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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

 

COMPETITION TRIBUNAL REPUBLIC OF SOUTH AFRICA

 

Case No: CO017May20

 

In the matter between:

 

The Competition Commission                          Applicant

 

And

 

C. Sanua CC t/a Naturally Yours                     Respondent

Weleda Pharmacies

 

Panel  :         Y Carrim (Presiding Member),

A Ndoni (Tribunal Member),

A Roskam (Tribunal Member)

 

Heard on      :         14 May 2020

 

Decided on   :         14 May 2020

 

 

CONSENT AGREEMENT

 

 

The Tribunal hereby confirms the consent agreement as agreed to and proposed by the Competition Commission and C. Sanua CC t/a Naturally Yours Weleda Pharmacies annexed hereto marked “A”.

 

 

Signed by: Yasmin Tayob Carrim Signed at: 2020-05-14 13:57:51

Reason: I approve this document

Presiding Member

Ms Yasmin Carrim

Concurring: Ms Andiswa Ndoni and Mr Anton Roskam

 

Date: 14 May 2020

 

 

IN THE COMPETITION TRIBUNAL OF SOUTH AFRICA

 

 

CT CASE NO:

CC CASE NO: 2020APRC0389

 

In the matter between:

 

COMPETITION COMMISSION OF SOUTH AFRICA   Applicant

 

and

 

C. SANUA CC T/A NATURALLY YOURS WELEDA PHARMACIES          Respondent

 

 

CONSENT AGREEMENT BETWEEN THE COMPETITION COMMISSION AND C. SANUA TRADING TIA NATURALLY YOURS WELEDA PHARMACIES IN RESPECT OF AN ALLEGED CONTRAVENTION OF SECTION 8(1)(a) OF THE COMPETITION ACT 89 OF 1998, AS AMENDED, READ WITH REGULATION 4 OF THE CONSUMER AND CUSTOMER PROTECTION AND NATIONAL DISASTER MANAGEMENT REGULATIONS AND DIRECTIONS PUBLISHED IN GOVERNMENT GAZETTE NO 43116 ON 19 MARCH 2020

 

The Competition Commission and C. Sanua CC t/a Naturally Yours Weleda Pharmacies hereby agree that application be made to the Competition Tribunal for the confirmation of this Consent Agreement as an order of the Tribunal in terms of section 49D of the Competition Act 89 of 1998, as amended ("the Act"), in respect of a contravention of section 8(1)(a) of the Act read together with Regulation 4 of the Consumer And Customer Protection And National Disaster Management Regulations And Directions published in Government Gazette No 43116 on 19 March 2020, as well as the Regulations on Competition Tribunal Rules for COVID-19 Excessive Pricing Complaint Referrals published in Government Gazette No 43205 on 3 April 2020 and the Tribunal Directive forCovid-19 Excessive Pricing Complaint Referrals on the terms set out below:

 

1.       DEFINITIONS

 

The following words shall, unless otherwise stated or inconsistent with the context in which they appear, bear the following meanings in this Consent Agreement:

 

 

1.1     "Act" means the Competition Act 89 of 1998, as amended;

 

1.2     "Commission" means the Competition Commission of South Africa, a statutory body, established in terms of section 19 of the Act, with its principal place of business at Building C, Mulayo Building, the Dti Campus, 77 Meintjies Street, Sunnyside, Pretoria, Gauteng;

 

1.3     "Commissioner" means the Commissioner of the Competition Commission, appointed in terms of section 22 of the Act;

 

1.4     "Consent Agreement" means this agreement duly signed and concluded between the Commission and C. Sanua CC t/a Naturally Yours Weleda Pharmacies;

 

1.5     "Consumer Protection Regulations" means the Consumer and Customer Protection and National Disaster Management Regulations and Directions published in Government Gazette No 43116 on 19 March 2020;

 

1.6     "Tribunal" means the Competition Tribunal of South Africa, a statutory body, established in terms of section 26 of the Act, with its principal place of business at Building C, Mulayo Building, the Dti Campus, 77 Meintjies Street, Sunnyside, Pretoria, Gauteng;

 

1.7     "Tribunal Directive for Covid-19 Excessive Pricing Complaint Referrals" means the directive issued by the Tribunal on 6 April 2020; and

 

1.8     "Tribunal Rules for COVID-19 Excessive Pricing Complaint Referrals" means the Regulations on Competition Tribunal Rules for COVID-19 Excessive Pricing Complaint Referrals published in Government Gazette No 43205 on 3 April 2020.

 

1.9     "Weleda Pharmacies" means C. Sanua CC trading as Naturally Yours Weleda Pharmacies, with registration number 2014/116619/07. Weleda Pharmacy is situated at 453 Main Road, Bryanston, Johannesburg;

 

2.       BACKGROUND AND CONTEXT

 

2.1     On 15 March 2020, the Minister of Co-operative Governance and Traditional Affairs ("COGTA") declared a State of National Disaster in the Republic of South Africa which declaration was published in Government Notice No. 313 of Government Gazette No. 430096.

 

2.2     On 18 March 2020, the Minister of COGTA issued regulations ("Disaster Management Regulations") published in Government Notice No. 318 of Government Gazette no. 43107, regarding the steps necessary to prevent an escalation of the disaster or to alleviate, contain and minimize the effects of the disaster. These regulations were made in terms of section 27(2) of the Disaster Management Act, 1957 (Act No. 57 of 2002) ("Disaster Management Act"). Paragraph 10(6) of the Disaster Management Regulations. ("Disaster Management Regulations") authorised the Minister of Trade and Industry to, inter alia, issue directions to protect consumers from excessive, unfair, unreasonable or unjust pricing of goods and services during the national state of disaster.

 

2.3     On 19 March 2020, the Minister of Trade and Industry published the Consumer Protection Regulations. The purpose of the Consumer Protection Regulations is to promote concerted conduct to prevent an escalation of the national disaster and to alleviate, contain and minimise the effects of the national disaster and to protect consumers and customers from unconscionable, unfair, unreasonable, unjust or improper commercial practices during the national disaster.

 

2.4     In relation to excessive pricing, the Consumer Protection Regulations states the following:

 

"4. Excessive Pricing.

 

4.1.  In terms of section 8(1) of the Competition Act a dominant firm may not charge an excessive price to the detriment of consumers or customers.

4.2.  In terms of section 8(3)(() of the Competition Act during any period of the national disaster, a material price increase of a good or service contemplated in Annexure A which -

4.1.1.   does not correspond to or is not equivalent to the increase in the cost of providing that good or service; or

4.1.2.   increases in net margin or mark-up on that good or service above the average margin or mark-up for that good or service in the three-month period prior to 1 March 2020 is a relevant and critical factor for determining whether the price is excessive or unfair and indicates prima facie that the price is excessive or unfair."

 

2.5     Annexure A lists the goods and services that fall to be regulated by the Consumer Protection Regulations.

 

2.6     On 23 March 2020, the President of the Republic of South Africa announced the enforcement of a nationwide lockdown for 21 days with effect from midnight on Thursday, 26 March 2020.

 

2.7     On 3 April 2020, the Tribunal Rules for COVID-19 Excessive Pricing Complaint Referrals were published and thereafter, on 6 April, the Tribunal Directive for Covid-19 Excessive Pricing Complaint Referrals was issued.

 

3.       THE COMMISSION'S INVESTIGATIONS AND FINDINGS

 

 

3.1     On the 24th of March 2020, the Commission received information in terms of section 498(2)(a) of the Competition Act, against Weleda Pharmacies in relation to the inflated prices of its 500ml hand sanitizer, that it was charging its customers in March 2020.

 

3.2     Hand sanitizers fall under the category of 'medical and hygiene supplies' in Annexure A as well as item 1.2, i.e. hand sanitizer, of Annexure B of the Consumer Protection Regulations. Regulation 4 of the Consumer Protection Regulations is therefore applicable to the conduct described in this Consent Agreement.

 

3.3     In terms of Section 7(3) of the Act, market power can also be inferred from the economic behaviour of the firm. The mere ability to raise prices is indicative of market power as it demonstrates a lack of constraints such that there is an ability to control prices and/or behave independently of competitors and customers.

 

3.4     States of disaster often provide the conditions for temporary market power to be held by market participants that may not otherwise have market power outside of the disaster period.  The removal of constraints may occur for several reasons, many of which are conceptually related to a narrowing of the geographic market for products as a result of disruptions to the normal functioning of markets. Due to the national lockdown, the scope of the geographic market is narrow as citizens' movements are heavily restricted.

 

3.5     In a state of national disaster, an established test within the assessment of excessive pricing under the Act is determining whether price increases have a corresponding cost justification. This is because an excessive profit margin is detectable if the ordinary prices are increased materially absent cost increases.

 

3.6     Following receipt of the information, the Commission conducted an investigation into Weleda Pharmacies' alleged conduct and found the following:

 

3.6.1  Weleda Pharmacies is an individual pharmacy that trades out of two branches located in Johannesburg, Gauteng, and operates 365 days a year with extended service hours;

3.6.2  Weleda Pharmacies operates in the market for the supply of pharmaceutical products to consumers in the Bryanston and Fourways areas of Johannesburg;

3.6.3  The alleged conduct is in respect of Weleda Pharmacies' Bryanston branch, in Johannesburg.

3.6.4  Weleda Pharmacies has market power in the abovementioned market, given the current pandemic and state of national disaster;

3.6.5  Weleda Pharmacies did not sell hand sanitizers before March 2020, but due to the sudden demand and panic-buying brought on by the state of national disaster, Weleda Pharmacies entered the market for hand sanitizers and had to source the hand sanitizers from a supplier;

3.6.6  Weleda Pharmacies sold 250 units of 500ml hand.sanitizers; and

3.6.7  Weleda Pharmacies obtained an average cost mark-up of 50% and a gross profit margin of 33.33% on hand sanitizers since entering the market in March 2020.

 

3.7     The Commission found that the average cost mark-up of approximately 50% and a gross profit margin of 33.33% in respect of hand sanitizers for March 2020 by Weleda Pharmacies is high and possibly a contravention of section 8(1)(a) of the Act read together with Regulation 4 of the Consumer Protection Regulations.

 

4.       AGREEMENT REGARDING FUTURE CONDUCT

 

Weleda Pharmacies agrees to:

 

4.1     immediately desist from the pricing conduct described above;

 

4.2     reduce its gross profit margin on the sale hand sanitizers to 20% or less with immediate effect for the duration of the national state of disaster;

 

4.3     donate, within 7 calendar days of the date of confirmation of this Consent Agreement as an order by the Tribunal, an amount of R 18

750.00 (eighteen thousand seven hundred and fifty Rand alone) to be paid to the Solidarity Fund by usin·g the following bank account details:

 

Bank: Standard Bank

Branch Name: Sandton City

Account Name: Solidarity Fund

Account Number: [….]

Account Type: Current account Branch Code: 051001

SWIFT Code: SBZAZAJJ

 

4.4     submit an affidavit under oath by a duly authorised representative of Weleda Pharmacies, testifying that the abovementioned donation has been made to the Solidarity Fund, within 7 calendar days of such donation.  Proof  of  payment  must  also  be  sent  to collections@compcom.co.za. Please          include this case number [2020APRC0389] in the subject line;

 

4.5     develop, implement, and monitor a competition law compliance programme incorporating corporate governance designed to ensure that its employees, management, directors, and agents do not engage in future contraventions of the Act. In particular, such compliance programme will include a mechanism for the monitoring and detection of any contravention of the Act;

 

4.6     to submit a copy of a compliance programme to the Commission within 0 business days of the date of confirmation of the Consent Agreement as an order by the Tribunal; and

 

4.7     to circulate a statement summarising the content of this Consent Agreement to all management and operational staff employed at Weleda Pharmacies within 7 calendar days from the date of confirmation of this Consent Agreement by the Tribunal and notifying the Commission by submitting an affidavit under oath by a duly authorised representative of Weleda Pharmacies, confirming compliance with this undertaking.

 

5.       FULL AND FINAL SETTLEMENT

 

This Consent Agreement, upon confirmation as an order by the Tribunal, is entered into in full and final settlement and concludes all proceedings between the Commission and Weleda Pharmacies relating to any alleged contravention of section 8(1)(a) the Act read together with Regulation 4 of the Consumer and Customer Protection and National Disaster Management Regulations and Directions published in Government Gazette No 43116 on 19 March 2020 that is the subject of the Commission's investigation under Commission Case No. 2020APRC0389.

 

 

Erin du Plessis

Duly authorised to sign on behalf of Weleda Pharmacies

 

Tembinlfusi Bonakele

The Commissioner, Competition Commission of South Africa

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