Tribunal confirms consent agreement between Commission and chemical distributor accused of excessive pricing during Covid-19

Pretoria, Gauteng, SA - The Competition Tribunal has confirmed, as an order, a consent agreement concluded between a Gauteng-based chemical distributor and the Competition Commission, in relation to alleged excessive pricing in the context of Covid-19.

One of the main ways of combating the spread of the pandemic is through the use of a minimum of a 70% alcohol-based hand sanitizers and disinfectants which can be made from either propyl alcohol, propanol alcohol, or ethyl alcohol (commonly referred to as ethanol).

Crest Chemicals (Pty) Ltd is a distributor of chemicals, including isopropanol (IPA) and n-propanol (NPA) which are intermediate inputs into hand sanitiser and disinfectants – essential products as listed in the Consumer Protection Regulations (the Regulations). It sells inter alia IPA 85% formulation in both litres (220 Lt and 25 Lt) and Kilograms (164 Kg).

In terms of the consent agreement, Crest Chemicals agrees to pay an administrative penalty of R98 536.92. Crest Chemicals has agreed to resolve the complaint on the terms set out in the consent agreement in order to avoid protracted litigation and costs. It does not admit that its conduct constitutes excessive pricing.

 

In addition to paying an administrative penalty, Crest Chemicals agrees to, among others:

immediately desist and refrain from the alleged excessive pricing conduct;

with immediate effect, ensure its gross profit margins on IPA 85% formulation do not exceed its average gross margins realised during December 2019 to February 2020 for the remaining duration of the state of national disaster; and

develop, implement and monitor a competition law compliance programme. This aims to ensure that the employees, management, directors and agents of Crest Chemicals have knowledge of and comply with the Competition Act (the Act).

 

In addition to the above-mentioned undertakings, Crest Chemicals has donated hand sanitisers valued at R60 000 to the Utho Ngathi Disability Projects, a Soweto based non-profit company focusing on the upliftment of people with disabilities in Southern Africa.

The Commission accuses Crest Chemicals of charging excessive prices for its IPA 85% formulation products following the Covid-19 outbreak (during the period April to June 2020), without corresponding increases in its costs.

Based on Crest Chemical’s transactional information (particularly sales volumes, prices, and costs for IPA 85% formulation) the Commission concluded that the firm derived approximately R158 536.92  as estimated excess profits by charging the alleged excessive prices.