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[Covid-19] Competing Covid-19 by Adams & Adams

Competing with Covid-19 | Article by Adams & Adams 

The devastating impact of COVID-19 is being felt across the globe. The pandemic will highlight the inequality amongst the different classes of South Africans. How will the South African Government deal with and protect the various classes of South Africans from the socio-economic complications that the Coronavirus arrives with? Does Competition Policy have a role to play?

The Government should be applauded for taking swift interventionist action against the pandemic; in particular we shall be focussing on the action taken by the Department of Trade and Industry (“the DTI”), which is home to the competition authorities being the Competition Commission (“the Commission”), the Competition Tribunal (“the Tribunal”), and the Competition Appeal Court (“the CAC”). The actions taken by the DTI are aimed at alleviating the socio-economic harms presented by the Coronavirus.

In mid-March 2020 the Minister gazetted various regulations in terms of the Competition Act, 89 of 1998 (“the Competition Act”) to minimise the impact of the COVID-19. The Competition Act echoes the objectives of the Constitution in that it similarly has as one of its purposes “to promote employment and advance the social and economic welfare of South Africans”.[1]

The first mechanism of the Competition Act invoked by the Minister is section 10(10) read with section 78(1) of the Competition Act. Section 10(10) reads as follows:

The Minister may, after consultation with the Competition Commission, and in order to give effect to the purposes of this Act as set out in section 2, issue regulations in terms of section 78 exempting a category of agreements or practices from the application of this Chapter.

In essence the Minister has granted an exemption in terms of the Competition Act, that is to say that certain agreements and behaviours which may otherwise be unlawful will be exempt from scrutiny from the Competition Act and the competition authorities.

The exemption and regulations have the purpose of exempting a category of agreements or practices in the healthcare sector from the application of sections 4 and 5 of the Competition Act, solely with the aim of:

  1. Promoting concerted conduct to prevent an escalation of the national disaster and to alleviate, contain and minimise the effects of the national disaster; and
  2. Promoting access to healthcare, preventing exploitation of patients, enabling the sharing of healthcare facilities, management of capacity and reduction of prices.

This exemption enables the private healthcare system to cooperate with the public healthcare system to ensure that there is adequate capacity and stocks at healthcare facilities throughout the country in order to respond to COVID-19. This will assist in ensuring that the private and public healthcare system can provide the necessary care to all classes of South Africans without fear of contravening the Competition Act.

Finally, the Minister of the DTI further gazetted regulations in terms of section 8(3)(f) of the Competition Act, this section reads as follows:

Any person determining whether a price is an excessive price must determine if that price is higher than a competitive price and whether such difference is unreasonable, determined by taking into account all relevant factors, which may include any regulations made by the Minister, in terms of section 78 regarding the calculation and determination of an excessive price.”

The purposes of these regulations are to:

  1. Promote concerted conduct to prevent the escalation of the national disaster and to alleviate, contain and minimise the effects of the national disaster; and
  2. Protect consumers and customers from unconscionable, unfair, unreasonable, unjust or improper commercial practices during the national disaster.

In effect, the regulations prohibit firms from charging excessive prices to consumers.

Further, in terms of section 8(3)(f) of the Competition Act, during any period of the national disaster, a material price increase of a good or service as contemplated which does (i) not correspond to or is not equivalent to the increase in the cost of providing that good or service; or (ii) increases the net margin or mark-up on that good or service above the average mark-up for that good or service in the three month period prior to 01 March 2020, is a relevant factor for determining whether the price is excessive or unfair and indicates that the price is excessive or unfair. The goods and services protected by this regulation can be found annexed to the regulations which are accessible through the links below.

The Commission succinctly described the purpose of the regulations and its significance to the South African public:

The regulations aim to strengthen the ability of the Commission to respond to incidences of exploitative pricing. These regulations empower the Commission to prosecute cases where prices have increased materially without any cost justifications for the increase. 

The Minister of the DTI, the Commission and the National Consumer Commission have agreed that in the event of any unusual increases of prices by suppliers, the retailers will bring these to the attention of the regulators. Further, consumers were also encouraged to bring any concerns to the attention of regulators through the details available on their websites, or through the toll-free no. 0800 014 880.”

One would expect the Courts to view exploitation at this time in a very serious light.

It is furthermore likely that there will be ongoing regulatory developments as the situation progresses, including by extending exemptions to more industries.

Industry players should adopt a pro-active approach in respect of entering into arrangements that would, but for the regulations, be unlawful. We strongly advocate engaging with the Competition Authorities before doing so. We are in a position to facilitate these discussions.

The respective gazetted regulations can be accessed here:

  1. http://www.gpwonline.co.za/Gazettes/Gazettes/43114_19-3_DTI.pdf
  2. http://www.gpwonline.co.za/Gazettes/Gazettes/43116_19-3_DTI.pdf

We invite you to contact our Competition Law Team (jac.marais@adams.africa) if you have any questions in relation to the COVID-19 regulations under the Competition Act, or any related matter.

Article by:

Jac Marais | Partner
Misha van Niekerk | Senior Associate
Mia de Jager | Associate
Kameel Pancham | Candidate Attorney

 

About Adams & Adams

Adams & Adams is an internationally recognised and leading African law firm that specialises in providing intellectual property and commercial services.

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