SUMMARY OF APPLICABLE BLOCK EXEMPTIONS DURING THE COVID-19 PANDEMIC

Following President Cyril Ramaphosa’s proclamation of the National State of Disaster, the Minister of the Department of Trade, Industry and Competition (“the DTIC”), Mr Ebrahim Patel (“the Minister”), published numerous block exemptions in response to the COVID-19 pandemic.

Below are summaries of the block exemptions that have been published by the DTIC:

Healthcare Sector

The purpose of the exemptions is to exempt a category of agreements or practices in the healthcare sector which would ordinarily be considered to be restrictive horizontal or vertical practices in terms of the Act.

The categories of agreements and practices which are exempted from the provisions of sections 4 and 5 of the Act include the following, if they are undertaken at the request of, and in co-ordination with, the Department of Health and for the sole purpose of responding to the COVID-19 pandemic:

1. Hospitals and facilities;

2. Pathologists and laboratories;

3. Pharmacies;

4. Healthcare funders;

5. Medical and hygiene supplies; and

6. Manufacturers and suppliers of medical and hygiene supplies.

The block exemption does not currently permit pricing discussions between competitors, absent permission from the Minister of Health or the Minister of the DTIC.

In the event that it is necessary for the parties outlined in the Healthcare Exemptions to engage in such agreements and practices, it is required that they keep detailed minutes of meetings held and written records of such agreements and practices.

Retail Property Sector

These regulations have been implemented to enable the retail property sector to minimise the negative impact on the ability of designated retail tenants, including small independent retailers, to manage their finances during the national disaster and to be in a position to continue normal operations beyond the national disaster.

The exemption applies to agreements amongst and between designated retail tenants and retail property landlords with the sole purpose of ensuring the survival of tenants of retail properties during the COVID-19 national disaster. These agreements or practices are limited to agreements or practices in respect of payment holidays and/or rental discounts for tenants, limitations on the eviction of tenants and the suspension or adjustment to lease agreement clauses that restrict retail tenants from undertaking reasonable measures required to protect viability during the national disaster. The exemption does not extend to communications and agreements relating to pricing, unless specifically authorised by the DTIC.

To qualify for an exemption, an agreement or practice must extend to all South African retail tenants in the designated retail lines, including small, independent retailers, unless otherwise authorised by the Minister or the Competition Commission (“the Commission”).

Banking Sector

The block exemptions were promulgated in order to promote concerted conduct to (1) prevent an escalation of the national disaster and to alleviate, contain and minimise the effects of the national disaster; (2) enable the banking sector to minimise the negative impact on the ability of customers, including both business and private individuals, to manage their finances during the national disaster, and be in a position to continue normal operations beyond the national disaster; and (3) enable the banking sector to manage the banking infrastructure, including the payment infrastructure, ATMs and branches.

The exemption applies to the following agreements or practices insofar as their sole purpose is to respond to the COVID-19 pandemic:

1. Payment systems; and

2. Debtor and credit management.

The banking sector is also permitted to request that the Minister expands the scope of the exemptions.

Hotel Industry

As with healthcare sector and the banking sector, the regulations were promulgated in order to (1) promote concerted conduct to prevent an escalation of the national disaster and to alleviate, contain and minimise the effects of the national disaster; and (2) to enable the hotel industry to collectively engage with the Department of Health and the Department of Tourism in respect of identifying and providing appropriate facilities for persons placed under quarantine, as determined by the Department of Health.

The exemption applies to the following agreements or practices insofar as their sole purpose is to respond to the COVID-19 pandemic:

1. Identification and provision of facilities; and

2. Cost reduction measures

Any discussion and/or agreement on pricing amongst the hotel industry for purposes of providing appropriate facilities for the accommodation of persons placed under quarantine as required by the Department of Health and the Department of Tourism must be specifically

authorised by the Minister of Health and the Minister of Tourism.

Parties in the hotel industry participating in any agreements or practices falling within the scope of these exemption must keep minutes of meetings held and written records of such agreements or practices.

Recent developments in matters relating to Excessive Pricing during the COVID-19 National Disaster

Following the DTIC’s new regulations, which were gazetted on 3 April 2020, permitting the Tribunal to determine complaints of excessive pricing (made in terms of the Consumer and Customer Protection Regulations which were gazetted under the National Disaster Management Act) on an expedited basis, the Competition Commission has taken swift action against companies accused of inflating prices of essential goods and other basic food items following the declaration of the National State of Disaster by referring the first of such cases to the Competition Tribunal (“the Tribunal”).

The first case before the Tribunal is a case of alleged excessive pricing of face masks (which fall under the category of “medical and hygiene supplies” in the essential goods required for the prevention and minimisation of the COVID-19 pandemic) in which it is alleged that the company has made a mark-up in excess of 500% during the period 31 January 2020 to 5 March 2020.

Other matters which have been concluded by the Commission, but not yet referred to the Tribunal, include the following:

1. An investigation of a hardware store that allegedly increased the price of surgical gloves over the period of a week, with no cost increase justification;

2. A pharmacy that allegedly earned more than 300% mark-up on face masks and hand sanitisers;

3. A wholesaler of chicken that allegedly earned over 50% mark-up for chicken pieces, with no cost justification; and

4. A supplier of face masks that allegedly earned over 665% in mark-ups.

The Commissioner of the Commission has encouraged South Africans to report suspected cases of excessive pricing and has warned that “we will see a wave of prosecution of firms in the next coming days”.

Nortons is currently advising a number of clients on excessive pricing cases. Should you require additional information, please contact Anthony Norton on 082 452 7336 or by email on anthony@nortonsinc.com; or Leago Mathabathe on 082 400 6805 or by email on leago@nortonsinc.com.