Centrum Pharmacy Settles Excessive Pricing Complaint
On 19 March 2020, the Minister for Trade and Industry published regulations (“Consumer Protection Regulations”) in order to protect consumers against unconscionable commercial practices during the national state of disaster. These Consumer Protection Regulations stipulate that an increase in the price of an essential good (such as masks, hand sanitiser or other essential goods) which does not correspond with an increase in the cost of providing that good, or an above average margin increase, is grounds for excessive pricing. This is a prohibited practice for dominant firms in terms of the Competition Act of 1998 (“the Act”).
On 20 March 2020, the Competition Commission (“Commission”) received information about Centrum Pharmacy allegedly engaging in excessive pricing in relation to face masks. Upon investigation, the Commission found that, Centrum Pharmacy is dominant in that it does indeed have market power (i.e. the ability to act independently of its competitors and customers) in the market for the supply of pharmaceutical products to consumers in the Boksburg area. As a result of this finding any proven excessive pricing would constitute a breach of the Act.
In this regard, the Commission found that the average mark up on face masks at Centrum Pharmacy in March 2020 was approximately 150%. This gross increase of price lead the Commission to conclude that Centrum Pharmacy was in breach of the excessive pricing provisions under the Act and the Consumer Protection Regulations.
In light of these findings, Centrum Pharmacy agreed to enter into a consent agreement with the Commission. The consent agreement, concluded on 16 April 2020, states, amongst others, that Centrum Pharmacy will desist from excessive pricing conduct and donate hand sanitizers, face masks and gloves to the value of R25 410.00 to two old age homes situated in Boksburg.
This investigation and consent agreement indicate the Commission’s determined and strict stance on excessive pricing during this Covid-19 period. It is worth highlighting that the Consumer Protection Regulations make provision for some harsh penalties. For example, if a company is found guilty of excessive pricing by the Competition Tribunal, the penalty imposed may be a fine of up to R1 000 000 or even up to 10% of its annual turnover. While businesses may be tempted to capitalise on these uncertain times, the competition authorities are keeping a watchful eye in order to protect consumers.