Dis-Chem, answering a case of price gouging, has accused the Competition Commission of “scapegoating” the pharmaceutical retailer to show the public that it can prosecute excessive pricing as the country battles the coronavirus pandemic. A Fin24 report says the retail group has appeared before the Competition Tribunal after the commission charged it with abusing its dominance and charging excessive prices for surgical masks.
The commission accused Dis-Chem of pushing through two price increases, on 14 and 26 February, while its average cost of sourcing each mask declined over that period. The company effected four more price increases in March, according to the commission's heads of argument. The competition regulator wants the tribunal to fine Dis-Chem 10% of the group's total turnover.
“The commission's approach is that the penalty must match the conduct, and this has been reprehensible conduct. It must set indication. A clear message must be sent that deters all other firms and Dis-Chem again from engaging in the same conduct,” said the commission's litigation manager, Candice Slump.
Advocate Michelle le Roux, for Dis-Chem, said a fine equal to 10% of its revenue would be “shockingly inappropriate”. She said it would amount to an “unexplained eagerness for scapegoating Dis-Chem” and to find “a good company to make an example of”, notes the Fin24 report.
Le Roux said Dis-Chem was forced to temporarily increase prices of masks because of product shortages and inflated quotes it was receiving from suppliers. The demand for face masks spiked 12 times in January and in February as it breached 500,000 for just that month, while Dis-Chem only received about half of the masks it ordered. The quotes it received from suppliers were highly inflated, she added.
Le Roux argued that the retailer followed on the footsteps of competitors like Clicks and Takealot, who also reacted to this supply shock by increasing their prices, but that Dis-Chem kept its price adjustment lower than that of other retailers.
“This case actually tells the story of competition and markets that are working. We are dealing here with markets that have been disrupted to a level never seen before. We see spikes in demand. We see complete collapses in supply,” she said. Le Roux said the retailer has cut its prices for masks twice since the global supply stabilised, and the first cut was before the Commission approached the group about price gouging complaints.
[link url="https://www.fin24.com/Companies/Health/commission-is-trying-to-scapegoat-dis-chem-says-lawyer-20200504"]Full Fin24 report[/link]