SUPPLIER ACCUSED OF CHARGING GOVERNMENT EXCESSIVE PRICES FOR TONGUE DEPRESSORS DURING COVID-19 AGREES TO CREDIT THE NATIONAL HEALTH LABORATORY SERVICES FOR OVERCHARGE

Oak Medical and Laboratory Supplies CC (Oak Medical), accused of charging government excessive prices for a once-off batch of 200 000 tongue depressors (in the context of Covid-19), has agreed to give the National Health Laboratory Services (NHLS) a credit note to the value of the calculated overcharge.

 

This forms part of the terms of a consent agreement between Oak Medical and the Competition Commission (the Commission), which has been confirmed as an order by the Tribunal. Oak Medical agrees to, among others:

 

• restitution measures to the NHLS in the form of a credit note valued at the calculated overcharge amount of R109 772.84;
• immediately stop the excessive pricing conduct as described in the consent agreement;
• with immediate effect reduce its mark-up for tongue depressors to an agreed maximum percentage for the duration of the state of national disaster; and
• develop, implement and monitor a competition law compliance programme.

 

Although Oak Medical agrees to the terms of the consent agreement, it does not admit that its conduct (as described in the consent agreement) constitutes excessive pricing in terms of section 8(1)(a) of the Competition Act (the Act) read together with Regulation 4 of the Consumer Protection Regulations (the Regulations). It nevertheless has agreed to resolve the complaint on the terms set out in the agreement.

 

Background

 

The Commission, which investigates alleged contraventions of the Act before referring such cases to the Tribunal, launched an investigation into Oak Medical in August 2020 after receiving information that it may have been selling tongue depressors to the national government at substantially high prices.

 

The NHLS is the largest diagnostic pathology service in South Africa, with the responsibility of supporting the national and provincial health departments in the delivery of healthcare. It provides laboratory and related public health services through a national network of laboratories.

 

A tongue depressor (sometimes called a spatula) is used in medical practice to depress the tongue to allow for examination of the throat and mouth. In the context of the Covid-19 pandemic, tongue depressors may be used during the taking of a throat swab. Tongue depressors fall under the category of “medical and hygiene supplies” in the Regulations.

 

The Commission’s investigation found, among others:

• Oak Medical, in May 2020, supplied the NHLS once-off with 200 000 tongue depressors at excessive per unit prices when the prices charged by Oak Medical are compared to other prices charged in the market;
• Oak Medical applied a cost mark-up percentage of 463% on the tongue depressors and the gross profit margin earned was 83%; and
• the excess profits that Oak Medical earned from the conduct amounted to R109 772.84 (one hundred and nine thousand, seven hundred and seventy two Rand and eighty four cent).

 

A public version of the consent agreement will be made available on the Tribunal’s website at www.comptrib.co.za in due course.

 

 

Issued by:

 

Gillian de Gouveia, Communications Officer
On behalf of the Competition Tribunal of South Africa

Cell: +27 (0) 82 410 1195
E-Mail: GillianD@comptrib.co.za
Twitter: @comptrib

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