South Africa

09 June 2020

South African Competition Tribunal fines company for raising price of face masks due to COVID-19

Since the World Health Organization declared the COVID-19 virus an international health emergency, the pharmaceutical sector around the world has increased the price of its products, especially face masks.

Last week, the South African Competition Tribunal ruled that the price offered for face masks by Babelegi Workwear and Industrial Supplies CC (which is part of Babelegi) was excessive.

The Tribunal has found that Babelegi contravened section 8(1)(a) of the Competition Act by charging excessive prices for face masks that it sold to customers between 31 January 2020 and 5 March 2020 (the complaint period). The contravention relates to the sale of face Dust Mask FFP1 Pioneer (FFP1 masks).

According to the facts exposed by the Competition Tribunal, located in Pretoria, the company Babelegi considerably increased the prices of face masks on February 10 and March 5 (when South Africa announced the first case of COVID-19).

The Court considered that Babelegi took advantage of its dominance on the South African market during the pandemic crisis.

“As is clear from its pricing conduct, Babelegi exploited this crisis situation, when it successively and massively increases both its prices and mark-ups for masks during the Complaint Period …”, said the Tribunal that published some of their sentences in a Press Release. “One can reasonably infer that Babelegi had market power during the Complaint Period since it behaved to an appreciable extent independently of its competitors, customers or suppliers. Babelegi is therefore a dominant firm during the Complaint Period in terms of section 7(c) of the Act”.

The South African company was aware of the public utility of face masks for the citizens of South Africa and the court determines that they took advantage of this situation to increase the prices of their products: “Babelegi knew full well that there was a significant increase in demand for masks … and took advantage of customers and consumers amid the international Covid-19 health crisis. This leads us to conclude that Babelegi’s prices charged during the Complaint Period were to the detriment of consumers and customers”.

“It would be wholly against the public interest if Babelegi were to financially benefit from its excessive pricing conduct. This means that the administrative penalty should exceed the excess profit made by Babelegi”, said the Tribunal.

Finally, the Court sentenced Babelegi to an administrative penalty (fine) of R76,040 ($4,554.69).

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