Competition Commission v Lancet Laboratories (COVCO141Dec21) [2021] ZACT 107 (12 December 2021)
- Citation
- [2021] ZACT 107
- Status
- Order
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Posture
- Urgent Application / Consent Agreements Confirmed as Tribunal Orders
- Case number
- COVCO141Dec21
More details
- Court
- Competition Tribunal
- Posture
- Urgent Application / Consent Agreements Confirmed as Tribunal Orders
- Case number
- COVCO141Dec21
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal confirmed the consent agreements between the Competition Commission and Ampath and Lancet Laboratories as orders, capping the price of COVID-19 PCR tests at R500 inclusive of VAT for two years. The Tribunal found that the Commission's investigation established a prima facie case of excessive pricing, given the significant reduction in supplier costs and increased profitability of the laboratories. The voluntary price reductions and subsequent consent agreements were deemed appropriate to address the public interest in affordable COVID-19 testing during the pandemic. The laboratories are required to submit quarterly compliance reports and provide data on request, ensuring ongoing oversight. No admission of liability or wrongdoing was made by the laboratories, and the orders do not constitute a finding of contravention.
Court disposition
Consent agreements confirmed as orders of the Tribunal; price cap imposed for two years.
Orders
- Ampath and Lancet Laboratories must reduce the price of COVID-19 PCR tests to no more than R500 inclusive of VAT for two years.
- Both laboratories must submit compliance reports to the Competition Commission every three months detailing prices charged and material changes in costs.
- The Commission may request any data relating to compliance with the consent agreements at any time.
- No admission of liability or wrongdoing is made by Ampath or Lancet Laboratories.
02
Material facts
Parties
Competition Commission
ApplicantDrs Du Buisson, Kramer, Swart, Bouwer Incorporated t/a Ampath
RespondentDrs Mauff AC & Partners t/a Lancet Laboratories
RespondentAmounts and remedies
- Previous Ampath PCR Test Price: ZAR 850
- Ampath PCR Test Price Since 29 November 2021: ZAR 710
- Previous Lancet PCR Test Price: ZAR 850
- Lancet PCR Test Price Since 2 December 2021: ZAR 725
- Maximum PCR Test Price Cap (ampath and Lancet): ZAR 500
03
Procedural history
Posture
Urgent Application / Consent Agreements Confirmed as Tribunal Orders
04
Questions and positions
Legal issues
- 01
Whether Ampath and Lancet Laboratories charged excessive prices for COVID-19 PCR tests in contravention of section 8(1)(a) of the Competition Act.
- 02
Whether the consent agreements capping PCR test prices at R500 inclusive of VAT are appropriate and enforceable.
- 03
Whether the laboratories should submit compliance reports to the Commission.
Party arguments
- Applicant
- The Competition Commission argued that private pathology laboratories were charging excessive and unjustifiable prices for COVID-19 PCR tests, ranging from R850 to R900, despite reductions in supplier costs. The Commission's investigation revealed significant decreases in costs and substantial increases in profitability for the laboratories, indicating possible excessive pricing. The Commission demanded immediate price reductions to R500 inclusive of VAT, failing which urgent relief would be sought from the Tribunal.
- Respondent
- Ampath and Lancet Laboratories did not admit to charging excessive or exorbitant prices or to any contravention of section 8(1)(a) of the Competition Act. They voluntarily reduced their prices to R710 and R725 respectively prior to the consent agreements, and agreed to further reduce prices to R500 inclusive of VAT for two years, without admitting liability or wrongdoing.
05
Court’s reasoning
Legal principles
- 01
Competition Act, section 8(1)(a)
A dominant firm may not charge an excessive price for goods or services as prohibited by section 8(1)(a) of the Competition Act.
- 02
Competition Act, section 49D
Consent agreements may be confirmed as orders of the Tribunal to resolve competition complaints and enforce remedial measures.
- 03
Regulation 4 of the Consumer Protection Regulations
Consumer Protection Regulations empower the Commission to address excessive pricing in the context of national disasters such as COVID-19.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal confirmed the consent agreements between the Competition Commission and Ampath and Lancet Laboratories as orders, capping the price of COVID-19 PCR tests at R500 inclusive of VAT for two years. The Tribunal found that the Commission's investigation established a prima facie case of excessive pricing, given the significant reduction in supplier costs and increased profitability of the laboratories. The voluntary price reductions and subsequent consent agreements were deemed appropriate to address the public interest in affordable COVID-19 testing during the pandemic. The laboratories are required to submit quarterly compliance reports and provide data on request, ensuring ongoing oversight. No admission of liability or wrongdoing was made by the laboratories, and the orders do not constitute a finding of contravention.
Obiter and limits
- The Tribunal noted the urgency of the matter given the rising numbers of COVID-19 Omicron infections and the need for affordable testing.
- The Tribunal emphasized that the price cap is a maximum and laboratories may negotiate lower prices.
- The Tribunal clarified that the consent agreements do not amount to admissions of liability or wrongdoing by Ampath or Lancet.
Court disposition
Consent agreements confirmed as orders of the Tribunal; price cap imposed for two years.
- Ampath and Lancet Laboratories must reduce the price of COVID-19 PCR tests to no more than R500 inclusive of VAT for two years.
- Both laboratories must submit compliance reports to the Competition Commission every three months detailing prices charged and material changes in costs.
- The Commission may request any data relating to compliance with the consent agreements at any time.
- No admission of liability or wrongdoing is made by Ampath or Lancet Laboratories.
Source and reliance status
Competition Tribunal
This page organises the available record for research. Confirm quotations, current status, and subsequent treatment against the official source before relying on the case.
Judgment reading view
Judgment text
The complete available source text.
Competition Tribunal
Order
Date of release: 12 December 2021
AGREEMENTS TO REDUCE PRICES FOR COVID-19 PCR TESTS
CONFIRMED
AS ORDERS OF THE COMPETITION TRIBUNAL
Two leading pathology laboratories in South Africa have agreed to reduce their prices for COVID-19 PCR tests for the next two years, capping the amount at R500 including VAT.
This forms part of the terms of two separate consent agreements which the Competition Commission (“the Commission”) has concluded with Drs Du Buisson, Kramer, Swart, Bouwer Incorporated t/a Ampath (“Ampath”) and Drs Mauff AC & Partners t/a Lancet Laboratories (“Lancet”), respectively.
The two consent agreements have been confirmed as orders of the Competition Tribunal on an urgent basis to give effect to the price
reductions without delay, given the current rising numbers of Covid-19 Omicron infections and consequent increase in the number of PCR tests.
Ampath
In terms of its consent agreement, Ampath agrees to the following: to stop charging a price of R850 (VAT incl.). This amount formed the subject matter of a complaint lodged by the Council for Medical Schemes (“CMS”) with the Commission; to stop charging
R710 (VAT incl.), which is the price charged since 29 November 2021; and to reduce the price of Covid-19 PCR tests to no more than R500, inclusive of VAT.
Lancet
Lancet agrees to the following, in respect of its consent agreement: to stop charging the price of R850 (VAT incl.) which formed the subject matter of the CMS complaint; to stop charging R725 (VAT incl.) which is the price charged since 2 December 2021; and to reduce the price of Covid-19 PCR tests to no more than R500, inclusive of VAT.
The price reductions by Ampath and Lancet will be applicable for a period of two years. The price of R500, inclusive of VAT, is a maximum price cap and Ampath and Lancet may charge or negotiate a price below this maximum price cap.
In addition, both laboratories will be required to submit compliance reports, setting out, inter alia, the prices charged for PCR tests and any material changes in costs, to the Commission every three months. Furthermore, the Commission will be entitled, at any time, to request any data relating to their compliance with the consent agreements.
Neither Ampath nor Lancet admit that they charged excessive or exorbitant prices in contravention of section 8(1)(a) of the Competition Act, read together with Regulation 4 of the Consumer Protection Regulations. As stipulated in their respective consent agreements,
nothing therein amounts to or should be construed as an admission of any facts, conduct, liability or wrongdoing on their part.
Background
On 8 October 2021, the CMS lodged a complaint with the Commission, alleging that private laboratories were charging between R850-R900
for a COVID-19-test. The CMS believes that these prices are exorbitant and unjustifiable in the context of alleged reductions in
costs.
The Commission’s investigation revealed that prices have decreased across pathology suppliers, i.e. suppliers who supply the
laboratories have lower prices, thus reducing their costs. A basic average of the costs (i.e. not accounting for differences in volume) from individual COVID-19 PCR test kit suppliers, shows that the costs have decreased between March 2020 and September 2021.
The Commission’s investigation also revealed that the pathology groups have been earning significant profits since March 2020,
especially in the current financial year to date. The significant increases in profitability indicated to the Commission that excessive
pricing on COVID-19 PCR tests may be present.
The Commission found that, prima facie, pathology groups including Ampath and Lancet have engaged in conduct amounting to a contravention of section 8(1)(a) of the Act.
Whilst the investigation was under way, and following preliminary discussions with Ampath, Ampath voluntarily reduced its COVID-19 PCR test price to R710 (VAT inclusive) on 29 November 2021. Lancet too, from 2 December 2021, reduced its price to R725 (VAT inclusive).
However, an assessment by the Commission concluded that Ampath and Lancet were capable of profitably selling tests at R500 (VAT
inclusive).
On 08 December 2021, the Commission sent letters of demand to Ampath and Lancet to immediately reduce the cost of COVID-19 PCR tests to no more than R500 inclusive of VAT, failing which it would launch an urgent application in the Tribunal for appropriate relief aimed at the reduction of COVID-19 PCR tests to R500 inclusive of VAT.
On 9 December 2021 Ampath responded and on 10 December 2021 Lancet responded to the Commission’s request and agreed to reduce the price for COVID-19 PCR tests to no more than R500 inclusive of VAT. Consequently, the Commission and the two laboratories concluded the respective consent agreements.
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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