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7 Jun 2020

UK lagging behind on laws to protect against price gouging

As other countries issue fines and bans, Which? is calling for emergency legislation to stop price gouging and protect UK consumers
empty supermarket shelves

The UK is trailing behind in introducing laws to combat price-gouging of essential items and protect consumers during the coronavirus crisis and future emergencies.

Several countries already had legal powers in place designed to stop sellers from seeking to profit from the sale of certain items during a state of emergency, while others have quickly introduced laws relating specifically to the coronavirus crisis.

  • In Canada, an individual may face a fine of up to CAD 100,000 and up to a year imprisonment, while corporations may be fined up to CAD 10 million.
  • In Greece, the Development Ministry issued fines totalling u20ac113,500 between 24 and 26 March for profiteering
  • In Australia, fines of up to AUD 63,000 can be issued, and sentences of up to five years imprisonment

And these countries are far from the only ones - France and Italy have taken action in relation to face masks. Italy has set a maximum cap price for all type of masks, whereas France has stepped in to address the sale of surgical masks (single use masks) and textile masks (reusable) with distinct regimes for each.

In the UK, the Competition and Markets Authority (CMA) has advised government that emergency, time-limited legislation may be necessary for swifter enforcement action to be taken against those looking to profit from the price gouging of essentials.

In investigations conducted since March, we've repeatedly found evidence of price gouging in the UK, including proof that thousands of Covid-19 essentials had been sold for at least double the price. We've also received thousands of submissions of price gouging via our reporting tool and across social channels.

Which? is calling for emergency legislation to give regulators the tools to swiftly crack down on price-gouging on essential products, such as hand sanitiser and cleaning products, during this crisis and any future ones.

Price gouging laws across the world

Price gouging of essential products during a national crisis is nothing new, and is often seen after an increase in demand or issues with supply.

In March, headlines around the world showed the stockpiling of essential items - from toilet rolls in Australia to hand sanitiser, soap and cleaning products in the UK. Some shoppers weren't simply stocking their bathroom or kitchen cupboards, though, and as shelves emptied many turned to selling products online at inflated prices. Over the last two months we've seen examples of both online sellers and shops seeking to profit from the panic amid plummeting stocks.

Some countries quickly took action. Here we take a look at some of those that did, and how the legal protections were implemented.

Canada prohibits price gouging with steep penalties

While there are no federal competition laws prohibiting price gouging in Canada, several provinces have emergency management statutes, which allow governments to fix prices of essential goods during a period of emergency.

On March 28, an order prohibiting the price gouging or 'unconscionable prices' of essential items was issued, and applied to necessary goods plus items deemed to be essential during the COVID-19 such as PPE, personal hygiene products disinfectants and non-prescription medication.

The penalties for those found to be price gouging in Ontario are steep. If convicted, a company director or officer could face a fine of up to CAD 500,000 and up to one year in prison, while corporations may be fined up to CAD 10 million. Any individual engaged in price gouging may face a ticket of CAD 750, or, if charged and convicted, a fine of up to CAD 100,000 and up to a year imprisonment.

Greece issues fines

In Greece the Development Ministry issued fines totaling u20ac113,500 between 24 and 26 March for profiteering, after price margins were introduced on specific essential items such PPE, antiseptic and disinfectant products.

The penalties included a u20ac50,000 fine for a drug warehouse which had increased its profit margin from 20% to 35%, and u20ac20,000 each for three petrol stations who had increased their profit margins on petrol in light of the global oil crisis.

United States invokes Defence Production Act

In the US, there is no federal law against price gouging, but on 23 March President Trump issued an executive order at a federal level invoking the Defence Production Act.

It contains three main components, including one designed to prevent hoarding of items deemed to be essential, and to prevent such goods being resold at prices in excess of market prices. The act allows the president to decide which items are designated as scarce or essential, and in response to the COVID-19 crisis President Trump labelled PPE, sterilisation materials and some medical equipment as protected.

At a state level, additional action has been taken by Attorney Generals involving lawsuits and cease-and-desist notes against third party online sellers and bricks and mortar stores. For example, in Washington State the Attorney General's office issued a release saying that they were actively investigating reports of price gouging. They have also issued six cease-and-desist notices to online sellers, including one who priced hand sanitiser at a 600% markup.

PIRG reveals price-hikes on Amazon

The US advocacy organisation Public Interest Research Groups (PIRG) is calling for a federal law against price gouging, and has launched a petition, after its own research revealed significant price hikes on hand sanitiser and masks on Amazon.com.

The group supported 346 state legislators from 45 states with a joint letter to Amazon, Craigslist, eBay, Facebook and Walmart on April 7, calling for preventative measures to be quickly implemented to protect consumers.

And it's not just retailers that are included in the laws on price gouging. In Tennessee, two brothers were placed under investigation by the Attorney General after hoarding 17,700 bottles of hand sanitiser for sale on online marketplaces.

From 1 March, the day after the first coronavirus-related death in the US was confirmed, the two brothers spent three days driving across state and buying all the hand sanitiser they could find. They then listed the bottles on Amazon, selling some for as much as $70 (£57).The investigation concluded without any civil charges, but the brothers are prohibited from selling emergency or medical suppliers during a crisis at grossly inflated prices.

South African company found guilty of excessive pricing

In April, the South African Competition Tribunal fined a Pretoria-based company that it found guilty of excessive pricing of face masks. The company was found to have hiked prices by at least 888% between December 2019 and March 2020, and has been instructed to pay an administrative penalty.

Two further COVID-19-related excessive pricing complaints, both relating to face masks, have been referred to the Tribunal.

Australia bans price gouging for consumer to consumer sales

In Australia, the government has taken action through the Biosecurity Act (2015) to ban price gouging for consumer to consumer sales. The Minister for Health announced on 30 March that the price gouging by people trying to re-sell essential goods such as PPE, disinfectant products and antibacterial hand sanitiser during the COVID-19 pandemic would be prohibited under the act.

This coincided with high-profile media coverage around the uncertainty of Australia's own stocks of essential goods, including a whistleblower at the Chinese-owned company Greenland alleging that 'tonnes of gloves, masks, gowns, sanitiser and other vital medical supplies [were] being packaged to be shipped out of Australia to China.'

If a consumer is believed to be profiteering on essentials, the Australian Federal Police can require the goods to be surrendered and donated. Fines of up to AUD63,000 can be issued, and sentences of up to five years imprisonment.

In April, the New South Wales minister for fair trading, Kevin Anderson, also announced the launch of a reporting tool by the Australia Competition and Consumer Commission (ACCC), similar to the one launched by the CMA in the UK.

Consumer organisation Choice launches campaign

But the current action taken by the Australian government is temporary, and does not guarantee that price gouging will be tackled in future emergencies. As a result, Australian consumer organisation Choice has launched a campaign to put pressure on state and federal governments to introduce permanent laws which would clearly outlaw price gouging during all future emergencies.

It's not just consumer organisations that are taking a stand against price gouging. One Australian store owner made headlines in April after refusing a refund to a man attempting to return 132 packs of toilet roll and 150 one litre bottles of hand sanitiser.The director of Drakes Supermarkets said the man was attempting to return AUD5,000 worth of goods that he'd been unable to sell online.

Which? is calling for emergency legislation

Our investigations into price gouging paint a troubling picture for consumers looking to purchase essential items during the coronavirus pandemic.

And without emergency legislation, the UK continues to trail behind other countries in combating price-gouging and protecting consumers during the coronavirus crisis and future emergencies.

Sue Davies, Head of Consumer Protection at Which?, said: 'With face coverings being made compulsory on public transport in England there is a risk that unscrupulous sellers will try to sell face masks at hugely inflated prices, as we have found with other essential items during this pandemic.

'Yet the UK is currently hampered in any attempts to take swift action on price-gouging during crises such as Covid-19 and trails well behind other countries that already have laws in place to tackle profiteering during emergencies.

'To stamp out price-gouging during this ongoing crisis, and in future ones, the government, working with the CMA, needs to step in with emergency legislation to keep the price of essential items reasonable.

'Until this happens the CMA must, where appropriate, use the existing powers it has to crack down on any individual or business found to be exploiting others during this time of crisis.'

Additional research by Christopher Walker.

Read the latest coronavirus news and advice from Which?.