Commission investigating over 300 excessive pricing cases since virus outbreak

31st March 2020 By: Marleny Arnoldi - Creamer Media Online Writer

Commission investigating over 300 excessive pricing cases since virus outbreak

Since Cyril Ramaphosa declared a State of National Disaster on March 15, the Competition Commission has been flooded with complaints of retailers charging excessive prices for certain goods.

This is despite regulations having been put in place by Trade and Industry Minister Ebrahim Patel to prohibit anticompetitive conduct aimed at profiteering during the Covid-19 pandemic.

The commission has received 559 complaints, but 250 of these matters fall outside the scope of the Competition Act and cannot be pursued.

The balance of the complaints, however, against retailers and suppliers are being investigated. The complaints relate to products that have become essential amid the virus outbreak in South Africa, including hand sanitisers, face masks, toilet paper and flu medication.

The commission says it is prioritising those cases against national retailers and suppliers, as well as cases from complainants who are essential services professionals, such as doctors and dentists.

About 100 letters have been issued to national retailers, suppliers and independent suppliers notifying them of the complaints, to which these companies have 48 hours to confirm or rebut the allegations.

The responses received so far vary: in some instances, the alleged price increases are explained as the difference between December/January promotional pricing and the pricing reverting back to normal in February, coinciding with the pandemic. 

There are, however, instances where price increases are not justified and the commission will pursue enforcement.    

Following its inquiries, the commission has witnessed some of the large national retailers instituting pricing discipline across their branches, including Massmart, which recently announced a price freeze in all its stores – Makro, Cambridge Food, Game and Cash & Carry – for the duration of the nationwide lockdown.

As of March 31, Spar Group has started sharing with the commission promotional prices for essential goods for the upcoming three weeks. The list covers all basic goods such as sugar, detergents, flour and chicken. 

The Spar Group motivated that it was alerting the commission so that when prices go back to normal (pre-promotion price) after the promotion, they are not deemed by customers as having increased prices.

The commission highlights that some independent retailers have been responsive. For example, AJ Safety, which is a small independent retailer based in Secunda, took a decision to refund customers the balance that it overcharged for face masks following the commission’s engagements.

AJ Safety had increased the price of dust masks from about R5 to R25. However, following the commission’s engagement, the owner of AJ Safety said he was not aware that the store manager had increased the price of dust masks.

The company has since decreased the price and has started the process of refunding all those customers who bought the masks at an inflated price. AJ Safety submitted invoices to the commission showing that it has credited some of the customers about R19, which is the amount that it overcharged them.

The commission says it is working closely with the National Consumer Commission to streamline investigations to minimise duplication.

The commission has also noted with concern the spiralling prices of agricultural products such as wheat, white maize, sunflower seeds, carrots, onions and tomatoes.

There have been complaints streaming in that are related to these basic food products, whose spiralling prices hurt poor people the most.

The commission is monitoring these prices in consultation with other stakeholders in the policy sphere and is also probing these price hikes with the traders and suppliers of these products. “Appropriate steps and action will be determined after having considered all relevant factors that contribute to the costs of these product.”

The Competition Act prohibits various acts of excessive pricing, price fixing, allocation of markets and market shares, and bid rigging. Any firm found to have engaged in such acts faces penalties of up to 10% of annual turnover for the first offence and up to 25% of annual turnover for a repeat offence.

For price fixing, allocation of markets and market shares, and bid rigging, the directors or persons with management authority who engage in such acts or instigate these face imprisonment of a period not exceeding ten years.