, these two conditions mean that product or service margins after the surge in fuel prices should be no higher than the margins prior to the fuel price increase.
• Furthermore, once fuel costs decline, product or service prices should decline immediately.”

What is Price Gouging?

Price gouging is the act of charging customers unreasonably high prices for goods or services typically in response to a crisis, natural disaster or demand shock where consumers have few alternatives and the product is a necessity. This behaviour sits at the intersection between business ethics and consumer protection in considering exploitation of a demand spike to maximise profits.

South Africa’s legal approach to this issue does not use the term “price gouging” directly in its primary statutes, rather the framework is built upon two distinct pillars. The first pillar is found in the Competition Act 89 of 1998. Section 8(1)(a) of the Act prohibits a dominant firm from charging an “excessive price to the detriment of consumers or customers”, a definition refined by the Amendment Act of 2018 to mean “higher than a competitive price” and where such a difference is “unreasonable”, targeting firms with substantial market power which abuse their dominance. The second pillar is enshrined in the Consumer Protection Act 68 of 2008. Sections 40 and 48 of this Act prohibit suppliers from engaging in unconscionable conduct and from supplying goods or services “at a price that is unfair, unreasonable or unjust”. This provision has a broader application, as it does not require a firm to be dominant. It applies to any supplier who takes unfair advantage of a consumer.

Considering the existing legislative framework on price gouging behaviour in South Africa, price gouging is then defined as the practice of increasing prices on essential goods or services during a declared disaster or crisis to a level that:

1.         Does not correspond to increased costs of providing the good or service; or

2.         Exceeds pre-crisis profit margins without justification; and

3.         Takes unfair advantage of those consumers with limited alternatives as a result of the emergency situation.

Lessons from COVID-19

The most significant development in South Africa with regards to price gouging came in response to the COVID-19 pandemic. On 19 March 2020, the Minister of Trade and Industry, Ebrahim Patel, published the Consumer and Customer Protection and National Disaster Management Regulations and Directions (the “Regulations“). They were designed to prevent an escalation of the disaster and to protect consumers from exploitative commercial practices during this period of vulnerability.

The Regulations formalised a cost-based test for determining excessive or unfair pricing, that a material price increase of an identified good or service will be considered indicative of excessive pricing if:

• it “does not correspond to or is not equivalent to the increase in the cost of providing that good or service“; or
• it “increases the net margin or mark-up on that good or service above the average margin or mark-up for that good or service in the three month period prior to 1 March 2020“.

Furthermore, the Commission’s 2021 Guide for Business Compliance with Price Gouging Regulations, emphasised that during a disaster, price increases must be strictly proportionate to cost increases, and businesses must not exploit temporary demand surges to inflate profit margins.

The Commission’s willingness to act was demonstrated early in the pandemic in the Babelegi case, where a firm was found liable for excessive pricing after increasing mask prices by over 1 000% while its own supply costs remained unchanged.

In essence, South Africa’s legal framework defines price gouging not by the final price itself but by seller behaviour, where an unjustified cost increase representing abuse of a temporary situation in which consumers are a captive market and desperate for essential goods and services. A framework established during COVID-19 now guides current pricing conduct and sheds some light on how the Commission would evaluate seller behaviour in relation to demand shocks arising from emergencies, natural disasters, or market disruptions.

What Businesses Should Do

Business should be mindful of not increasing prices in anticipation of the impact of the oil price increase and engage in corresponding price increases once these price increases have a clear and quantifiable impact on internal pricing mechanisms.

The wider public does have recourse available to contact the Commission, should it appear that a business is engaging in price gouging behaviour, or has responded too erratically to the market disruptions caused by the sudden spike in the oil price. The Commission has stated the following: “Given the heightened risk of price gouging during this period of oil price volatility, the Commission calls on the public and businesses to report instances where they believe price gouging is occurring so that the Commission can investigate.”

Ultimately, the lesson from COVID-19 remains unchanged in that price increases have to be justified by evident supply cost increases and not by opportunity. As the Commission has made clear, anticipation pricing and margin expansion will not be tolerated.