Two companies accused of overcharging the SA Police Service (SAPS) for hand sanitiser appeared at the Competition Tribunal on Monday in the first Covid-19 excessive pricing case involving the public sector.
According to the Competition Commission, the companies made a 54% profit, about R14m, on the cleaning product.
The competition inquiry into the sanitiser prices has also highlighted how in March 2020 the police ordered 81,000 units of hand sanitiser from a small firm that had never sold sanitiser before and that had neither the supplies nor the money to provide it.
According to the investigation, the R287m tender, in excess of the police’s personal protective equipment budget of R140m, took only 24 hours to be decided. It started on a Saturday and was completed the following day.
Bluecollar Occupational Health bid for a R287m tender to sell 81,000 units of sanitisers in 25l quantities, but this was later downgraded to 10,000 units in a deal worth R35.5m. After the tender was accepted, it approached Ateltico Investments for funding.
Regulations gazetted in March 2020 by trade & industry minister Ebrahim Patel prevent firms selling essential goods required for the pandemic from increasing their markups by more than 10% during the state of national disaster.
Since early March 2020 the Competition Commission, which acts as a prosecutor in antitrust matters, has charged many firms, including Dis-Chem, for selling masks at excessive prices.
A charge of excessive pricing under the Competition Act requires a firm to be dominant in the market or almost holding a monopoly.
The tribunal, which acts like a court on competition matters, has been asked to find both Bluecollar and Ateltico guilty and fine them as much as 10% of their turnover.
In its defence on Monday, Bluecollar argued that it is not a dominant firm as it had never provided sanitiser before and therefore cannot be guilty of excessive pricing.
Bluecollar, a six-year-old small company, does not sell products but screens police pilots and divers to ensure they are fit enough to do their jobs.
The firm’s advocate, Kristy Wilson, told the tribunal the company did not actually make a 54% profit as claimed, saying most of the money it made went to paying back debt it incurred to finance the deal. She said the profit was about 18%.
For its part, Ateltico Investments argued that it should not be joined to the case as it was not involved in the process to bid and set prices for the product. It was only brought into the deal a week later to help provide finance to Bluecollar.
Under cross-examination by the Bluecollar advocate, police administrator Stephen Mahlangu, who put out the tender, admitted that no negotiations on the prices of the sanitisers were entered into and no-one checked whether the firm had sanitiser in stock before awarding the tender.
The advocate for Ateltico investments, Jonathan de Wet, accused the police of being “thoroughly and incredibly incompetent” at best, or at worst that there “was corruption involved in the deal”.
As excessive pricing case requires a firm to be dominant in the market. The tribunal may rely on a groundbreaking judgment at the Competition Appeal Court last year which found that a small family firm, Babelegi, was dominant when it overcharged for masks in February, before the pandemic, by virtue of being a “lucky monopolist” and having a supply of something consumers were desperate for in a natural disaster.
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