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Dis-Chem to challenge Competition Tribunal's fine

Dis-Chem not happy with the guilty finding by the Tribunal and intends to appeal the ruling. /Luba Lesolle / Gallo Images
Dis-Chem not happy with the guilty finding by the Tribunal and intends to appeal the ruling. /Luba Lesolle / Gallo Images

Dis-Chem will appeal the Competition Tribunal's finding that the pharmacy was guilty of excessively increasing its mask prices during the coronavirus pandemic.

This comes after the tribunal yesterday ordered Dis-Chem to pay a fine of R1,2m after being found guilty of contravening the Competition Act by charging excessive prices for face mask.

It was found that Dis-Chem hiked its mask prices by between 43% and 261% on the day SA recorded its first case of coronavirus in March.

On average, the pharmacy increased the price of 50 units of 50PC surgical masks from R43,47 in February to R156,95 in March while the 5PC surgical masks increased by 43% in the same period.

Dis-Chem yesterday said it was disappointed by the guilty finding and was adamant that the increases were a reaction "in a responsible manner to the disruptions to the market" and said the pharmacy would take it on appeal.

"We reiterate that Dis-Chem did not charge an excessive price for face masks. Like everybody else, we were challenged to find supply because of the unprecedented global scale of the disaster and the unprecedented rapid rise in demand for masks," Dis-Chem Pharmacies CEO Ivan Saltzman said.

"Our imperative was to obtain masks to meet customer demand, even though our local suppliers had no available stock and we had to pay higher prices to import millions of masks. There is no avoiding the commercial need to cover these higher input costs."

According to the Competition Tribunal, Dis-Chem increased their surgical masks prices three times in March.

"The [Competition] Commission's investigation established that prior to the declaration of a national state of disaster, Dis-Chem was selling the three types of masks, namely, surgical face masks blue 50PC, surgical face masks 5PC and surgical face masks folio dress blue at far lower prices," the commission commissioner Tembinkosi Bonakele said.

"This judgment reaffirms our work as the commission on price gouging. It sends a strong message that the commission will spare no efforts to protect the South African consumers against abusive pricing behaviour by firms whether small or large."

The Competition Tribunal said that by January and February, when cases of coronavirus were being reported across the world, it was clear that consumer behaviour was changing which would lead to the demand for such masks.

"It is common knowledge that the Covid-19 outbreak has led to an increase in global demand for personal protective equipment (PPE) of which surgical masks constitute an essential component.

" This increase in demand is reflected in the massive increases in Dis-Chem's own sales volumes from January onward," the Competition Tribunal said.

Dis-Chem, according to the Tribunal, failed to prove that its prices increases were reasonable, however, Dis-Chem disagrees.

"Before the outbreak of the Covid-19 global pandemic, Dis-Chem stocked, but sold very few face masks. Once demand increased massively in late January and early February from resellers of face masks, Dis-Chem was unable to replenish its stocks of masks in the volumes required locally and had to find new sources of supply," Saltzman said.

"Only more expensive imported products were available and Dis-Chem was competing globally to find any available masks."

The Competition Tribunal and the Competition Commission have been investigating and holding accountable companies accused of taking advantage of the novel coronavirus pandemic by excessively increasing their prices.

They have so far charged 25 companies for excessive pricing of essential goods such as face masks and sanitisers during the pandemic to a tune of R14m.

Caprichem, a Cape Town company, was recently charged R600,000 for excessive pricing of its five litre hand sanitisers.

It was found that the excessive prices had increased Caprichem's gross profit margin by a whooping 91% and its net profit margin by a staggering 1,918%.

In the case of Dis-Chem, the Tribunal found that its excessive increase in prices was at the detriment of consumers, especially the poor.

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