Competition Commission still seeing price hikes up to 900% during coronavirus outbreak

Competition Commissioner Tembinkosi Bonakele. (File, Bloomberg)
Competition Commissioner Tembinkosi Bonakele. (File, Bloomberg)

Competition Commissioner Thembinkosi Bonakele told Parliament on Tuesday that while 13 settlements worth R12 million have been secured from companies for uncompetitive behaviour and pricing, prosecutions are still pending for price increases as high as 900%.

The Competition Commission, empowered by the Competition Act to investigate, control and evaluate restrictive business practices, has vowed to act decisively against companies that use the coronavirus pandemic to hike prices beyond necessary margins.

The Competition Commission told a joint meeting of Portfolio Committee on Trade and Industry and Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour that since the beginning of the National Disaster in March, it has received a total of 1 354 complaints of anti-competitive behaviour and pricing from the public.

Bonakele said the complaints received by the Commission have been investigated in terms of Section 8 of the Competition Act, which prohibits excessive pricing.

"The complaints we received 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, and certain essential goods and basic food items," said Bonakele.

Bonakele said pandemic was likely to impact market dynamics, as the Commission was already anticipating "an increase in market concentration as well as an increase in merger activity on acquisitions of distressed firms".

Among instances of prosecution by the commission, Bonakele said Babelegi, workwear manufacturers and industrial supplies, were prosecuted for prices increases of face masks from R41 per box up to R500 per box with mark ups in excess of 500%.

He said Dis-Chem Group was prosecuted for price increases of surgical face masks increased in excess of between 43% and 261% while Hennox 638 CC were prosecuted for increases of filtering face pieces by up to 969.07% and Sicuro Safety were prosecuted for increases of masks by up to 956.07%. He said the firms could face penalties of up to 10% of annual turnover.

Bonakele said 13 settlements have been confirmed by the Competition Tribunal through consent orders, with a total value of the settlements concluded at R12.8 million.

"The Commission has achieved a number of settlements and consent orders with several respondent firms, with corrective action to prices, reduction of up to 20%, penalties or donations related to the excess profits earned to the Solidarity Fund and charities. To date, a total of 35 firms are in various stages of settlement," he said.

Monitoring the food market

He said the Commission would continue monitoring food market pricing to understand retail level inflation and enforce action where necessary.

"Rand depreciation has resulted in price increases for imported crops such as wheat and rice, which is feeding through to higher flour, bread and rice prices amongst suppliers & retail.

"Domestic maize prices increased due to season end shortages but will drop significantly as the new bumper crop comes in late May. Fresh produce initially impacted by panic buying of staples, leading to some price spikes. The drop in demand from restaurants and constrained consumers has seen prices steadily fall on most fresh produce since lockdown as supply outstrips demand," he said.

Competition Commission chief economist James Hodge said while the Commission does not follow or predict inflation as the South African Reserve Bank would, it would continue to monitor inflation in food commodities and keep track of essential items to see how prices move.

"As the lockdown winds down and more stores come online, there may be pressure on the ability to price gouge on items. In time we may see prices going down instead of price increases," said Hodge.

"On wheat we engaged DTIC on the tariffs. It is a careful balancing act as we need incentive for new crop to be planted. The rand depreciation is a big factor and so is the need for other markets to ensure their own food security," Hodge added.

Sectoral exemptions

Bonakele told parliamentarians that the Commission managed to negotiate exemption regulations in the healthcare sector relating to supply response of health services and products, the banking sector relating to debt relief measures, the retail property industry for rental relief and the hotel industry on supply of space for potential quarantine premises.

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