How businesses ripped off South Africans during the lockdown

The Competition Commission has published new data showing how some businesses have used South Africa’s lockdown to hike the price of goods.

Presenting to parliament on Tuesday (19 May), the Commission said that has since the beginning of the national disaster on 17 March 2020, it has received a total of 1,354 complaints and tip-offs from the public.

The complaints are investigated in terms of Section 8 of the Competition Act, which prohibit excessive pricing.

“An excessive price refers to a price for a good or service which bears no reasonable relation to the economic value of that good or service, or is higher than the value of that good or service,” the Commission said.

“It is prohibited for a dominant firm to charge an excessive price to the detriment of consumers. The threshold for dominance is turnover of over R5 million and the possession of market power.”

The Commission said that most of the complaints relate to the allegations that retailers, traders, suppliers and pharmacies are charging excessive prices for Covid-19 related products including:

  • Masks and sanitisers;
  • Protective gear (PPEs), and;
  • Certain essential goods and basic food items.

From the cases that it screened, the Commission said that it noticed the following trends:

  • Retailers, traders or suppliers increased prices and margins in response to increases in: Public demand and panic buying; Input costs and cost of imports; Rand depreciation and/or supply disruptions because of Covid-19.
  • Some firms have increased prices despite no significant increase in input costs (price gouging).
  •  There was an increase in  ‘opportunistic trading’ through various platforms, such as existing retail channels, direct sales to the public or online platforms of items that were not previously traded with huge mark-ups.

Complaints 

The Competition Commission said that the largest proportion of complaints about excessive pricing were from Gauteng (43%).

By comparison, KZN (14%), the North West (13%) and the Western Cape (12%) received comparatively fewer cases.

The largest portion of complaints around excessive pricing was about the high cost of basic food products (265 complaints).

Other complaints focused on the price of masks (164 complaints) and the cost of sanitisers/wipes (125 complaints).

While the Competition Commission did not provide details on all of its cases, it did highlight some of the most egregious companies which it dealt with.

It should be noted that some of these cases are still ongoing and that the case may be found in favour of the firm.

  • Babelegi Workwear Overall Manufacturers & Industrial Supplies:  Price increases of facial masks from R41 per box up to R500 per box which account for markups in excess of 500%;
  • Dis-Chem Group: Price increases of surgical face masks increased in excess of between 43% and 261%;
  • Hennox: Price increases of Filtering Face Piece 1 (FFP1) masks by up to 969.07%;
  • Sicuro Safety: Price increases of FFP1 masks by up to 956.07%.

The firms could face penalties of up to 10% of annual turnover.

Punishment

The Competiton Commission said it also achieved a number of settlements and consent orders with several respondent firms, with the following broad undertakings:

  • Corrective action to prices/margins – reduction of up to 20%;
  • Penalty or donation that bears some relationship to the excess profits earned to charity organizations, old age homes and the Solidarity Fund, and;
  • Penalty that exceeds excess profits earned.

To date, a total of 35 firms are in various stages of settlement, the Competition Commission said.

It added that 13 settlements have been confirmed by the Competition Tribunal through consent orders,.

The total value of the settlements finalised is equal to R12,854,694.

Food prices 

The Commission said it is also monitoring food market pricing to understand retail level inflation & enforcement action:

It noted that rand depreciation has resulted in price increases for imported crops such as wheat (25%) and rice (30%), which is feeding through to higher flour/bread/rice prices amongst suppliers and the retail sector.

It said that domestic maize prices increased due to season end shortages but will drop significantly as the new bumper crop comes in late May.

Fresh produce was also initially impacted by panic buying of staples (onions, potatoes, tomatoes), leading to some price spikes, it said.

However, a drop in demand from restaurants and constrained consumers has seen prices steadily fall on most fresh produce since lockdown as supply outstrips demand.


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How businesses ripped off South Africans during the lockdown