Dis-Chem faces Competition Tribunal for hiking prices during coronavirus pandemic

The Competiton Commission has referred Dis-Chem to the Competition Tribunal for excessive pricing during South Africa’s coronavirus pandemic.

This referral follows an investigation by the commission which found that Dis-chem charged excessive pricing on essential hygienic goods to the detriment of customers and in contravention of Section 8 of the Competiton Act, it said in a statement on Thursday (23 April).

“From 28 March, the Commission received several complaints from the public against several retail stores owned by Dis-Chem foe engaging in excessive pricing of face masks, specifically dusk and surgical masks.”

Some of the examples highlighted by the commission include:

• For surgical mask ‘blue 50PC’, the average price was inflated from R43.47 (excluding VAT) per unit in February 2020 to R156.96 per unit in March 2020. A price increase of 261%.
• For surgical mask ‘5PC’, the average price was inflated from R13.27 (excluding VAT) per unit in February 2020 to R19.03 per unit in March 2020. A price increase of 43%.

“People who seek these essential products ought to appreciate that these are literally life-saving items right now,” said competition commissioner Tebinkosi Bonakele.

“They shouldn’t be exploitative and take advantage of cash-strapped consumers during the worst time in our history. We will spare no effort in protecting the consumer.”

Pricing regulations

Shortly after the declaration of Covid-19 as a national disaster, government published regulations aimed at stopping price gouging in South Africa.

The new pricing regulations prohibit dominant suppliers from charging excessive prices for certain specified goods and services, says Tamara Dini, co-head of Competition at law firm Bowmans.

Dini said that the new regulations around pricing provide that a price increase by a dominant supplier of specified critical medical equipment and basic consumer goods will be ‘a relevant and critical factor in determining whether a price is excessive or unfair’.

They further indicate the price will be deemed to be ‘excessive or unfair’in terms of the Competition Act, in circumstances where the price increase:

• Does not correspond to, or is not equivalent to, an increase in cost; or
• Increases the net margin or mark-up on the product or service above the average margin or mark-up in the three months prior to 1 March 2020.

“Under the Act, dominant firms alleged to have engaged in excessive pricing must be able to demonstrate that the price charged was reasonable,” said Dini.

“If not, a penalty of up to 10% of the firm’s annual turnover may be imposed for a first offence and up to 25% if the conduct is substantially a repeat by the same firm of conduct previously found by the Tribunal to be a prohibited practice.”

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