Competition law experts have questioned the judgment against Babelegi Workwear and Industrial Supplies CC for excessive pricing.
Competition law experts have questioned the judgment against Babelegi Workwear and Industrial Supplies CC for excessive pricing.

Law experts poke holes in the Competition Commission's findings

By Siphelele Dludla Time of article published Jun 12, 2020

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JOHANNESBURG - Competition law experts have questioned the judgment against Babelegi Workwear and Industrial Supplies CC for excessive pricing and abuse of market dominance.

The experts yesterday poked holes in the Competition Tribunal’s first contested excessive pricing case in the context of the coronavirus (Covid-19) pandemic.

Stellenbosch University Professor Phillip Sutherlands asked whether the tribunal’s necessity was sufficient to find dominance given that there was an emergency situation created by the rising demand of face masks.

“It would be important to determine the relationship between the regulations and the Competition Act itself,” Sutherland said. “The methodology used to determine the fine may not stand on appeal.”

The tribunal found the Pretoria-based company guilty of inflating the prices of face masks between January 31 and March 5 this year, and fined it R76 000.

The Competition Commission had found that during the period January 31 to March 5, Babelegi had increased its prices of facial masks from R41 per box up to the highest price of R500 per box, earning during this period mark-ups in excess of 500 percent.

The commission found that Babelegi’s prices for facial masks increased by at least 888 percent when comparing the prices charged on December 9, 2019, to the prices charged on March 5, 2020.

The tribunal found that Babelegi, as a dominant firm in terms of section 7(c) of the Competition Act, had a prima facie case of an abuse of dominance in breach of section 8(1)(a) of the Act.

It concluded that Babelegi had not put up a rational and valid explanation for its successive and massive price increase that were not substantiated by any corresponding increase in cost, adding that the company had market power during the complaint period since it behaved to an appreciable extent independently of its competitors, customers or suppliers.

Professor Massimo Motta, a research professor at Catalan Institution for Research and Advanced Studies, said the tribunal’s definition of market dominance could need proving.

“The concern is that the Competition Tribunal sidestepped the standard analysis to define the market and rather inferred dominance from the conduct,” Motta said. “This may create the wrong precedence in future cases.”

Head of competition at Lawtons Africa Nkonzo Hlatshwayo said Babelegi might not have been given sufficient time to respond to allegations properly.

“There must be a determination of the relevant market to determine the application of section 7(c) is not sufficient,” Hlatshwayo said.

“The fact that the respondent was given a few days to respond raises questions on the due process of the proceedings.”

Acting deputy commissioner James Hodge said context and relevance was important in considering the judgment, given that this happened during a crisis.

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