The Competition Tribunal has found Dis-Chem guilty of price gouging amid the COVID-19 pandemic, and fined the pharmacy chain R1.2-million.

In April, Dis-Chem was referred to court by the Competition Commission over public complaints of excessive price gouging on their face mask products. According to Fin24, Dis-Chem argued that the price hikes were necessary due to disruptions in supply and price increases from suppliers.

The Tribunal has now ruled that the company contravened the Competition Act.

“In its order and reasons, the Tribunal has found that Dis-Chem contravened section 8(1)(a) of the Competition Act (the Act) in that it charged an excessive price for three types of surgical face masks (SFM 50, SFM 5 and Folio50) to the detriment of consumers during March 2020,” the Tribunal wrote in a statement.

While a list of the Tribunal’s reasons will be released to the public soon, they briefly mentioned key excerpts.

“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 of COVID-19, it would not have been able to implement such material price increases in surgical masks…” wrote the Tribunal.

The Tribunal has found that Dis-Chem failed to show that its price increases were reasonable, and concluded that they engaged in excessive pricing to the detriment of consumers.

“The exploitative conduct of Dis-Chem of excessive pricing was particularly reprehensible. It exploited customers desperate to lay their hands on an essential item in the fight against a pandemic of global proportions, with potential consequences for consumers and public health… Not withstanding its professed commitment to the interests of consumers, Dis-Chem elected to increase its prices of surgical masks by exorbitant percentages in the context of the life-threatening outbreak of COVID-19. To this end we consider its conduct was not only exploitative of vulnerable consumers, especially the poor, but was especially egregious,” the Tribunal said.

Having regard to the aggravating and mitigating factors in totality we find that the aggravating factors far outweigh any mitigating factors. While we would be hesitant to impose a penalty of the magnitude requested by the Commission, we are of the view that Dis-Chem’s conduct was not only exploitative to the detriment of consumers but also reprehensible in the context of COVID-19, and requires serious sanction. Accordingly, we find that an appropriate penalty in this case would be R1 200 00 (one million and two hundred thousand rand).”

Picture: Facebook / Dis-Chem Pharmacies

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