COMPETITION COMMISSION WARNS AGAINST PRICE GOUGING AMID OIL PRICE INCREASE

The war in the Middle East has caused global oil prices to surge above $100 per barrel in the past two weeks. While a higher oil price is expected to raise the costs of fuel in South Africa, as well as products and services that use fuel, there is a distinct risk that unscrupulous businesses will exploit the sudden surge and uncertainty in fuel prices by engaging in price gouging, namely, increasing prices beyond what is warranted by the fuel cost increases.

This risk is prevalent for unregulated fuels such as diesel retail prices and jet fuel; oil-based products such as nitrogen-based fertilisers and plastics; fuel-intensive services such as air, land and sea transport and logistics; and all other products and services that rely on these inputs, particularly food products and delivery services.

South African case precedent on price gouging sets clear standards for businesses facing these types of cost increases, namely:

· Businesses may not increase prices in anticipation of future fuel cost increases; they may only

increase prices once they experience actual fuel cost increases.

· Businesses that experience fuel cost increases may only increase their prices in proportion to the actual fuel cost increases they experience.

In effect, these two conditions mean that product or service margins after the surge in fuel prices should be no higher than the margins prior to the fuel price increase.

Furthermore, once fuel costs decline, product or service prices should decline immediately.

Businesses that increase prices in advance of any actual fuel cost increases or increase prices by far more than their actual cost increases, risk being prosecuted and found guilty of price gouging. The same applies to businesses that continue to charge higher prices after the oil price shock has subsided. The Competition Commission calls on all businesses in South Africa to comply with the law and avoid price-gouging behaviour during this period of oil price volatility.

Given the heightened risk of price gouging during this period of oil price volatility, the Commission calls on the public and businesses to report instances where they believe price gouging is occurring so that the Commission can investigate. To assist with the investigation, please provide your name and contact details, as well as the name and location of the business suspected of price gouging; the product or service for which the price has increased; the new price and the price prior to the increase; and the reason you suspect price gouging.

The public and businesses can lodge a complaint via email to ccsa@compcom.co.za or via WhatsApp at 084 743 0000.

Issued by:

Siyabulela Makunga, Spokesperson

On behalf of: The Competition Commission of South Africa