COVID-19 block exemption for the healthcare sector, 2020
Author: Phuti Mashalane – Senior Associate
In the wake of the declaration of a state of national disaster due to the COVID-19 pandemic, the Government of South Africa has made further interventions to help combat the pandemic. The Government, through the Department of Trade and Industry, has published Regulations aimed at exempting certain conduct that would ordinarily be in contravention of the Competition Act, 89 of 1998 (as amended) (the “Competition Act”). This exemption relates to the healthcare sector which is understandably at the centre of combating COVID-19.
Ordinarily, any conduct or business practice involving price fixing, collusive tendering and market division between parties in a horizontal relationship (i.e. competitors) is prohibited by section 4 of the Competition Act. The prohibition also ordinarily extends to section 5 of the Competition Act, which regulates conduct between parties in a vertical relationship (e.g. customer and a supplier). These prohibitions hugely impact how parties in the healthcare sector, for instance, would conduct business and interact with one another. A contravention of these provisions could in certain instances attract enforcement action against those that are found to have contravened, an administrative penalty or imprisonment (under section 4), or both, could be imposed.
The Regulations are designed to exempt a category of agreements or practices in the healthcare sector from the application of sections 4 and 5 of the Competition Act, only in relation to conduct associated with the combating of the COVID-19 pandemic. More importantly, the exemption is granted by Government on its own volition and will accordingly fall away when COVID-19 is no longer a national disaster. In terms of the Regulations, the objective of Government is twofold, namely:
to promote concerted conduct in order to prevent an escalation of the national disaster and to alleviate, contain and minimise its effects; and
to promote access to healthcare, preventing exploitation of patients, enabling the sharing of healthcare facilities, management of capacity and reduction of prices.
Consumer and customer protection and national disaster management regulations and directions
In addition, the Regulations seek to protect consumers and customers from unconscionable, unfair, unreasonable, unjust or improper commercial practices during the national disaster. These Regulations proscribe any price hikes/ manipulation in respect of certain key goods or services during the national disaster. In particular, the Regulations prohibit dominant firms from charging excessive prices to the detriment of consumers or customers within the meaning of the Competition Act. Further, the Regulations draw from and refer to the provisions of the Consumer Protection Act, 2008 which prohibits a supplier, in this case of certain medical goods or services, from offering to supply any goods or services at a price that is unfair, unreasonable or unjust, or to charge a price increase which does not correspond to or is not equivalent to the increase in the cost of providing those goods or services.
The suppliers of certain key goods or services are also required to develop and implement reasonable measures to ensure the equitable distribution to consumers or customers, including small business, of certain goods and to keep adequate stocks of key goods. These measures may include limiting the number of items of certain key goods which a customer or a consumer may purchase in a defined period of time.
Any person or firm which contravenes these regulations could face penalties in the form of a fine or imprisonment.
As Lawtons Africa, we remain committed to support and guide those who are in the frontlines of combating the COVID-19 pandemic, especially those impacted by the Regulations above. These Regulations are in our view an important intervention by Government, which we fully endorse and support.
For more information and queries, please do not hesitate to contact us:
Director and Head of Competition Department email@example.com
D +27 11 286 6922
Senior Associate – Competition Department firstname.lastname@example.org
D +27 11 523 6263
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