Price gouging during Covid-19 and lessons for Namibia
The SA Competition Commission has been very successful in closing down such behaviour, write Sivuyise Lutshiti and Tshidi Malete
Concerns over suspected outbreaks of price gouging are preoccupying competition regulators around the world as the Covid-19 pandemic up-ends economies and disrupts supply chains.
Competition authorities within and outside Africa have been inundated with complaints about excessive and arguably unjustifiable price increases on essential food, healthcare and emergency care items.
Excessive pricing cases are notoriously difficult to prosecute in ordinary times. In times of crisis, such as a pandemic, it can be even more challenging. To quote the Organisation for Economic Development and Co-operation’s (OECD) May brief, “Exploitative pricing in the time of Covid-19: distinguishing legitimate from illegitimate pricing practices, as well as how best to deal with the latter, creates substantial challenges for competition authorities”.
Interestingly, SA’s competition authorities have been among the first to grasp this particular nettle and have been very successful in using pricing regulations to combat the behaviour — indeed their strategy is being closely watched by counterparts in other African countries, including Namibia, where price increases ranging from 14% to more than 1,000% on certain essential items have been reported.
The SA Competition Act already prohibits “dominant firms” from selling goods and services at excessive prices. However, the competition legislation was not designed with a health crisis in mind, so when the pandemic broke, the government moved swiftly to protect consumers by issuing regulations amplifying the provisions in the act and stipulating that any material price increase during the period of national disaster is a relevant and critical factor for determining whether a price is excessive.
Namibia does not have a competition tribunal such as SA’s that can swiftly adjudicate competition law complaints
Under the SA consumer and customer protection and the National Disaster Management Act regulations and directions, the Competition Commission has been pursuing a number of firms for Covid-19 excessive pricing.
Many of the allegedly contravening firms have concluded settlement agreements with the commission, agreeing to pay administrative penalties; make contributions to the Covid-19 Solidarity Fund; donate essential goods to public interest organisations; and/or agreeing to pricing concession on essential items for the duration of the national disaster. By the end of May. the total value of these settlements stood at R12.8m.
Meanwhile, the Competition Tribunal has found one firm guilty of excessive pricing and its decision on whether the conduct of a second firm contravenes the regulations is pending. SA’s competition authorities have been commended for acting swiftly in response to price gouging — but the results have been criticised too. The majority of the companies punished have been small companies with no clear position of dominance.
The commission has argued that dominance in the ordinary course does not have to be established to prosecute a firm for price gouging. Instead, it argues that market power can be temporary, particularly in times of crisis. It is irrelevant to the commission whether there were many sales or only a few, and it is also inconsequential that the additional profit earned from the conduct might have been negligible.
Be that as it may, the swift action of the SA authorities contrasts with that of Namibia, which, for various reasons, has not yet taken action against companies engaged in price gouging. One of the challenges in Namibia is that, at the time of writing, the country does not have adequate consumer protection legislation and also does not have a dedicated consumer protection regulator.
In the absence of a legal framework to address price gouging in the context of Covid-19, the Namibian Competition Commission is engaging relevant stakeholders to find space to deal with this conduct within the framework of the Namibia Competition Act.
While there may be scope for the Namibian Competition Commission to pursue price-gouging cases via the abuse of dominance provisions in the Namibia Competition Act, which are very similar to those in the SA legislation, this may not be challenge-free.
One of the challenges the Namibian commission would face is in the prosecution of these cases. Namibia does not have a competition tribunal such as SA’s that can swiftly adjudicate competition law complaints. Pursuant to an investigation and finding that a dominant firm has excessively priced products, the Namibian Competition Commission would need to institute proceedings in the high court of Namibia.
Unless relief is sought on an urgent basis, these excessive pricing complaints will be prosecuted alongside ordinary civil and criminal matters, which could take a long time to finalise, and at great expense.
Alternatively, the commission may, at any time, conclude a settlement agreement with contravening firms, but again, these settlement agreements must be made an order of the high court.
Despite its successes, there is much controversy surrounding the excessive pricing regulations in SA. Whether a similar approach can be adopted in Namibia, which already appears to present some challenges, remains to be seen.
• Lutshiti is senior associate and Malete associate designate at Bowmans.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.