At the height of the pandemic, two face mask suppliers allegedly colluded to exploit Takealot.com’s listing algorithm to maximise profits, according to the Competition Commission.
The commission has referred Medmart Health and BabyBug to the Competition Tribunal, asking for the maximum penalty: 10% of annual turnover.
The commission said the two suppliers collaborated to exploit Takealot’s listing algorithm to maximise profits at the peak of the pandemic, reports TimesLIVE.
In December 2020, Medmart and BabyBug entered into an agreement “and/or engaged in concerted practice to fix prices and divide markets by allocating suppliers” an offence under the Act.
The commission said on Thursdays, competing companies place their products on Takealot, which become visible to consumers based on an algorithm that takes into account variables like price and stock availability.
“For example, a supplier with a cheaper product and available stock is likely to have its product more visible to customers who enter the Takealot platform than a supplier with a higher price and less stock.
“In a phone conversation in early December, the companies devised a scheme to manipulate the algorithm to their benefit, allocating days to each other on which each would adjust its respective prices and stock availability accordingly, limiting competition between themselves.
“They also agreed to alternate the days on which each would price higher than the other. This meant BabyBug and Medmart would each have a day to charge a higher price, followed by a day to charge a lower price.” The switching would be at 5pm daily.
“The prices ranged from R79 to R90 per pack of 50 three-ply face masks. Medmart was suspended from the platform by Takealot in June 2021 on suspicion of collusion and BabyBug for the same reason in early December 2022.
“This type of collusive conduct is harmful to consumers as it deprives them of the benefits which arise from competition,” the commission said.
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