EDITORIAL: Profiteers will pay heavily

As the government rolls out a nationwide lockdown to contain the Covid-19 pandemic, some companies, probably using the name of free-market economic principles, will exploit fears and heightened demand for basic goods from panicking consumers.

Shame on them.

Earlier this week trade, industry & competition minister Ebrahim Patel told a news conference that the Competition Commission is pursuing at least 11 companies for unjustifiably hiking prices on in-demand products after consumers lodged complaints with the antitrust watchdog.

With queues snaking inside shopping malls and spilling into car parks as panic stockpiling — which this newspaper has denounced — strips shelves of essential items such as hand sanitiser, meat and toilet rolls, it might be tempting for suppliers and retailers to hike prices and take advantage.

But be warned, the commission has set up a dedicated task team with the National Consumer Commission, an agency that looks after the welfare of the consumer, to swiftly respond and investigate complaints related to exploitive price increases. The team will prioritise these complaints to ensure companies taking advantage of consumers are quickly prosecuted and penalised.

The Competition Act prohibits excessive pricing and collusive behaviour by suppliers and retailers artificially inflating prices and exploiting consumers. The penalties for such offences are severe, including a fine of 10% of the firm’s annual turnover for a first-time offence and 25% of annual turnover for a repeat offence.

Directors of the companies found guilty of collusive conduct could face up to 10 years in jail. The commission is keeping a close eye on a list of 22 items that are expected to be in demand in the coming weeks for signs of price gouging.

Given that the sense of community, where everyone, including retailers and suppliers, is looking out for each other, is lost on some companies, these fines and penalties should give them reason to think again.

But maybe not all of them will be deterred by the prospect of fines or jail terms. The greediest will do the risk-reward calculations: is it worth paying a fine of 10% of annual turnover for, say 30% more profit?; and legally, what is the likelihood of a director going to prison for ripping off consumers?  

The fines and threats of jail terms might be a risk some will be willing to take. But in the long run ripped-off consumers will not forget and chances are many of them will not return when things get back to some sort of normality.

There is no morally and commercially justifiable reason for anyone to jack prices to unreasonable levels. Forget what a staunch supporter of the law of supply and demand principles in the free market economic system — where suppliers can change prices to what consumers are willing to bear — tells you.

It is a shortsighted line of reasoning that ignores that we are in a national state of disaster, regular economic activity has been disrupted and panic buying has intensified — meaning a trip by one consumer to a store will bring in sales equivalent to probably two or more shopping trips.

The problem with stockpiling is that it denies the poor access to goods essential to survive the lockdown in a country where millions depend on welfare grants, the minimum wage is just over R20 an hour and wage increases are at their lowest on record.

As President Cyril Ramaphosa said on Monday, there will be enough food to go around because the food production industry, supply-chain sector and grocery stores will continue to run their businesses as usual during the 21-day lockdown.

In a public emergency that is quickly morphing into an economic contagion, profiteering and stockpiling are morally objectionable. The best way out of the crisis is to work together as consumers, retailers and suppliers to ensure there is enough for everyone.