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COMPETITION TRIBUNAL REPUBLIC OF SOUTH AFRICA
Case No: CO022May20
CO022May20.2020 Competition Commission v Domoney Brothers Bloemfontein
(Pty) (Ltd) (14 May 2020)
In the matter between:
The Competition Commission Applicant
And
Domoney Brothers Bloemfontein (Pty) (Ltd) Respondent
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 Domoney Brothers Bloemfontein (Pty) Ltd
annexed hereto.
Presiding Member Ms Yasmin Carrim
Concurring: Ms Andiswa Ndoni and Mr Anton Roskam
Date: 14 May 2020
IN THE COMPETITON TRIBUNAL OF SOUTH AFRICA
CT CASE NO:
CC CASE NO: 2020MarC0146
In the matter between:
COMPETITION COMMISSION OF SOUTH AFRICA Applicant
And
DOMONEY BROTHERS BLOEMFONTEIN (PTY) LTD Respondent
CONSENT AGREEMENT BETWEEN THE COMPETITION COMMISSION AND
DOMONEY BROTHERS BLOEMFONTEIN (PTY) LTD 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 Domoney Brothers Bloemfontein (Pty) Ltd 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 for Covid-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 Demoney;
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 "Domoney" means Domoney Brothers Bloemfontein (Pty) Ltd, a company
duly incorporated in accordance with the laws of the Republic of South Africa with
its principal place of business at 23 Fritz Stockenstrom Street, New East End,
Bloemfontein, South Africa;
1.7 "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;
1.8 "Tribunal Directive for Covid-19 Excessive Pricing Complaint Referrals"
means the directive issued by the Tribunal on 6 April 2020; and
1.9 "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.
2 BACKGROUND AND CONTEXT
2.1 On 15 March 2020, given the magnitude and severity of the COVID-19
outbreak which had been declared a global pandemic by the World Health
Organisation (WHO) and classified as a national disaster by the Head of the National
Disaster Management Centre, 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)(f) 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.
2.8 On 9 April 2020, the President of the Republic of South Africa announced an
extension of the enforced nationwide lockdown by a further two weeks, until the end
of April 2020.
3 THE COMMISSION'S INVESTIGATIONS AND FINDINGS
Investigation
3.1 On 28 March 2020, the Commission received a complaint against Budget
Shop, a retailer based in Bloemfontein who was alleged to be selling face masks at
an excessively high price. Budget Shop attributed the increase in price to cost
increases by its supplier, Domoney, the Respondent.
3.2 Facial masks fall under the category of 'medical and hygiene supplies' in
Annexure A as well as item 1.3 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(c) of the Act, market power can also be inferred from the
economic behaviour of the firm. In this case, 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.
Findings
3.6 The Commission conducted an investigation into Domoney's alleged conduct
and found the following:
3.6.1 Demoney is based at 23 Fritz Stockenstrom Street, New East End,
Bloemfontein, South Africa;
3.6.2 Demoney is a supplier of a diverse range of quality protective and
corporate clothing, health and safety equipment and corporate gifts,
3.6.3 Domoney has a varied product range, including FFP1 unvalved dust
masks;
3.6.4 Domoney does not manufacture the FFP1 unvalved dust masks, but rather
purchases them from a number of suppliers and then on-sells the masks to its
customers;
3.6.5 Based on pricing information supplied by Domoney in relation to FFP1
unvalved dust masks -
3.6.5.1 Domoney's mark-up was 56% in February 2020 on the FFP1 unvalved
dust masks bought from its supplier Pinnacle Welding and Safety (Pty) Ltd
("Pinnacle"); and
3.6.5.2 Domoney's mark-up was 262% in March 2020 on the FFP1 unvalved
dust masks bought from its supplier Rebel Safety Gear (Pty) Ltd ("Rebel").
3.7 The Commission found that the increase in mark-up by Domoney of
approximately 56% bought from its supplier Pinnacle in February 2020 and 262%
bought from its supplier Rebel in March 2020 in respect of FFP1 unvalved dust
masks is a contravention of section 8(1)(a) of the Act read together with Regulation 4
of the Consumer Protection Regulations.
4 ADMISSION
Domoney admits that it significantly increased its mark-up on FFP1 unvalved dust
masks during February 2020 and March 2020 in contravention of section 8(1)(a) of
the Act read together with Regulation 4 of the Consumer Protection
Regulations.
5 CONTRIBUTION TO THE SOLIDARITY FUND
5.1 Demoney undertakes to pay a contribution in the amount of R30 040,00 to the
Solidarity Fund.
5.2 Demoney will pay the amount set out above to the Solidarity Fund within 30
(thirty) days from the date of confirmation of this Consent Agreement as an order by
the Tribunal.
5.3 The contribution must be paid into the Solidarity Fund's bank account which is
as follows:
NAME: Solidarity Fund BANK: Standard Bank
ACCOUNT NUMBER: [....]
ACCOUNT TYPE: Current account
BRANCH CODE: 051001
SWIFT CODE: [….]
PAYMENT REF: Competition Commission 2020MarC0146/Domoney
6 AGREEMENT REGARDING FUTURE CONDUCT
Domoney agrees to:
6.1 immediately desist from the excessive pricing conduct described above;
6.2 reduce its mark-up on FFP1 unvalved dust masks to a maximum of- with
immediate effect for the duration of the state of the national disaster;
6.3 donate face shields amounting to a total of R30 040,00 including VAT within 7
calendar days of confirmation of this Consent Agreement as an order of the Tribunal
to the following organisations -
6.3.1 Carel Du Toit School for the Deaf situated at National Hospital, Roth
Avenue, Willows, Bloemfontein;
6.3.2 Universitas Hospital situated at 1 Logeman Street, Universitas,
Bloemfontein; and
6.3.3 Pelonomi Academic Hospital situated at 121 Dr Belcher Rd, Heidedal,
Bloemfontein;
6.4 submit an affidavit under oath by the owner or director of Domoney testifying
that the abovementioned undertakings have been adhered to within 7 calendar days
of confirmation of the Consent Agreement as an order by the Tribunal;
6.5 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;
6.6 to submit a copy of a compliance programme to the Commission within 60
business days of the date of confirmation of the Consent Agreement as an order by
the Tribunal; and
6.7 to circulate a statement summarising the content of this Consent Agreement
to all management and operational staff employed at Domoney 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 the owner or
director of Domoney confirming compliance with this undertaking.
7 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 Domoney 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. 2020MarC0146.
Tembinkosi Bonakele
The Commissioner, Competition Commission of South Africa