We came across an excellent article from law firm Baker McKenzie on price gouging, a phenomenon that has sadly become an issue in the new ‘COVID-19 economy’ that we’re all struggling to adjust to.
COVID-19 has had a severe impact on businesses, resulting in significant changes in demand for certain products, as well as major disruptions to supply chains often bringing large increases in costs. Amidst this, there have been allegations of ‘price gouging’ in response to businesses seeking to increase their prices as a result of the changed market conditions.
This alert provides guidance on price gouging under Australian competition and consumer law and the ACCC’s approach to it. It also covers a new Determination by the [Australian] Minister for Health introducing a limited specific prohibition against price gouging involving essential goods purchased in retail transactions.
- There is no general prohibition against price gouging in Australia.
- Increasing prices in response to changed market conditions will generally not be unlawful, nor is increasing prices in response to cost increases. However, businesses looking to implement price rises need to be careful to ensure that:
- any justifications provided for price increases are accurate and can be substantiated to avoid any misleading conduct risk; and
- they are mindful of the prohibitions against unconscionable conduct, particularly when dealing with vulnerable consumers and/or essential goods or services.
- The ACCC has reiterated its preparedness during the COVID-19 crisis to engage with businesses directly in response to behaviour that involves price gouging.
- A new price gouging prohibition, introduced in a Determination made by the Minister for Health, applies to persons seeking to resell ‘essential goods’ (such as disposable face-masks, gloves, and hand sanitiser) that were purchased in a retail transaction on or after 30 January 2020.
- The Determination doesn’t apply to the resale of products purchased via ordinary wholesale transactions. It’s directed at persons purchasing large quantities of essential goods from retailers and then seeking to resell them at extortionate prices.