Price gouging as a species of excessive pricing during the covid-19 pandemic and beyond: has the ‘lucky monopolist’s’ luck run out? (and is price regulation on the horizon?)

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The Covid-19 pandemic saw widespread market disruption causing extreme and sudden price increases in foods and essential goods. This paper provides a critical analysis of the response by South Africa’s competition authorities to the Covid-19 pandemic. First, it discusses excessive pricing as an exploitative abuse. It argues that there is considerable overlap between excessive pricing and price gouging conceptually, which reveals why price gouging has been pursued as a species of excessive pricing. Secondly, it traces the development of market definition in competition law. It argues that while there has been a growing strand of scholarship arguing in favour of an effects-based approach to assess market power and arguing against the necessity of market definition, that market definition is still the superior method of assessing market power and alleged anti-competitive effects, as it considers the full range of relevant factors necessary to establish the boundaries of competition and the degree of substitutability between competing firms and products. Thirdly, it considers the traditional approach to excessive pricing in competition law to contextualise the approach adopted in the Covid-19 cases. It argues that pursuing price gouging as a species of excessive pricing represents a break with traditional excessive pricing as previous excessive pricing concerned traditionally dominant firms, many of whom were beneficiaries of former state support and/or were operating in markets with high barriers to entry. On the other hand, the Covid-19 cases were characterised by many smaller firms with low market shares, new entrants, and once-off market participants being found to be temporarily dominant firms (the so-called ‘Lucky Monopolist’) who were inferred to have market power. Fourthly, it analysed the Covid-19 cases and several consent agreements. This paper argued that the approach adopted in several cases in which the market was not properly defined was incorrect and contrary to traditional South African competition law. It argued that the Consumer Protection Regulations were promulgated too late and forced the competition courts to use traditional excessive pricing provisions to evaluate these cases. Furthermore, assessing these cases under the traditional excessive pricing provisions may influence future excessive pricing cases by diluting legal precedent with less economically and competition law defensibleapproaches. Fifth, this paper evaluated the response of the competition authorities to the Covid-19 pandemic. It found that the interventions of the competition authorities were able to deter price gouging conduct in response to the pandemic and agrees with the remedies and penalties imposed by the authorities as an appropriate response while arguing further that it is inappropriate to impose punitive administrative penalties on firms that are not dominant under traditional abuse of dominance and excessive pricing tests. Finally, this paper argues that price regulation is not the ideal intervention for competition authorities and has proffered possible alternatives such as market monitoring, informal engagement with market participants; and/or a general price gouging or consumer protection law which would automatically activate upon the declaration of a state of disaster or emergency which would obviate the need to use the traditional dominance and excessive pricing provisions of the Act to assess such conduct
Submitted in partial fulfilment of the requirements for the degree of Master of Laws by Coursework and Research Report at the University of the Witwatersrand, Johannesburg
Covid-19 pandemic, Price gouging, Pricing, Lucky monipolis, UCTD