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Tribunal approves settlement between Commission and Cape Town firm accused of charging excessive prices for hand sanitiser
The Competition Tribunal (the Tribunal) has confirmed, as an order, a settlement agreement whereby Caprichem (Pty) Ltd (Caprichem) agrees to pay an administrative penalty (a fine) of R500 000 (five hundred thousand rand) after it was accused by the Competition Commission (the Commission) of charging excessive prices for hand sanitisers.
In terms of its settlement with the Commission, Caprichem also undertakes to donate R100 000 (one hundred thousand rand) to the Solidarity Fund.
In addition to paying the fine and donating to the Solidarity Fund, the manufacturer and supplier of chemicals in Cape Town agrees to the following, among others:
- Caprichem’s gross profit margin on 5-litre hand sanitisers will not exceed an agreed to maximum percentage for the duration of the national state of disaster;
- The gross profit percentage will not include commission payable to Caprichem’s sales representatives; and
- The firm will implement and monitor a competition law compliance programme.
Charge
The Commission alleges that Caprichem contravened section 8(1)(a) of the Competition Act (the Act) read together with Regulation 4 of the Consumer Protection Regulations (the Regulations), in that it charged excessive prices for its 5-litre variant of hand sanitisers from 16 March 2020.
Hand sanitisers fall under the protected category of ‘medical and hygiene supplies’ in the Regulations.
No admission
However, Caprichem does not admit to any contravention. According to the settlement agreement, Caprichem is entering into the agreement “in order to avoid protracted litigation and nothing in the agreement should be construed as an admission of liability…”
Background
On or around 30 March 2020, the Commission received a complaint against Caprichem. The complainant alleged that Caprichem had increased its price for 5-litres of hand sanitiser from R262 to R527 inclusive of VAT during the national state of disaster and lockdown and subsequent to the publication of the Regulations.
The Commission says its investigation found, among others, that:
- Around 16 March 2020, Caprichem increased its prices for 5-litre hand sanitisers from R262 to R527 (including VAT). This increase amounts to a 101.15% increase;
- Caprichem prior to the state of national disaster (i.e. before 15 March 2020), sold the 5-litre hand sanitisers at a gross profit margin of 31.4% and a net profit margin of 2.2%;
- After it increased its prices shortly after the declaration of the state of national disaster (i.e. after 15 March 2020), Caprichem sold its 5-litre hand sanitisers at a gross profit margin of 60.1% and a net profit margin of 44.4%; and
- The increase constitutes a 91% increase in gross profit margin and a 1918% increase in net profit margin.
The Commission concluded that Caprichem’s conduct amounts to a contravention of the Act read with Regulation 4 of the Regulations.
Western Cape hardware company agrees to donate to Solidarity Fund after Commission accuses it of excessively pricing face masks
A Western Cape hardware company has agreed to donate R6 074.63 to the Solidarity Fund after the Commission accused it of having charged its customers excessive prices for face masks during March 2020.
This forms part of the terms of a consent agreement between the Commission and West Coast Hardware (Pty) Ltd. The company trades as Brights Hardware Store which is a group of hardware stores in eight towns in the province.
Although West Coast Hardware does not admit that its conduct contravened section 8(1)(a) of the Act read with Regulation 4 of the Regulations, it agrees to resolve the complaint on the terms set out in the consent agreement.
In terms of the agreement, which has now been confirmed as an order of the Tribunal, West Coast Hardware will, among others:
- immediately stop the excessive pricing conduct described in the consent agreement;
- reduce its gross margin on FFP1 dust face masks to an agreed maximum percentage with immediate effect, for the duration of the national state of disaster;
- pay R6074.63 in the form of a donation to the Solidarity Fund; and
- develop, implement and monitor a competition law compliance programme.
Background
The Commission launched an investigation into West Coast Hardware after receiving information that the business was allegedly charging excessive prices for its FFP1 dust face masks. These masks fall under the category of “medical and hygiene supplies” in the Regulations.
The Commission’s investigation found that the company’s gross margins for the dust face masks, across all branches, were in excess of what is regarded as fair and reasonable and therefore it had contravened the Act and the Regulations.
Mica Durban North agrees to donate hand sanitisers after Commission accuses the franchise of excessive pricing
The Tribunal has confirmed, as an order, a consent agreement between the Commission and Farpoint Trading 31 CC, trading as Mica Durban North.
Following an investigation, the Commission found that the Mica franchise only started selling hand sanitisers in March 2020. It also found that Mica Durban North’s average gross profit margin during March 2020 and April 2020 in respect of hand sanitisers, is a contravention of section 8(1)(a) of the Act read together with Regulation 4 of the Regulations.
Although Mica Durban North does not admit that its conduct amounts to excessive pricing, it has agreed to resolve the matter. It agrees to, among others:
- immediately stop the excessive pricing conduct as described in the consent agreement;
- reduce its gross profit margin on hand sanitisers to an agreed maximum percentage with immediate effect and for the duration of the state of national disaster;
- donate 722 units of 50ml hand sanitisers (valued at a cost price of R14 400) and 50 units of 5-litre hand sanitisers (valued at a cost price of R19 500); and
- develop and implement a competition law compliance programme.
The hand sanitisers will be donated to the following non-profit organisations: The Wellness Centre Trust; Action in Autism; Khulani Children Shelter; and The Baby Home Durban North.
Tribunal approves KKL’s acquisition of the starch, glucose and animal feed ingredients business of Tongaat Hulett
The Tribunal has approved, without conditions, the large merger whereby KLL Group (Pty) Ltd (KKL) intends to acquire the starch, glucose and animal feed ingredients business of Tongaat Hulett Limited (target business).
KLL is ultimately controlled by Barloworld Limited Group, a public company listed on the JSE. Barloworld Group is a distributor of leading international brands providing integrated rental, fleet management, product support and logistics solutions. The core divisions of Barloworld Group comprise equipment (earthmoving equipment and power systems), automotive (car rental, motor retail, fleet services, used vehicles and disposal solutions) and logistics services.
The target business produces starch, glucose and other related products from maize processed through four wet milling plants. The target business is also a producer of unmodified and modified starches in South Africa and is one of only two starch producers in Africa (the other being in Egypt).
The Commission, which assesses large mergers before referring them to the Tribunal for a decision, is of the view that the proposed transaction is unlikely to substantially prevent or lessen competition in any market. The Commission also concluded that the merger does not raise any public interest concerns and recommended unconditional approval of the merger.
Two customers of the target business expressed concerns relating to the merger. The Commission concluded that none of the concerns raised are merger specific. In addition, the Commission did not find any evidence that lends credence to the concerns raised.
The Commission, however, says it will continue to monitor and assess the competition dynamics in the relevant markets post-merger.
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