COVID-19: SOUTH AFRICAN SUPPLIER OF FACE MASKS FOUND GUILTY OF EXCESSIVE PRICING

By Tamara Dini Tuesday, June 02, 2020
  • SHARE THIS ARTICLE

On 1 June 2020 the South African Competition Tribunal (Tribunal) found Babelegi Workwear and Industrial Supplies CC (Babelegi) guilty of COVID-19 excessive pricing.

As discussed in our earlier newsflashes (accessible here and here), the South African Competition Commission (Commission) alleged that Babelegi had sold FFP1 dust masks at excessive prices during the period between 31 January 2020 and 5 March 2020, earning mark-ups in excessive of 500%.

The Commission referred the matter to the Tribunal on 9 April 2020, pleadings were exchanged between the parties in terms of expedited timelines, and the matter was set down for hearing on an urgent basis on 24 April 2020.

The Tribunal noted that Babelegi effected several price increases during the complaint period, the first on 31 January 2020, a day after the World Health Organisation declared COVID-19 a public health emergency of international concern. Two significant price increases were effected thereafter, with concomitant increases in Babelegi’s mark-ups. The Tribunal concluded that the price increases were successive, significant and unsubstantiated and that no rational and valid explanations were tendered for these.

The Tribunal also noted that from an economics perspective, and during the complaint period, the market was susceptible to exploitation as a result of the COVID-19 crisis, allowing Babelegi to exercise market power and act as a dominant firm in respect of the sale of FFP1 masks. The Tribunal found that Babelegi’s excessive pricing amounted to an abuse of that dominance.

The Tribunal also found that Babelegi’s price increases and mark-ups were unreasonable in that they bore no reasonable relation to the prices charged and mark-ups earned on the same products outside of the complaint period. The Tribunal concluded that Babelegi’s prices were detrimental to customers and consumers and imposed a penalty of ZAR 76 040. According to the Tribunal, the penalty exceeds the profits earned by Babelegi as a result of the impugned conduct and also reflects a warning to other market players to refrain from engaging in such conduct.