Company fined R76,000 for excessive pricing on face masks

The Competition Tribunal on Monday found a Pretoria-based company guilty of hiking the prices of face masks on January 31 and March 5 this year.

Babelegi Workwear and Industrial Supplies CC was fined R76,000.

This is the country's first contested excessive pricing case in the context of Covid-19, as other companies reached consent agreements with the commission after admitting guilt over excessive pricing.

On April 9, the Competition Commission referred to the tribunal the first excessive pricing complaint, in the context of Covid-19, against Babelegi.

Babelegi denied the commission’s claims against it, arguing that it was not a dominant firm during the complaint period and that it anticipated that its supplier would increase its price of masks during this time.

The tribunal heard the matter on an urgent basis via video conferencing on April 24.

In its order and reasons issued on Monday, the tribunal 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 that period.

The contravention relates to the sale of face Dust Mask FFP1 Pioneer (FFP1 masks). The tribunal also ordered the company to pay an administrative penalty (a fine) of R76,040.

The tribunal noted Babelegi’s successive and significant price increases for face masks during the complaint period.

The first significant price increase occurred on January 31, a day after the World Health Organisation declared Covid-19 a public health emergency of international concern.

There was a further price increase in February.

On March 5, when SA announced its first Covid-19 case, Babelegi again significantly raised its price.

The tribunal said Babelegi’s markups on the masks sold increased significantly with each successive price increase during this period.

“Babelegi has not put up a rational and valid explanation for its successive and massive price increases ... [that are] not substantiated by any corresponding increase in cost,” the tribunal said.

The tribunal also said the commission established a case of an abuse of dominance because Babelegi charged excessive prices for FFP1 masks during the complaint period in breach of the Act.

The tribunal found Babelegi’s price increases and markups were unreasonable in that they “ ... bear no reasonable relation to the prices charged and markups prior [to] the complaint period as the appropriate and sensible benchmark of what competitive prices and markups would be under conditions of normal and effective competition”.

The tribunal said the exploitation of consumers or customers by charging excessive prices in a time of crisis such as Covid-19, must be considered as both grave and reprehensible conduct.