Fine for pandemic price-hiking company set aside

Picture for illustration. A vendor arranges facemasks to sell on a roadside in Hyderabad on July 28, 2020. (Photo by NOAH SEELAM / AFP)

A court has quashed the R76 000 fine meted out to a Pretoria-based company this year for hiking the prices of its face masks by almost 900% during the early stages of Covid-19.

The Citizen reports from 9 December last year to 5 March this year, the price of Babelegi Workwear’s FFP1 masks increased from R50.60 to R500 for a box of 20; and in June, the Competition Tribunal found the company guilty of excessive pricing and fined it R76 040.

This prompted Babelegi to turn to the Competition Appeal Court, where Judge Dennis Davis handed down his ruling on Thursday.

He found justice would be best served by not imposing a penalty, saying Babelegi was “a small firm” and that it had only sold 76 boxes of masks at the inflated prices.

But the judge stopped short of overturning the guilty finding against Babelegi.

Babelegi had not been charged under the Competition Act, which bars dominant firms from hiking prices unreasonably in general. And its argument had been that it was not a dominant firm.

But Davis disagreed.

“During the complaint period, [Babelegi] faced no increase in costs in that it sold its existing stock of masks, all of which had been acquired at pre-Covid 19 prices,” he said.

“Accordingly, it might be asked: what other explanation is available for its ability to increase the prices of FFP1 mask by 888% over the relevant period other than that it could act with appreciable independence of its competitors, customers or suppliers?”

In short, for the relevant period, it had the power to control its prices without concern that a countervailing power of a competitor would cause it to reduce its prices during that period.

He said Babelegi had acted as if it was a monopolist, extracting the maximum price possible from those who purchased a product necessary to assist in slowing the spread of the virus.

“The actions of [Babelegi] took place in circumstances where it is possible to take judicial notice of the anxieties of purchasers as the wave of the Covid-19 pandemic finally broke onto South African shores,” Davis added.

Babelegi, through its lawyers, declined to comment yesterday.

But Competition Commissioner Tembinkosi Bonakele welcomed the judgment, despite the fine originally handed down having now been set aside. He said it vindicated the commission’s proactive stance on investigating and prosecuting excessive prices during the advent of the pandemic.

“I’m also very happy that this really places the commission and the competition authorities of South Africa as pioneers in enforcement and protection of consumers during a national disaster.

“This brings certainty to the question of whether or not we can prosecute such cases.”

Bernadette Wicks / The Citizen