THE COMPETITION Commission says Dis-Chem inflated the price of surgical facial masks by 261 percent to R156.95 for a unit of 50 masks in March from R43.47 in February.     Reuters
THE COMPETITION Commission says Dis-Chem inflated the price of surgical facial masks by 261 percent to R156.95 for a unit of 50 masks in March from R43.47 in February. Reuters

Dis-Chem says it charged less than its competitors for face masks

By Dineo Faku Time of article published May 5, 2020

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JOHANNESBURG - Dis-Chem shares fell more than 4percent yesterday as the pharmaceutical retailer moved to defend its prices for surgical face masks, telling the Competition Tribunal that the alleged price hikes by several of its outlets were below those of its competitors.

Dis-Chem said there was no prima facie case of price inflation, and it increased the prices only in response to higher demand and supply constraints amid the global scramble for masks. The company said the prices took into account the prices of its competitors.

Dis-Chem’s legal representative advocate, Michelle le Roux, told the hearing that regulatory intervention was not necessary, as the group had reduced prices twice after managing to secure stock. “The pandemic is ongoing. South Africa is yet to reach its peak. Lockdown is easing, yet Dis-Chem has already dropped its prices twice,” Le Roux said.

Le Roux said the commission had failed to prove market dominance by Dis-Chem and detriment to customers.

“What you see here is Dis-Chem checking consciously what competitors are doing and pricing below them, and in terms of customers, you see Dis-Chem losing volumes,” she said, adding that Dis-Chem would no longer sell the face masks if it were found guilty of charging excessive prices.

“It is not a threat from Dis-Chem to say it will not sell masks anymore. There are loads of new entrants that are selling masks,” Le Roux said. “It is simply that there will be no incentives for Dis-Chem to do what it did to scramble the globe to try and find suppliers. It will leave the market to the true price gougers, to the pirates who outbid on orders that they placed, and they got delivery of the stock.”

The Competition Commission charged Dis-Chem with inflating the prices of surgical masks during the state of disaster in mid-March.

The commission said it established that, prior to the declaration of a national state of disaster, Dis-Chem had inflated the price of surgical facial masks by 261percent to R156.95 for a unit containing 50 masks in March from R43.47 for a unit containing 50 masks in February. “The onus is on the commission to say what the competitive prices are,” said Le Roux.

The commission’s chief economist, James Hodge, earlier told the tribunal that there was no justification for the price hike. Hodge said Dis-Chem did not manufacture face masks and was another intermediary in the value chain.

“What we are seeing is that every intermediary in the value chain is using the argument of the shortage and cost increases to escalate their own margins, and Dis-Chem is one of those,” Hodge said.

“That extra margin that Dis-Chem earns do not go back to the manufacturer; it does not go back to stimulate their production. It is kept by Dis-Chem,” said Hodge. The hearing continues tomorrow.

Dis-Chem shares closed 4.42percent lower at R20.98 on the JSE yesterday.

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