By Thato Mahlangu
A company found guilty of inflating prices of masks and personal protection gear has agreed to pay millions in fines after the Competition Commission conducted an investigation into its activities, following complaints.
The commission said on Wednesday it referred a matter to the Competition Tribunal after finding evidence of price inflation during the lockdown. An agreement was reached between the company and the tribunal after its directors admitted to this unethical practise.
“We found that Matus (a protective gear supplier) unreasonably increased the prices of dust masks resulting in excessively inflated gross profit margins in contravention of the Competition Act and Regulation 4 of the Consumer Protection Regulations,” said the commission.
It said in terms of the agreement, Matus would pay an administrative penalty of R5.9-million.
“The company will also contribute R5-million to the Solidarity Fund. Further, it will, with immediate effect, reduce its gross profit margin on dust masks to acceptable levels for the duration of the state of national disaster,” said the commission.
“Matus supplies and distributes personal protection equipment such as dust masks (including FFP1 and FFP2 masks), overalls, hand sanitisers, fire protective gear, and first aid kits, among others. These are procured from local and overseas manufacturers,” said commission spokesperson Sipho Ngwema.
Commission clamps down on companies accused of price inflation
Ngwema said the commission was still pursuing other companies and retailers who were accused of inflating prices since the Covid-19 outbreak, and has reached settlements with some. In a number of cases, the price adjustments were made as recently as March 2020.
He said such settlements would include the reduction of prices and the contribution of various amounts or essential hygienic items, based on the merits of each case, to charity organisations nominated or approved by the Commission, including the Solidarity Fund for Covid-19.
“In some cases, some retailers have agreed to freeze price increases and/or run specials,” Ngwema said.
Big retailers also guilty
After receiving numerous complaints, the commission also charged drug store chain Dis-Chem with inflating prices, particularly of blue surgical face masks. The commission has referred Dis-Chem to the Competition Tribunal, asking for the maximum penalty.
UPDATE, 2 May 2020: We previously reported that Dis-Chem had been found guilty of price inflation. This was incorrect information as the case is still in progress, and we have accordingly amended our article to reflect the current situation.
In its media statement announcing the referral to the tribunal, the Competition Commission said: “Dis-Chem has charged excessive prices on essential hygienic goods to the detriment of customers and consumers in contravention of Section 8(1)(a) of the Competition Act.”
For a pack of 50 blue surgical face masks, Dis-Chem inflated the average price from R43.47 (excl VAT) in February 2020 to R156.95 (excl VAT) in March 2020, a price increase of 261%, explained the commission. Furthermore, the average price of a pack of five blue surgical face masks rose from R13.27 (excl VAT) in February 2020 to R19.03 (excl VAT) in March 2020, an increase of 43%.
Commissioner Thembikosi Bonakele said the company should have not exploited its customers during these economically difficult times.
“People who sell these essential products ought to appreciate that these are literally lifesaving items right now. 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.”
Dis-Chem to challenge findings against it
According to an article published by Moneyweb, Dis-Chem denied the claims, saying its pricing was within regulated guidelines and it had not engaged in price-gouging or excessive price-fixing.
In an e-mail response, Dis-Chem told MoneyWeb that it was consulting its legal team and economic experts and would oppose the complaint referral.
“It does not believe that the information and data provided to the Competition Commission during its investigation establishes any contravention of the Competition Act,” said MoneyWeb.