Watchdog ‘driven by blood lust’

Dis-Chem has accused the Competition Commission, which investigates cases of anticompetitive behaviour by companies, as being motivated by “blood lust” in its desire to win a case and impose a more than R2bn fine on it for allegedly inflating mask prices during the Covid-19 outbreak.

Dis-Chem has accused the Competition Commission, which investigates cases of anticompetitive behaviour by companies, as being motivated by “blood lust” in its desire to win a case and impose a more than R2bn fine on it for allegedly inflating mask prices during the Covid-19 outbreak.

The commission charged the pharmacy group with billing excessive prices after it increased the cost of surgical masks in February by more than 200%, without a rise in input costs. It recommended a fine of 10% of Dis-Chem’s annual turnover, which was about R22bn in its latest results. .

The Competition Tribunal, which acts as a court, will make the final decision.

The commission has received more than 900 complaints from consumers who say they paid too much for masks and hygiene products needed to protect themselves against Covid-19.

Dis-Chem advocate Michelle Le Roux said the commission had not proved the retailer was a dominant seller of surgical masks as required by law.

DOMINANT COMPANY

The regulations banning increasing profit margins for essential goods under the Disaster Management Act were signed into law on March 19 by trade & industry minister Ebrahim Patel.

The period in February and March for which Dis-Chem has been charged was before the regulations were enacted.

The Competition Act section 8 only allows an excessive price charge to be laid against a “dominant” company with more than 35% market power and is able to set prices independently of competitors for long periods of time. Companies that have been charged in the past under this act include steel manufacturer Arcelor Mittal and fuel producer Sasol.

The Dis-Chem case, which was heard on Monday, is expected to show whether the Competition Commission can use the coronavirus pandemic to charge companies for shortterm price hikes on essential goods needed to fight against the Covid-19 disease without proving the companies have longterm market dominance.

In its submission, the commission argued that the coronavirus crisis “has conferred upon Dis-Chem a temporary market power, which has afforded it the opportunity to exploit consumers and customers, by charging an excessive price for its surgical masks in the midst of a devastating pandemic”. It said the poor were made more vulnerable by excessive prices.

Commenting on the proposed penalty, Le Roux said the fine should be worked out as percentage of turnover from the sale of masks for the period in question.

The fine requested was “shockingly inappropriate and far beyond punitive”.

“The commission is feeling blood lust ... it seems to have forgotten to some sense of proportion,” she said.

The commission’s chief economist, James Hodge, testified that Dis-Chem had provided “no justification” for its price increases of about 200% and had shown no increased costs.

The highest price charged was R175 for 50 masks — at R3.50 a mask in the pack — but some pricing details remained confidential. The case continues on Tuesday.