Block exemption - essential goods

In response to disruptions to the supply chains of essential goods pursuant to the recent unrest in the country, the Minister of Trade, Industry and Competition has issued regulations exempting certain forms of communication and coordinating activities by businesses in the value chain for essential goods (i.e. production, distribution and retail), from the application of sections 4 and 5 of the Competition Act (Act no. 89 of 1998) (“Competition Act”) (which sections of the Competition Act would have rendered such communication and activities prohibited practices under normal circumstances).

Essential goods are basic food and consumer items, emergency products, medical and hygiene supplies (including pharmaceutical products), refined petroleum products and emergency clean-up products. It includes the final goods as well as all inputs in the supply chain required for the production, distribution and retail thereof.

The exempted forms of communication and coordinating activities are –

Exempted communication

• Communicating with each other in relation to the loss of stock or capacity in general and in particular areas of the country in order to determine the extent and location of likely shortages of essential goods;
  
  
• Communicating with each other in relation to the availability of stocks and capacity in general and in particular areas of the country in order to determine the overall capacity for supply and the ability of different firms to supply different areas, as well as the timing thereof; and
  
  
• Communicating with each other as to the extent of demand for essential goods in different parts of the country in order to determine the extent of shortage and an equitable distribution of available supply across the country to consumers and customers, including small businesses.
  
  

Exempted coordinating activities

• Coordinating in relation to the allocation of inputs across producers of essential goods in order to reduce anticipated or actual shortages in general or in particular areas, and to ensure an equitable distribution of essential goods across the country, including the transfer of inputs between producers of essential goods; 
  
  
• Coordinating in relation to the distribution of essential goods to different geographic areas in order to ensure an equitable distribution of essential goods across the country to consumers, and especially poorer households, and customers, including small businesses; and
  
  
• Coordinating in relation to measures that may expand stocks or capacity in order to relieve anticipated shortages of essential goods in general or in particular areas.
  
  

The Department of Trade, Industry and Competition and the Competition Commission must have been notified of actual or anticipated shortages and the need to engage in such communication and activities before reliance may be placed on the exemption.

The purpose of the exemption is to prevent critical shortages of essential goods within the country and to promote the equitable distribution of scarce essential goods across the country to consumers, especially poorer households, and customers, including small businesses.

The exemptions are limited only to communication and coordinating activities as mentioned, which have the sole purpose of responding to actual and anticipated shortages for essential goods in general, or in particular areas of the country, arising from disruptions to the supply chains for essential goods.

Businesses should -

• note that the exemption does not exempt price-fixing and collusive tendering in respect of essential goods and inputs used in the production of essential goods and does not authorise any discussion of the pricing of essential goods and the pricing of inputs used in the production of essential goods;
  
  
• be remined that in terms of section 4 of the Consumer and Customer Protection and National Disaster Management Regulations and Directions, any increases in prices for the essential goods, or the supply of inputs for essential goods, must be cost justified and not increase the net margin or mark-up for that good above the average margin or mark-up for that good in the three month period to 1 March 2020. 

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Zelmaine van der Westhuizen | Director (Corporate and Commercial Law) | This email address is being protected from spambots. You need JavaScript enabled to view it. | @GildenhuysMalat