COVID-19: Competition Tribunal fines Dis-Chem R1.2m for excessive pricing of masks

The Competition Tribunal has fined Dis-Chem Pharmacies R1.2 million for charging excessive prices for surgical face masks during the COVID-19 pandemic.

In a statement on Tuesday, the tribunal said it had found Dis-Chem guilty of overcharging consumers for three types of masks – SFM 50, SFM 5 and Folio50 – in March 2020.

Dis-Chem “exerted market power by materially increasing its prices without a significant increase in costs” while at the same time benefitting from a significant increase in margins, the tribunal found.

‘Utterly unreasonable’

It added that were it not for COVID-19 economic conditions, Dis-Chem would not have been able to increase prices by between 47 and 261 percent.

The tribunal said, “In our view, Dis-Chem’s massive price increases of surgical masks during the complaint period, which constitute an essential component of life saving first line protection in a pandemic of seismic proportions, without any significant increases in costs, are utterly unreasonable and reprehensible.

“Accordingly, we find that Dis-Chem has failed to show that its price increases for SFM50 and SFM5 and Folio50 were reasonable in the circumstances of the Covid-19 pandemic.”

The tribunal’s ruling follows a complaint referred to it by the Competition Commission in April. It held a hearing on the matter in early May after Dis-Chem denied claims of overpricing.

The commission said at the time, “For surgical face mask blue 50PC, the average price was inflated from R43.47 (excl VAT) per unit (50 masks) in February 2020 to R156.95 (excl VAT) per unit (50 masks) in March 2020, a price increase of 261 percent.

“For surgical face masks 5PC, the average price increased from R13.27 (excl VAT) per unit (5 masks) in February 2020 to R19.03 (excl VAT) per unit (5 masks) in March 2020, a price increase of 43 percent.”

Profit margin

It added that Dis-Chem’s gross profit margin for surgical face masks foliodress blue increased from 20 percent in February 2020 to 45 percent in March 2020 despite its input costs remaining the same.

In a statement in April, Dis-Chem said the information and data the commission used during its investigation did not establish any contravention of the Competition Act.

“Dis-Chem’s pricing is within regulated guidelines and does not engage in price gouging or excessive price fixing,” it said.

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