Durban — The South African Police Service’s (SAPS) supplier of hand sanitiser during the Covid-19 pandemic was fined R3.5 million for excessive pricing.
On Monday, Competition Tribunal spokesperson Gillian de Gouveia said the tribunal had found BlueCollar Occupational Health (Pty) Ltd (BlueCollar) - acting on behalf of and/or within the ambit of its partnership with Ateltico Investments (Pty) Ltd (Ateltico) - guilty of having charged the SAPS excessive prices for the urgent supply of 10 000 25l containers of hand sanitiser during the Covid-19 pandemic in 2020.
De Gouveia said the tribunal described BlueCollar’s conduct as particularly egregious when one considers its social consequences - it exploited a pandemic by charging excessively for hand sanitiser that was crucial for the combating of the pandemic.
“The tribunal has imposed an administrative penalty of R3 550 000 on BlueCollar and Ateltico, jointly and severally,” De Gouveia said.
“In terms of the Tribunal’s order, BlueCollar and Ateltico are jointly and severally liable to pay an administrative penalty of R3 550 000 within 30 business days of the date of the order, the one paying the other to be absolved.”
The tribunal said that BlueCollar supplied hand sanitiser to SAPS during April 5-29, 2020. When supplying the hand sanitiser to SAPS, BlueCollar did so as a so-called trader or reseller. In other words, it bought the sanitiser stock from third-party suppliers and supplied it to SAPS (without adding any value to the product itself). BlueCollar’s usual business activities relate to the provision of occupational health services, including to SAPS, and is registered on National Treasury’s Central Supplier Database.
Competition Commission spokesperson Siyabulela Makunga welcomed the decision by the Competition Tribunal, in which it found SAPS supplier, BlueCollar Occupational Health (Pty) Ltd acting on behalf of and/or within its partnership with Ateltico Investments (Pty) Ltd, guilty of excessive pricing of hand sanitiser during the Covid-19 pandemic.
“This is the second excessive pricing case successfully prosecuted by the commission and determined by the tribunal in the context of a public procurement process during the pandemic. The first prosecution of price gouging in the context of public procurement relates to the April 2022 matter where another SAPS supplier, Tsutsumani Business Enterprises (Tsutsumani), was found guilty of price gouging in its supply of face masks in 2020. Tsutsumani was fined R3.4 million. The Tsutsumani matter is currently under review before the Competition Appeal Court,” Makunga said.
De Gouveia said the commission received a complaint from SAPS against several firms - including against BlueCollar - that responded to individual SAPS requests for quotation.
The commission, in its referral of the matter to the tribunal, alleged that BlueCollar supplied SAPS with 10 000 25l containers of hand sanitiser at a price of R3 550 (including VAT) per container. The commission ultimately argued that BlueCollar added a mark-up of 120% per 25l container of hand sanitiser and earned a gross margin of more than 50%.
Explaining the various steps involved in an excessive pricing assessment, De Gouveia said that even on a best-case scenario for BlueCollar, in terms of what cost items should be included under its “costs of sales”, its actual gross margin (as determined by BlueCollar’s financial expert) for the supply of the hand sanitiser to SAPS is more than 40% and its mark-up is more than 70%. This is substantially higher than the competitive gross margin for resellers of between 10% to 15% previously determined by the tribunal in a similar case (Tsutsumani).
“Furthermore, a comparison of BlueCollar’s price of R3 550 (VAT incl.) to National Treasury’s list price of April 15, 2020, of R1 635.45 (VAT incl.) reveals that BlueCollar’s price is more than double the National Treasury list price.
“The excess profit that was earned by BlueCollar and Ateltico, also referred to as the overcharge to SAPS, even on a best-case scenario for BlueCollar in terms of what cost items to include under its “costs of sales”, amounts to more than R9 million.”
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