The Competition Commission (CompCom) has referred two competing companies to the Competition Tribunal for prosecution on allegations of price fixing and collusion.
The companies – Medmart Health and BabyBug – were previously listed as merchants offering personal protective equipment (PPE) including face masks on e-commerce giant Takealot.
“The commission alleges that at the height of the Covid-19 pandemic Medmart Health (Pty) Ltd (Medmart) and BabyBug colluded to fix prices of face masks and divided the market by allocating customers in contravention of the Competition Act,” reads a statement issued by the commission on Thursday afternoon.
“It is alleged that in or around December 2020, Medmart and BabyBug entered into an agreement and/or engaged in concerted practice to fix prices and divide markets by allocating suppliers. This is an offence in terms of sections 4(1)(b)(i) and (ii) of the Act.”
Explaining Takealot’s algorithmic design, the commission indicated that competing companies place their products on the platform and are vetted through Takealot’s algorithm based on variables such as price and stock availability, which then dictate product visibility on the site.
On Takealot, it adds, a supplier with a cheaper product and availability of that product is likely to have more product visibility on the platform as opposed to suppliers with a higher price and limited stock.
The commission says it is further alleged that a telephone conversation between the representatives of Medmart and BabyBug on 3 December 2020 ended off with the parties agreeing to manipulate their respective prices to make a profit from selling three-ply disposable face masks on the platform.
“It is alleged the two companies allocated days to each other on which each company would adjust its respective prices and stock availability accordingly, this would limit competition between themselves,” it adds.
“They also agreed to alternate the days each would price higher than the other. This meant BabyBug and Medmart would each have a day to charge a higher price followed by a day to charge a lower price. The switching would be at 5pm each day.”
It says the two companies communicated frequently to discuss the prices, which ranged from R79 to R90 per pack of 50 three-ply face masks.
It notes that Takealot suspended Medmart from its platform on 14 June 2021, and BabyBug on 8 December 2022, due to suspected collusion.
“This type of collusive conduct is harmful to consumers as it deprives them of the benefits which arise from competition. Such agreements are inherently inimical to competition and the commission has asked the tribunal to impose a maximum penalty.”
Read: As PnP and Takealot inch ever closer, would a merger make sense? (Jan 2023)
Nondumiso Lehutso is a Moneyweb intern.