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: CO044Jun20
CO044Jun20.2020 Competition Commission v West Coast Hardware (Pty) Ltd (06 July 2020)
In the matter between:
The Competition Commission Applicant
And
West Coast Hardware (Pty) Ltd Respondent
Panel: E Daniels (Presiding Member)
A Ndoni (Tribunal Member)
F Tregenna (Tribunal Member)
Heard on: 06 July 2020
Decided on: 06 July 2020
CONSENT AGREEMENT
The Tribunal hereby confirms the consent agreement as agreed to and proposed by the Competition
Commission and West Coast Hardware (Pty) Ltd annexed hereto.
CONSENT AGREEMENT BETWEEN THE COMPETITION COMMISSION AND WEST COAST
HARDWARE (PTY) LTD T/A BRIGHTS HARDWARE STORE 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 West Coast Hardware (Pty) Ltd Ua Brights Hardware Store 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 490 of the Competition Act 89 of 1998, as amended ("the Act"), in respect of an alleged 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 West Coast Hardware;
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;
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; and
1.9 "West Coast Hardware" means West Coast Hardware (Pty) Ltd trading as Brights Hardware
Store a private company duly registered in accordance with the laws of the Republic of South Africa,
with its principal place of business at Shop No 1, Laguna Mall, Langebaan, Western Cape.
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 –
4.2.1. does not correspond to or is not equivalent to the increase in the cost of providing that good
or service;
or
4.2.2. 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 In March 2020, the Commission received information in terms of section 498(2)(a) of the
Competition Act, against West Coast Hardware in relation to the allegedly inflated prices of dust masks
FFP1 that it was charging its customers in March 2020.
3.2 Dust masks FFP1 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(3) of the Act, market power can also be inferred from the economic
behaviour of the firm. The mere ability to raise prices can be 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 West Coast
Hardware's alleged conduct and found the following:
3.6.1 West Coast Hardware trades as Brights Hardware Store, which is a group of hardware stores
that trades in eight towns in the Western Province;
3.6.2 West Coast Hardware operates in the market for the supply of a variety of hardware product
range, including dust masks, tools, plumbing, building electronics to consumers in areas such as,
Blackheath, Boston, Langebaan, MitchellsPlain, Montague Park, Plattekloof, Stikland, Uitzicht and
Brackenfell which are all located within the Western Cape Province;
3.6.3 West Coast Hardware has market power in the market for the supply of dust masks to
consumers in the areas where it operates, given the current pandemic and state of national disaster;
3.6.4 During March 2020, West Coast Hardware realised gross margins and mark-up as depicted in
table 1 below. The table also shows the estimated excess profits realised by West Coast Hardware.
3.7 During the above -mentioned period, the gross margins across all of West Coast Hardware's branches were in excess of the average 20% gross margin, which is generally earned on dust mask and regarded as fair and reasonable. The Commission found that the average gross margin of approximately 49.4% during March 2020 in respect of dust masks FFP1 by West Coast Hardware across all of its branches is a contravention of section 8(1)(a) of the Act read together with Regulation 4 of the Consumer Protection Regulations.
3.8 West Coast Hardware does not admit that the conduct set out above constitutes excessive pricing in terms of Section 8(1) (a) of the Act read with Regulation 4 of the Consumer Protection Regulations.
3.9 After engaging with the Commission, West Coast Hardware nevertheless agrees to resolve the complaint on the terms set out below.
4 AGREEMENT REGARDING FUTURE CONDUCT AND DONATION TO THE SOLIDARITY FUND
West Coast Hardware agrees to:
4.1 immediately desist from the pricing conduct described above;
4.2 reduce its gross margin on dust masks FFP1 to 20% with immediate effect for the duration of the
state of the national disaster;
4.3 pay RS 074.63 in the form of donation to the Solidarity Fund within 7 (Seven) calendar days from
the date of confirmation of this Consent Agreement as an order by the Tribunal. 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: SBZAZAJ
PAYMENT REF: CompCom 2020AprC0262/West Coast
4.4 submit within a period of 7 (Seven) calendar days, an affidavit under oath by the owner of West
Coast Hardware testifying that the abovementioned donation has been made to the Solidarity Fund in
line with paragraph 4.3 above;
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 60 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 West Coast Hardware in all eight stores 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 CEO of West Coast Hardware 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 West Coast Hardware 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. 2020AprC0262.
Orlando Luis
CEO: West Coast Hardware (Pty) Ltd
Tembinkosi Bonakele
The Commissioner, Competition Commission of South Africa