DIS-CHEM says demand for masks increased substantially, particularly from bulk buyers in January and February, and it was unable to procure the volumes required.
   Tracey Adams African News Agency (ANA)
DIS-CHEM says demand for masks increased substantially, particularly from bulk buyers in January and February, and it was unable to procure the volumes required.
 Tracey Adams African News Agency (ANA)

Matus agrees to pay R11m fine for inflating price of masks

By Dineo Faku Time of article published May 7, 2020

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JOHANNESBURG - The Competition Tribunal yesterday won a psychological victory against coronavirus lockdown price hikes when tools company Matus agreed to pay an R11million fine for inflating the price of masks.

The settlement came just hours before the tribunal concluded its case against pharmaceutical retailer Dis-Chem.

It said Matus agreed to an R11m fine for inflating mask prices.

The anti-graft body said Matus would pay a R5.9m administrative penalty and contribute R5m to the Solidarity Fund.

It said Matus would also reduce its gross profit margin on dust masks to acceptable levels for the duration of the state of national disaster.

JSE-listed Dis-Chem faces a maximum penalty of 10% of its annual turnover if found guilty of contravening the Competition Act.

Dis-Chem says demand for masks increased substantially, particularly from bulk buyers in January and February, and it was unable to procure the volumes required.
 Tracey Adams African News Agency (ANA)

The Competition Commission laid charges with the tribunal against Dis-Chem for inflating mask prices by 261%. 

The commission said its investigation found that prior to the declaration of a national state of disaster, Dis-Chem hiked prices from R43.47 for a unit containing 50 surgical face masks to R156.95 in March.  

The commission’s legal counsel Bukhosibakhe Majenge yesterday told the tribunal the hikes came at a great cost to consumers who were battling the Covid-19 pandemic.

Majenge argued price gouging disconnected consumers from essential goods which were necessary or required to protect their health.

“That is why we find it curious that our learned colleagues argue with audacity in this matter to say there is no detriment to consumers in this matter. When clearly we have demonstrated the higher price disconnects consumers from equitable access to essential goods,” Majenge said.

Dis-Chem had previously argued prices for the surgical face masks were below its competitors.

It said the demand for the masks increased substantially, particularly from bulk buyers in January and February, and it was unable to procure the volumes required. The pharmaceutical group said it eventually purchased at higher prices and had to increase the price to cover its costs. Dis-Chem said its margins fell substantially as a result of these high input costs.

Yesterday, its expert witness and independent economist Patrick Smith said it was not possible to establish an excessive price in the short period of the allegation as the market was likely to self-correct.

“I do not think there is such a thing as a competitive price that exists for a day, that is not how market competition works,” Smith said. “Competition can happen over the short term, but a long-term competitive equilibrium simply cannot be defined over a week or even a month.”

BUSINESS REPORT 

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