The Competition Tribunal has found pharmacy and health retail group Dis-Chem guilty of charging excessive prices for surgical face masks during the Covid-19 pandemic.<\/p>\n
The Tribunal ordered that Dis-Chem is liable for a R1.2 million fine.<\/p>\n
In its order and reasons, the Tribunal found that Dis-Chem contravened section 8(1)(a) of the Competition Act in that it charged an excessive price for three types of surgical face masks (SFM 50, SFM 5 and Folio50) to the detriment of consumers during March 2020.<\/p>\n
The Tribunal considered the background to the Covid-19 pandemic as the economic context in which Dis-Chem had increased its prices on three occasions. This included, among others, the fact that the virus was spreading globally and at an alarming rate<\/p>\n
\u201cAlthough the first case of Covid-19 in South Africa was only reported on 5 March and the National Disaster proclaimed on 15 March 2020, South Africans were already affected by the rampant spread of Covid-19 from January, with global supply chains being disrupted, international travel and events being cancelled,” it said.<\/p>\n
“Fears of infection already started to influence consumer behaviour in January and February. It is common knowledge that the Covid-19 outbreak has led to an increase in global demand for personal protective equipment (PPE) of which surgical masks constitute an essential component.”<\/p>\n
This increase in demand reflected in the massive increases in Dis-Chem\u2019s own sales volumes from January onward, it said.<\/p>\n
According to the Tribunal, the Competition Commission established that Dis-Chem exerted market power in its pricing of face masks by increasing prices to significant levels in the context of the Covid-19 pandemic.<\/p>\n
One such increase took place on the very day that South Africa\u2019s first Covid-19 case was announced.<\/p>\n
“We find that in the context of a global health crisis, with excess demand of surgical masks, considered to be essential in the fight against Covid-19, Dis-Chem has demonstrated that it enjoyed and exerted market power by materially increasing its prices, without a significant increase in costs, and significant increase in margins,” the Tribunal said.<\/p>\n
“But for the economic conditions brought about by the outbreak of Covid-19, it would not have been able to implement such material price increases in surgical masks.”<\/p>\n
The Tribunal has found that Dis-chem failed to show that its price increases were reasonable.<\/p>\n
Material price increases for the masks were measured at 47%-261%.<\/p>\n
The Tribunal said it was hesitant to issue the penalty requested by the Competition Commission (10% of turnover), given the economic climate of the country, but said that the price hikes “were not only exploitative to the detriment of consumers but also reprehensible in the context of Covid-19, and requires serious sanction”.<\/p>\n
“Accordingly, we find that an appropriate penalty in this case would be R1,200,000,” it said.<\/p>\n