Covid-19 excessive pricing consent agreements provide important insights
The Competition Tribunal has now confirmed three consent agreements relating to Covid-19 excessive pricing complaints. Although many more firms are expected to litigate against, or also settle with the Competition Commission, these agreements provide some valuable insights. This note examines the first two confirmed consent agreements - firms that have been accused of similar conduct, or firms attempting to navigate the risks of price increases during the lockdown, should take note of certain terms of these agreements which provide a useful indication of how the Commission is evaluating these complaints and the circumstances in which the Commission may deem price increases to be excessive under the Consumer and Customer Protection and National Disaster Management Regulations and Directions.
Taking stock of Covid-19 competition developments over March and April
Pursuant to the President's declaration of a State of National Disaster, and the subsequent national lockdown, the Minister of Trade, Industry and Competition (the Minister) has published certain regulations. Below is a summary of all competition law related developments to date:
Key Covid-19 competition law developments (March - April 2020)|
Block exemptions were issued in the following sectors:
retail property and the
hotel industry. The purpose of these exemptions is to strengthen the Government's programs designed to fight Covid-19 by exempting categories of agreements or practices from the application of sections 4 and 5 of the Competition Act.
Excessive pricing regulations were issued to protect against exploitative price increases of essential goods and services in terms of the Competition Act and Consumer Protection Act.
Regulations have also been issued to allow the Competition Tribunal to expeditiously address these complaints.
The Commission has indicated that it discourages the filing of all merger transactions during the national disaster period, except those involving failing firms or firms in distress. Although merger parties are still able to file mergers falling outside this category, delays may be anticipated due to difficulties in contacting stakeholders such as competitors and trade unions during the lockdown period. Merger parties should proactively provide alternate contact details for stakeholders and communicate transparently with the Commission regarding any issues in responding to information requests.
The Tribunal has confirmed three consent agreements relating to Covid-19 excessive pricing complaints:
- In the first case, the Commission found that Cilliers and Heunis CC, trading as Centrum Pharmacy (Centrum Pharmacy) charged excessive prices for facial masks during March 2020. Although Centrum Pharmacy did not admit liability, it agreed, among other things, to donate hand sanitizers, surgical gloves and face masks, valued at ZAR 25 410.00, to two old aged homes in its area of business
- The second case involved a Gauteng hardware store, Main Hardware (Pty) Ltd (Main Hardware). The Commission found that Main Hardware charged its customers excessive prices for surgical gloves. Main Hardware, among other things, was ordered to refund all its customers who bought boxes of surgical gloves for the higher price. In terms of the consent agreement, Main Hardware did not admit liability.
- In the third case, the Commission found that Evergreens Fresh Market (Evergreen), a fresh produce supplier, charged excessive prices for hand sanitisers. The Commission said that the average margin of approximately 33.4% in respect of hand sanitisers for March 2020 was not reasonable – adding that it deems, as reasonable, the average margins of hand sanitisers (from a number of retailers) to be between 20% and 25%. Although Evergeen did not admit liability, it has agreed to donate hand sanitisers valued at ZAR1,800.00 to the Tembisa Provincial Hospital.
Contested excessive pricing matters
The first contested Covid-19 excessive pricing matter was heard on 23 April at the Tribunal and involves Babelegi Workwear and Industrial Supplies CC (Babelegi), a company accused of unlawfully charging excessive prices for FFP1 dust face masks in the period leading up to the national state of disaster and the countrywide lockdown. Babelegi is contesting the proceedings and denies contravening the excessive pricing provisions of the Competition Act.
The Commission has also referred Dis-Chem Pharmacies Ltd (Dis-Chem) to the Tribunal for prosecution. This referral follows an investigation by the Commission which found that Dis-Chem charged excessive prices on essential hygienic goods. Oral arguments are being heard on 4 May 2020.
Significantly, the Commission is arguing that the United States principle in relation to “treble damages” should be considered by the Tribunal for matters relating to excessive pricing in the context of Covid-19.
Agribusiness, food & beverages: Bakery owner denied access to the Commission's record
The Tribunal dismissed an application by a former bakery owner to access confidential parts of the Commission’s record of investigation. Mr Neethling filed a complaint against Wholesome Foods (Pty) Ltd alleging that the company was selling baked bread below cost. Following the Commission's decision not to refer the complaint, Mr Neethling decided to self-refer the complaint and launched an application after he was denied access to the Commission's confidential record of investigation. The Tribunal held that
"the Tribunal must not be used by litigants…to seek information from non-litigants (in this instance, the Commission) in order to assess the merits of their cases for the purposes of pursuing their self-referrals.”
Healthcare: Updates & developments
- The Tribunal has filed a request with the Constitutional Court for leave to appeal the Competition Appeal Court's decision to approve the merger between Mediclinic Southern Africa (Pty) Ltd and Matlosana Medical Health Services (Pty) Ltd. The Commission and Tribunal both prohibited the merger due to concerns relating to increased costs and the substantial lessening of competition.
- The Commission conditionally approved Upjohn Inc.'s acquisition of Mylan N.V. (Mylan). The Upjohn Business operates Pfizer’s main off-patent branded and generic (non-sterile injectables) established medicines business. Mylan is a global pharmaceutical company engaged in the global development, licensing, manufacture, marketing and distribution of generic, branded and over the counter pharmaceutical products. The merger was approved subject to a three year moratorium on job losses.
Oil & gas: Tribunal hears case involving alleged LPG cartel
During March 2020, a hearing was held at the Tribunal involving five liquefied petroleum gas (LPG) companies alleged to be involved in a cartel. In 2015, the Commission launched an investigation into the companies for allegedly entering into an agreement and/or engaging in a concerted practice to fix the price paid as a deposit fee for LPG cylinders for first-time buyers. The companies contend that the uniform deposit was as a result of each one of the companies making the unilateral decision to increase the deposit in order to sustain a programme involving the exchange of empty LPG cylinders. Closing arguments took place on 28 and 29 April 2020.
Retail: Updates & developments
- The Commission has extended the Grocery Retail Market Inquiry (GRMI) recommendations implementation period. In November 2019, the GRMI published its final report and made a number of recommendations, indicating that these should be implemented within a period of six months from the date of publication of the final report. In light of Covid-19 pandemic, the Commission, the Department of Trade, Industry and Competition (DTIC) and Mr Harvey (the DTIC facilitator) agreed to extend the period for engagement and reaching agreement in respect of all GRMI’s recommendations, other than those relating to exclusive leases, by three months.
- The Tribunal ordered the Commission to file a supplementary founding affidavit in its abuse of dominance case against Shoprite Checkers (Pty) Ltd (Shoprite) and Computicket (Pty) Ltd (Computicket). The matter relates to the Commission’s second abuse of dominance case against Computicket, a subsidiary of Shoprite. The Commission is seeking to hold Shoprite jointly and severally liable for Computicket’s alleged contraventions. The Tribunal held that Computicket and Shoprite are separate economic entities and should therefore be treated as such in respect of the allegations contained in the Commission’s complaint referral.
Transport: Updates & developments
- The Tribunal published its
reasons for dismissing an interim relief application by Africa People Mover (APM) against the Passenger Rail Agency of South Africa (PRASA). In terms of the application, APM had asked the Tribunal for an interim relief order to interdict and restrain PRASA from preventing buses operated by APM from entering Park Station and/or engaging in exclusionary behaviour. The Tribunal held that the information provided by APM is not determinative proof of an exclusionary act and does not present prima facie proof of dominance on the part of PRASA.
- The Tribunal conditionally approved Marinvest Srl's acquition of Ignazio Messina & C. (Ignazio) and RORO Italia. Marinvest operates through the MSC Group, a global maritime transport company. Ignazio provides regular line services that connect the Mediterranean to Africa, the Middle East, and the Indian subcontinent. The merger was approved subject to a three year moratorium on retrenchments and commitments to honour existing supplier arrangements with South African small and medium sized suppliers. A ring-fencing condition was also imposed, in terms of which Ignazio's South African business must be kept separate from MSC's South African business.
- Following the scaling down of the Commission's operations due to the Covid-19 pandemic, the completion date for the Public Passenger Transport Market Inquiry has been extended to 30 June 2020. The date for comments by stakeholders on the draft Guidelines for Competition in the South African Automotive Aftermarket Industry has also been extended to 30 June 2020. .
Rest of Africa News
Covid-19: Competition authorities continue operations
Competition authorities across Africa have continued to actively enforce competition laws during the Covid-19 pandemic.
- In relation excessive pricing allegations, most authorities have vehemently warned against price gouging and have taken action against offending firms - for instance, the Competition Authority of Kenya (CAK) ordered a retailer to refund all consumers that purchased 960 units of the over-priced hand sanitizers. The Egyptian Competition Authority and the Gambia Competition and Consumer Protection Commission have introduced price caps on certain essential goods, while the Nigerian Federal Competition and Consumer Protection Commission (FCCPC) published
Business Guidance relating to Covid-19 on Business Co-operation/Collaboration.
- In relation to mergers, most competition authorities are accepting mergers electronically (e.g. Namibia, Kenya), while other authorities have suspended their services completely (e.g. Botswana). A few authorities (e.g. Zambia) are operating as normal. The COMESA Competition Commission (CCC) has issued interim processes for merger reviews indicating that mergers should be filed electronically and that merger parties shall not be penalised for failure to submit complete information within 30 days of the parties’ decision to merge. Furthermore, the CCC has indicated that the 120 day merger investigation period may be extended in some cases as it may not be practicable to complete the assessment within 120 days under the circumstances.
East African Community: Consultations on EAC Competition Bill
In March 2020, the East African Legislative Assembly's (EALA) Committee on Communication, Trade and Investment met in Nairobi for a week long consultation on the East African Community (EAC) Competition (Amendment) Bill 2020. The EALA Committee met with senior officials of the EAC Competition Authority, EAC Secretariat Trade and Customs Department and representatives from the CAK.
Ghana: Government urged to speed up passing of competition law
In March 2020, it was reported that Ghana is speeding up the processes of passing into law its Competition Policy. The urgency is necessitated as the passing of competition legislation is a necessary condition for the implementation of Phase Two of the Africa Continental Free Trade Area in December 2020. Currently, Ghana’s draft competition law is being considered by Cabinet.
Namibia: Banks seeks interchange fee exemption
The Payment Association of Namibia and a number of commercial banks have filed an exemption application with the Namibian Competition Commission (NCC) to enter into a multilateral agreement in terms of which they will agree on the interchange fees that will be levied in the event that a customer of one bank makes a payment to a customer of another bank. The exemption is being sought for three years and is still being considered by the NCC.
Nigeria: FCCPC publishes draft merger regulations and guidelines
The FCCPC has issued
draft merger review regulations and
draft merger guidelines. The draft regulations, among other things, provide useful guidance on internal restructurings, joint ventures, foreign mergers with a Nigerian component and the processes for negative clearance applications and pre-merger consultations. The draft guidelines outline the considerations that guide the FCCPC's merger review as well as the statutory factors relevant to the assessment.
Malawi: Competition authority tackles anti-competitive conduct
In March 2020, the Competition and Fair Trading Commission (CFTC) published a summary of its latest decisions, indicating that it had handled 72 cases. Of these cases, 24 related to alleged unfair trading practices and 19 dealt with restrictive business practices. The CFTC also reviewed 23 COMESA mergers and six local mergers. Notably, the CFTC ordered a school to cease and desist from engaging in anti-competitive behaviour in the supply of school uniforms, and also ordered Seedco (Malawi) Ltd to apply for authorisation of its exclusive distributorship and resale price maintenance schemes at a wholesale level.
European Union: Updates & developments
- Amongst other measures, the European Commission (EC) has published a document titled, Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current Covid-19 outbreak. The EC also announced that it will authorise exceptional derogations from EU competition rules applicable to the milk, flowers and potatoes sectors. These sectors will be allowed to take collective measures to stabilise the market.
- The EC conditionally approved the merger between the global pharmaceutical company Mylan and Upjohn, a business division of Pfizer, which operates Pfizer's off-patent branded and generic established medicines. The decision is conditional on the divestment of Mylan's business for certain generic medicines.
France: Apple fined EUR 1.1 billion
The French Competition Authority has fined Apple for anti-competitive behaviour relating to the companies' independent retail distributors. It found that Apple had prevented independent retailers in France from competing on price, and that it had abused its economic power over them. The fine amounts to EUR 1.1 billion (approximately ZAR21.6 billion).
United Kingdom: CMA receives almost 21 000 Covid-19 related complaints
As at 19 April 2020, the Competition and Markets Authority (CMA) announced that it had received just under 21000 Covid-19 related complaints. The CMA's Covid-19 task force, set up in March 2020, has written to 187 firms accounting for over 2500 complaints regarding price rises for personal hygiene products, such as hand sanitiser and food products. The CMA has also published
guidance on Merger assessments during the Coronavirus (Covid-19) pandemic and a ‘refresher’ note on
how it is likely to approach ‘failing firm’ claims in merger investigations.
United States of America: Warning against anti-competitive conduct in the Covid-19 labour market
The Federal Trade Commission’s Bureau of Competition and the Justice Department’s Antitrust Division jointly announced that they will seek to protect workers on the front lines of Covid-19 by using various antitrust laws against those who seek to exploit the current circumstances to engage in anticompetitive conduct in the labour market. The agencies are on alert for employers, staffing companies and recruiters, among others, who might engage in collusion or other anticompetitive conduct in labour markets, such as agreements to lower wages or to reduce salaries or hours worked.
Cara du Plessis and Tenisha Burslem-Rotheroe have published three recent articles -
Cara du Plessis also published a Business Day article titled
New provisions in the Competition Act will affect buyers and suppliers.
- Daryl Dingley provided insights regarding excessive pricing during the Covid-19 pandemic on
China Global Television Network.
- Shawn van der Meulen was interviewed on
Radio 702 and
Cape Talk regarding excessive pricing during the Covid-19 pandemic.
Our recent work
Fiat Chrysler / Peugeot
The Commission conditionally approved the proposed merger between Fiat Chrysler Automobiles N.V. (FCA) and Peugeot S.A. (PSA).
Robert Wilson and
Cara du Plessis represented PSA.
FCA is a global automotive group which is engaged in designing, engineering, manufacturing, distributing and selling motor vehicles, components and production systems worldwide. PSA is an original equipment manufacturer and a dealer of passenger vehicles as well as light commercial vehicles, under the brands Peugeot, Citroen, Opel, Vauxhall and DS.
The Commission found that the merger is unlikely to substantially lessen or prevent competition. In terms of public interest concerns, the Commission imposed conditions relating to the preservation of employment.
Main Street 1754 / Jachris-Hose
The Commission unconditionally approved Main Street 1754 (Pty) Ltd's (Main Street) acquisition of Jachris-Hose and Couplings (Pty) Ltd (Jachris).
Burton Phillips and
Andriza Liebenberg represented the merger parties.
Main Street, a special purpose entity, is a wholly-owned subsidiary of Ata Fund III (Pty) Ltd, an
en commandite partnership, managed by Ata Capital (Pty) Ltd (Ata Capital). Ata Capital is a black-owned alternative asset class fund manager with a focus on identifying and maximising investment opportunities. Jachris is a supplier of specialised hoses, couplings and fittings to mining and industrial customers for use in various fluid and material handling solutions.
The Commission found that the merger is unlikely to substantially lessen or prevent competition and does not raise any public interest concerns. The merger was also unconditionally approved by the Zambian Competition and Consumer Protection Commission.
PepsiCo / Pioneer Foods
The Tribunal conditionally approved PepsiCo Inc.’s (PepsiCo) indirect acquisition of Pioneer Foods Group Ltd (Pioneer Foods), through PepsiCo’s South African subsidiary, Simba (Pty) Ltd.
Busisiwe Masango and Nadia Dhorat represented Pioneer Foods.
PepsiCo is an international packaged foods and beverages producer. Pioneer Foods is a South African producer and distributor of a range of branded food and beverage products.
The conditions imposed by the Tribunal relate to BBBEE, employment, the location of the head office and tax residency, production, local supply chains, downstream agreements and the establishment of a development fund. The merger was also approved in the following jurisdictions: COMESA, Botswana, the UK, Kenya, Namibia, Nigeria and Germany.
Stanlib Infrastructure Yield Fund / AFGRI Silo
The Tribunal has unconditionally approved the proposed merger whereby Stanlib Infrastructure Yield Fund (Stanlib IYF), represented by its partner Stanlib Infrastructure GP 2 (Stanlib GP 2), will acquire negative control over AFRGI Grain Silo Company (Pty) Ltd (AGS).
Desmond Rudman and
Burton Phillips represented the merger parties.
Stanlib IYF is a private equity investment fund established to acquire long-term operational infrastructure assets, and an existing shareholder in AGS. AGS is a grain management business comprising grain silo and bunker storage facilities managed by AFGRI Operations (Pty) Ltd. AGS is not controlled by any single shareholder and does not control any firms.
The Tribunal found that the merger is unlikely to substantially lessen or prevent competition and does not raise any public interest concerns.