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Dis-Chem to challenge tribunal's price ruling

| Legislation

SE-listed Dis-Chem Pharmacies is preparing to approach the Competition Appeals Court to challenge Tuesday’s Competition Tribunal ruling that it had engaged in the excessive pricing of surgical masks, citing several errors in fact and law.

The tribunal yesterday slapped Dis-Chem with a R1.2 million administrative penalty after finding the company guilty of contravening the Competition Act in charging an excessive price for three types of surgical face masks – SFM 50, SFM 5 and Folio50 – to the detriment of consumers in March as Covid-19 spread.

Chief executive Ivan Saltzman said the company planned to take the ruling on review, charging that the tribunal failed to take into consideration that Dis-Chem was reacting responsibly to significant disruptions to the market, and it increased its retail prices while it was facing significant price increases and shortages from its suppliers. 

“Like everybody else, we were challenged to find supply because of the unprecedented global scale of the disaster and the unprecedentedly rapid rise in demand for masks. Our imperative was to obtain masks to meet customer demand, even though our local suppliers had no available stock and we had to pay higher prices to import millions of masks,” said Saltzman, adding that there was no avoiding the commercial need to cover these higher input costs.  

“When input costs reduced, we passed that reduction on to our customers in a series of price reductions. Importantly, we had already begun passing on these cost-savings before the Competition Commission of South Africa launched its investigation,” Saltzman said.

The Competition Commission accused Dis-Chem of abusing its dominance and charging excessive prices for surgical masks to the detriment of customers and consumers. The commission said Dis-Chem had hiked prices by up to 261 percent and referred the matter to the tribunal.

The tribunal yesterday concluded that the commission had shown that Dis-Chem had engaged in excessive pricing to the detriment of consumers.

It said material price increases of between 47 and 261 percent without corresponding increases in costs of any goods in a country such as South Africa with a long history of economic exclusion and deep inequality would seriously affect the public interest adversely. 

“Material price increases of surgical masks, without corresponding costs justifications, in the context of Covid-19 for which there is no discernible cure and where health services are skewed towards the wealthy, would seriously impact vulnerable and poorer consumers even more. Poorer customers would have been excluded from accessing the masks by such exorbitant increases, other customers would have spent more on these items as a percentage of their disposable income,” said the tribunal.

The tribunal also found that Dis-Chem had failed to show that its price increases were reasonable.

“In our view, Dis-Chem’s massive price increases of surgical masks during the complaint period, which constitute an essential component of life-saving first-line protection in a pandemic of seismic proportions, without any significant increases in costs, are utterly unreasonable and reprehensible,” said the tribunal.

The commission found that for a surgical face mask blue 50PC, the average price was inflated by 260 percent to R156.95 excluding VAT per unit of 50 masks in March from R43.47 excluding VAT per unit of 50 masks a month earlier.

Dis-Chem shares rose 2.99 percent to close at R18.23 on the JSE on Tuesday.



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