Lerisha Naidu, Partner, Sphesihle Nxumalo, Associate, and Thato Mkhize, Candidate Attorney, Competition and Antitrust Practice, Baker McKenzie, Johannesburg
The substantial increase in confirmed COVID-19 cases in Africa has led to innumerable complaints of anti-competitive conduct from customers and consumers across the continent, who have expressed concerns over sudden price hikes of healthcare and hygiene products as well as identified essential products. Numerous African competition authorities, aware of the effects of unjustified price hikes and excessive pricing on already vulnerable economies, have responded by establishing specialised investigation teams, refocusing existing resources to COVID-19 specific complaints and introducing new competition regulations. African competition authorities have further noted that collaboration between themselves and consumer protection authorities, as well as between competing essential service providers, is essential in order to enable countries to adequately respond to the COVID-19 crisis. Unprecedented times appear to have called for unprecedented measures from competition authorities across Africa.
In South Africa, competition and consumer protection authorities are collaborating in their efforts to examine complaints from customers and consumers implicating companies for excessive and/or exploitative pricing of essential products. Such essential products include facemasks, toilet paper and hand sanitizers. In addition, South Africa’s Department of Trade, Industry and Competition have introduced new regulations, which together with existing competition regulations on excessive pricing, deal with pricing and supply matters during the national disaster. These regulations do not prevent market players from implementing necessary price adjustments, their objective being to prevent unjustified price hikes and facilitate the collaboration of essential service providers in a regulated manner.
Further, essential service providers – the private healthcare sector, hotel industry, banking sector and retail property sector – have been granted block exemptions from certain provisions of the South African Competition Act, thereby enabling them to coordinate resources and infrastructure for the benefit of consumers during the period of the national disaster.
Measures introduced by the government have included a level 5 lockdown period, which began on Thursday, 26 March 2020 and mandated all non-essential service providers to allow employees to operate from their homes in order to limit non-essential human interaction. On 1 May 2020, the country began a phased reopening of the economy, with some activities such as the operation of restaurants on a delivery-only basis being permitted, subject to extreme caution. On 13 May 2020, South African President Cyril Ramaphosa announced that government was preparing for a further easing of the lockdown and a gradual opening of the economy. The government’s goal, as stated by President Ramaphosa, is to steadily increase economic activity, while putting measures in place to reduce the transmission of the virus and provide adequate care for those who become infected and need treatment.
The lockdown has affected the operations of both the Competition Commission (Commission) and Competition Tribunal (Tribunal), requiring that both refocus their resources on complaints filed in relation to COVID-19 and other urgent matters. The scaling down of operations by the competition authorities, together with the implementation of virtual hearings, has proved to be necessary, not only to comply with the resolution of the National Coronavirus Command Council, but also to deal with the increase in COVID-19 complaints submitted to the Commission – over 1000 complaints have been received to-date.
In Namibia, the Namibian Competition Commission (NaCC) concluded a market analysis, which revealed that the price of immune boosters, hand sanitizers and 3ply facemasks had substantially increased due to growing demand for these essential products. In response to this, the NaCC formed a dedicated task team under its Enforcement, Exemptions & Cartels Division, which continues to investigate and prioritize price exploitation complaints in relation to essential healthcare and hygiene during the COVID-19 crisis.
The NaCC recently published a statement reporting that it has received numerous complaints from the public in the past five weeks relating to price increases for various products. The NaCC admitted that it did not possess direct consumer protection powers, however, due to the absence of an adequate consumer protection legislation framework in Namibia, remedies in relation to the prevailing price gouging practices should be imposed under the Competition Act, where legally permissible.
It has therefore made attempts to have price regulations published in order to complement its current powers under the Competition Act, to enable quicker and more effective redress to the ongoing price exploitation complaints. The NaCC is working closely with other relevant stakeholders in Namibia, and will begin investigations as soon as the required price directives have been published.
Mauritius has also experienced a surge in the pricing of essential goods in response to the COVID-19 pandemic. In addition, certain suppliers of essential goods in Mauritius have come under the spotlight of the authority, suspected of creating artificial shortages of supplies. In response, the Mauritian government announced that its Competition Commission would be tasked with monitoring the market for unjustified price escalations of essential goods, and would prosecute any businesses found to be engaging in such restricted trade practices during this period.
The Competition Commission has clarified that it would not unduly constrain or impede necessary and critical cooperation between businesses, where such cooperation was in the interests of consumers and the public, and did not go further or last longer than necessary. It would not, however, tolerate commercial conduct on the part of dominant suppliers, which opportunistically sought to exploit the crisis to the detriment of consumers.
The Competition Commission further highlighted that the Competition Act did not prohibit suppliers to set maximum prices for their products with a view to limiting unjustified price increases at retail level. It also did not prohibit suppliers from recommending retail prices and affixing recommended retail prices on their products as long as the words “recommended price” appeared on the price label.
Although the number of confirmed COVID-19 cases in the East African countries combined are significantly less than those reported in South Africa, competition authorities in Kenya, Tanzania, Malawi and Zambia have adopted a proactive approach to guarding against unjustified price hikes and the excessive pricing of essential goods during this period.
The Competition Authority of Kenya (CAK) published a cautionary note warning manufacturers and retailers that were implicated in price fixing, or any sort of price manipulation behavior, that they would be subject to an administrative penalty of up to 10% of turnover. The CAK swiftly began tackling COVID-19 related cases. On 16 March 2020, it announced the first remedial order against a retailer that had exploited its relative strength to the detriment of consumers whose bargaining position had been diminished as a result of COVID-19 in Kenya. The CAK found the retailer to have excessively priced hand sanitizers, and ordered it to refund all the customers who had bought the product at an excessive price.
Further, the CAK ordered the removal of exclusivity clauses in agreements between manufactures and distributors of maize flour, wheat flour, edible oils, rice, sanitizers and toilet papers, effective 26 March 2020. Exclusive distribution agreements between market players interfere with the allocation of favorable prices in relation to essential goods. The CAK highlighted that negative effects of such agreements may be further exacerbated during pandemics such as COVID-19. In addition, distributors who also operate in the downstream retail market have been requested to provide these essential goods to other retailers on non-discriminatory terms.
The Competition and Fair Trading Commission (CFTC) of Malawi concluded an investigation on 23 March 2020, which revealed that 11 pharmacies in Lilongwe and Blantyre were excessively pricing hand sanitizers, facemasks and gloves in response to the COVID-19 outbreak in Malawi. The CFTC also published a cautionary note warning against excessive pricing during this period. Malawian President Peter Mutharika issued a warning to traders against consumer exploitation. President Mutharika consequently directed the CFTC to step up market surveillance and protect consumers from unfair trading practices in the supply of essential goods in the management of COVID-19. CFTC Executive Director, James Kaphale said it was encouraging that President Mutharika appreciated the role of the Commission in the management plan of COVID-19.
The CFTC has also received market intelligence that certain schools were engaged in discussions with each other and were sharing information about the level of school fees to be applied for Online Learning Programmes. Exchanging commercial information such as pricing intentions or pricing formulae among competitors constitutes collusion, and is prohibited under competition law. The market intelligence also revealed that certain schools were demanding full payment of school fees for online learning, despite that students were not able to access all essential school services such as library and extra-curricular facilities. The CFTC appealed to schools to structure the provision of essential services such as online learning in a manner that complied with the law, and to engage with parents in order to come up with a win-win scenario that allowed the schools to continue functioning as a business, without unfairly exploiting parents who wanted their children to learn.
The Competition and Consumer Protection Commission of Zambia issued a cautionary note directed at companies and individuals that were excessively pricing hygiene products in response to the demand during the COVID-19 crisis.
The Fair Competition Commission in Tanzania has responded to the Ministry of Industry and Trade’s request to monitor and report on whether market players are maintaining reasonable prices on essential items such as sterilizers, masks and disinfectant hand wash during the COVID-19 pandemic.
The Fair Trading Commission (FTC), working in collaboration with the Retailers Association, registered 26 complaints from 18 April 2020 to 25 April 2020, through various platforms, against 20 shops. The complaints related to excessive prices, prices not displayed, suppliers requiring consumers to pay the higher of two prices displayed and expired goods. Although the FTC did not report these complaints as COVID-19 related, the relevant period for their registration seems to be in line with the surge in excessive pricing complaints experienced by certain jurisdictions during the COVID-19 pandemic.
From a West African perspective, Nigeria announced a 14-day lockdown of its two major cities, Lagos and Abuja, effective Monday, 30 March 2020 at 11pm. Accordingly, the Federal Competition and Consumer Protection Commission (FCCPC) announced it would scale down its operations and that its available resources would be redirected to focus on COVID-19-related complaints and issues.
The FCCPC similarly published a cautionary notice to suppliers, retailers and online shopping platforms, warning them against irregularly increasing prices of essential hygiene products in response to increased demand caused by the COVID-19 epidemic. To facilitate compliance with the Nigerian government’s containment measures, which limit movement and restrict human resource capacity, the FCCPC has published a guidance document titled “Business Guidance Relating to COVID-19 on Business Co-operation/Collaboration and Certain Consumer Rights Under the FCCPA”. The guidance document aims at assisting businesses to ensuring compliance with competition and consumer protection regulations.
In addition to the above efforts, the FCCPC introduced an electronic merger filing process, specifying the type of mergers it would accept through electronic filing. The FCCPC has also been active in the enforcement of competition laws amid the COVID-19 crisis. Currently, it has referred four supermarkets and their pharmacy distributors to court for conspiring to hike prices and selling essential products at unfair prices during the pandemic.
Its consumer protection efforts during the pandemic have led to praise by the United Nations Conference on Trade and Development, which recognised Nigeria for its leadership role (as demonstrated by FCCPC’s early warnings against unfair practices and anti-competitive market behaviour) and for its robust determination to enforce the law against any competition law breaches.
Apart from communication indicating the scaling down of operations by competition agencies in Morocco, Tunisia and Egypt, no other preventative measures in response to COVID-19 have been communicated by competition authorities in North Africa.