Pharmacy to fight gouging fine

● JSE-listed pharmaceutical group DisChem intends appealing against the Competition Tribunal’s R1.2m fine for price gouging in the sale of surgical masks.

Dis-Chem CEO Ivan Saltzman said this week the group would take the matter on appeal to the Competition Appeal Court as “the decision seems to contain a number of errors of fact and law”.

“The Competition Tribunal failed to take into consideration that Dis-Chem was reacting in a responsible manner to significant disruptions to the market and that it increased its retail prices whilst it was facing significant price increases and shortages from its suppliers.

“Our imperative was to obtain masks to meet customer demand, even though our local suppliers had no available stock and we had to pay higher prices to import millions of masks. There is no avoiding the commercial need to cover these higher input costs. When input costs reduced, we passed that reduction onto our customers in a series of price reductions. Importantly, we had already begun passing on these cost-savings before the Competition Commission launched its investigation.”

The tribunal found that the Competition Commission had “established that Dis-Chem exerted market power in its pricing of face masks by increasing its prices to significant levels in the context of the Covid-19 pandemic”.

The tribunal said in a statement on Tuesday that one such increase took place on the very day that SA’s first Covid-19 case was announced.

“We find that in the context of a global health crisis, with excess demand of surgical masks, considered to be essential in the fight against Covid-19, Dis-Chem has demonstrated that it enjoyed and exerted market power by materially increasing its prices, without a significant increase in costs, and significant increase in margins. But for the economic conditions brought about by the outbreak … it would not have been able to implement such material price increases in surgical masks.”