Telkom subsidiary BCX and Vexall, in which pharmacy Dis-Chem is a shareholder, are at each other’s throats over a computer program used by hundreds of retail pharmacies in the country to dispense medicine.
The warring parties – which are currently involved in a High Court dispute over the program – will today appear before the Competition Tribunal in an application for interim relief.
Vexall, an ICT company that started trading in September 2019, is seeking interim relief against BCX, which owns the copyright to the computer program called Unisolv.
Vexall provides ICT support services to the healthcare industry, such as a pharmacy bureau and digital medical aid recon, the company says.
The Competition Commission says BCX developed Unisolv some 26 years ago. It is said to be the industry-standard software for use by private retail pharmacies.
According to the commission, in 2019, some BCX staff members involved in developing and implementing Unisolv resigned and joined Vexall.
Alleged poaching
BCX claims the resignations were orchestrated, while Vexall says the workers were either retrenched as part of a substantial cost-cutting exercise, or resigned seeking job security.
In 2018, BCX announced it was retrenching employees after its performance was negatively impacted by the weak economy and a decline in voice revenue from its connectivity business.
The Competition Commission adds that in the second half of 2019, Dis-Chem and a substantial number of other pharmacies gave notice to BCX that they would no longer procure “value-added services” from the company.
These comprise a wide range of ICT services such as hardware and software installation, central patient profile hosting and inventory management services, among others, it notes.
BCX says some of these services are integral to the functioning of Unisolv as a whole and it would not be viable to “unbundle” these.
However, it does not object to Vexall providing non-integral services. Vexall, in turn, argues it should be able to provide all “value-added services”.
BCX lodged a case in the High Court in October 2019 against Vexall, Dis-Chem and 46 others (former BCX employees who are now with Vexall).
BCX’s allegations – that Vexall acted unlawfully against BCX by illegally poaching its employees, customers and unlawfully appropriating its intellectual property in relation to Unisolv – are the subject of the case lodged in the High Court.
Vexall has lodged a complaint against BCX with the Competition Commission, accusing BCX of uncompetitive behaviour and contravening the Competition Act.
Pending the outcome of the commission’s investigation, Vexall wants the Tribunal to prohibit BCX from:
1. Inducing Vexall’s customers not to deal with it by making the licensing of the Unisolv software (including the right to receive updates, upgrades and new releases of the software) conditional upon those customers also procuring value-added services from BCX (these range from updates and support services to training and consulting services).
2. Licensing the Unisolv software on condition that the licensee purchases value-added services from BCX.
Conditional sale
In summary, the Competition Commission says, Vexall accuses BCX of being a dominant company and of “tying and bundling” – forcing its customers to purchase “value-added services” together with the licence in order to use the Unisolv software.
It argues this induces customers not to deal with Vexall.
The Competition Act prohibits a dominant company from selling goods or services on condition the buyer must purchase unrelated goods or services (unless the dominant company can show pro-competitive effects which outweigh the anti-competitive effect of its conduct).
BCX denies it is a dominant company. It also denies it has acted anti-competitively “tying and bundling”.
In its papers before the Tribunal, it also submits the matter before the Tribunal should be put on hold, pending the outcome of the case in the High Court.
BCX, formerly Business Connexion, has taken a different business approach since it was acquired by Telkom in 2015 in a R2.67 billion deal.
The acquisition saw co-founder Isaac Mophatlane leaving the company in 2017. He was replaced by Ian Russell, who was then group chief transition officer.
Jonas Bogoshi replaced Russell as CEO in June 2018.
Dis-Chem started out as a small pharmacy in 1978 in Mondeor, Johannesburg. The Professional Management Review rated it as the best and most successful pharmacy chain in SA. The pharmacy is privately owned and run by its founding members, Ivan and Lynette Saltzman.
- Correction:
The original headline of this story has been changed from “BCX, Dis-Chem unit fight over retail pharmacy software”.
ITWeb’s story was based on a statement from the Competition Tribunal which said Dis-Chem is a majority shareholder of Vexall. However, the Tribunal has issued another statement saying: “Please note in the Tribunal press release of 31 January 2020 it was incorrectly stated that Dischem has a majority shareholding in Vexall. The correct position is that Dischem has a small shareholding in Vexall and has no involvement in the operations of the company. The Tribunal apologises for the error in the press release. Please also note that the Tribunal has never described Vexall as a unit of Dischem.”
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