The recent outbreak of the COVID-19 coronavirus and the resulting declaration of a state of the national disaster led to high demand for certain healthcare & hygiene products and also basic food items, on its part due to panic buying. Due to the high demand, prices have increased as many consumers rushed to stockpile in anticipation of total lockdown.
Looking at applicable consumer legislation, it is important for suppliers to be aware of their responsibility for ethical business practices towards consumers and the risks for offences.
Section 48 of the Consumer Protection Act (CPA), states that the supplier may not –
- supply, offer to supply, or enter into an agreement to supply any goods or services at a price that is unfair, unreasonable or unjust nor on terms that are unfair, unreasonable or unjust;
While section 40 of the CPA states further that a supplier must not use unfair tactics or any other similar conduct, in connection with any supply of goods or services to a consumer.
The Competition Act prohibits various acts of excessive pricing and collusive behaviour by suppliers and retailers which artificially inflates prices and exploits consumers. In terms of section 8 of the Competition Act, suppliers may not exploit consumers by, for example, excessively increasing prices of goods in times when the demand increases. The penalties for such offences are severe, including a fine of 10% of the firm’s annual turnover for a first-time offence. For collusive behaviour, the directors of companies which engage in such acts face potential imprisonment for a period of up to 10 years.
There have been several complaints from the public about rising prices for essential products.
On 19 March 2020, Mr Ebrahim Patel, Minister of Trade and Industry, gazetted regulations in terms of the Competition Act and Disaster Management Act which aim to strengthen the ability of the Competition Commission and the National Consumer Commission to respond to incidences of exploitative pricing and anticompetitive behaviour. These regulations empower the Competition Commission to prosecute cases where prices have increased materially without any cost justifications for the increase. Price increases may not exceed the increase to the cost of raw materials or inputs and the profit levels should not be hiked higher in the period just before the outbreak of COVID-19.
According to the regulations, effective immediately, if suppliers increase their prices exorbitantly or stockpile goods, they may be liable to a fine of R1m, a fine of up to 10% of turnover or imprisonment of up to 12 months.
At least 30 supermarkets and other traders are currently being investigated by the National Consumer Commission and the competition commission for selling essential items such as hand sanitizer, toilet paper and protective gear crucial to the prevention of the spread of the COVID-19 coronavirus pandemic at inflated prices. (Malherbe, 2020)[1]
Retailers must take steps to ensure adequate stocks of basic goods during this period, including for weekends and month-end shopping. Wholesalers must also implement necessary measures to prevent stockpiling.
Should you require any assistance or consumer-related advice as a supplier, please contact your nearest SEESA office, or SMS the word “SEESA” to 45776 for professional legal advice.
ABOUT THE AUTHOR
Jan
Oosthuizen is a SEESA Consumer Protection & POPI senior legal advisor in
Pretoria. He obtained his LLB degree from the North-West University and was
admitted as an attorney in 2014, before starting his career at SEESA in 2015.
[1]“Die winkels verhoog glo pryse buitensporig”- www.netwerk24.com; 26 March 2020