THE COMPETITION Tribunal last week found SAPS supplier Tsutsumani Business Enterprises guilty of excessive pricing, or price gouging, and fined it R3.4 million.
The tribunal fined the company the maximum administrative penalty of 10% of its relevant turnover, which amounted to R3 441 689.10.
Tsutsumani was found to fall within the consumer protection regulations.
In a statement on Friday, the Competition Commission said that this was the first excessive pricing case prosecuted by it and determined by the tribunal in the context of a public procurement process during the Covid-19 pandemic.
Competition Commissioner Tembinkosi Bonakele said: “This is one of the landmark price-gouging cases the commission has successfully prosecuted since the advent of the Covid-19 pandemic. These prosecutions have uncovered how both state organs and vulnerable consumers and customers were exploited during the lockdown occasioned by the state of national disaster.
“The maximum fine imposed by the tribunal on Tsutsumani sends a clear message that price gouging in public procurement to exploit a crisis or emergency situation is viewed in a serious light by the competition authorities,” he said.
Tsutsumani is a general trader registered on the National Treasury’s central supplier database, and supplies a range of products through tenders issued by government departments and municipalities.
The matter emanated from a complaint lodged with the commission by the SAPS on May 5, 2020 relating to price gouging in respect of the supply of face masks required by the SAPS during the period of the hard lockdown.
The tribunal found that during the hard lockdown the SAPS was in desperate need of face masks for its 197 000 members who were at the frontline of efforts to contain the pandemic. The SAPS required 9 million masks a month to protect its members from contracting Covid-19.
At the time, there was an unprecedented surge in the demand for surgical face masks, and the SAPS had to secure the supply of face masks on an emergency basis.
The tribunal essentially found that Tsutsumani exploited the crisis presented by the pandemic, and in response to a request for a quotation sought on an emergency basis charged the SAPS R16 250 000 for the bulk supply of 500 000 surgical face masks during the hard lockdown in April 2020.
The tribunal found that Tsutsumani charged the SAPS an excessive price of R32.50 (inclusive of VAT) per mask. In its papers before the tribunal, the commission alleged that Tsutsunami procured the masks from its suppliers at an average cost of R17.35 per mask.
This meant that Tsutsumani earned a total of 87% mark-up and a 46% gross margin per mask. The commission estimated that the excessive profits earned by Tsutsumani amounted to R5.3 million.
Tsutsumani is not the only firm to have charged excessive prices amid the pandemic.
In 2020, the tribunal fined pharmaceutical firm Dis-Chem R1.2 million for price gouging in respect of face masks during the Covid-19 pandemic.
Other shops found raising prices during this period include the Spar supermarket at Silver Lakes in Pretoria, which inflated the price of Dettol; Checkers Hyper in Kempton Park; and Makro in Durban, which inflated the price of toilet paper.
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