Pandemic price gouging a prime consumer concern

Public concern over coronavirus ‘price gouging’ has continued to grow, with the pandemic creating shortages of essential groceries and medical supplies.  Generally, the law allows prices to be set based on market forces of supply and demand, and normally competitive pressure would keep prices down.  But even though price gouging is not specifically dealt with under Australian competition law, the ACCC has responded to the public’s concerns by warning that excessive pricing may indirectly breach particular provisions of the Australian Consumer Law.  For example, those who engage in price gouging may contravene:

• the misleading and deceptive conduct laws, where a business makes misleading claims about the reason for excessive pricing of a product; and
• the provisions relating to unconscionable conduct, where extreme product pricing is deliberately dishonest and affects vulnerable consumers.

The ACCC has also indicated that it will focus its efforts on ensuring the affordability of essential goods and services during this time, so businesses in essential industries should expect increased attention from the regulator and consider whether their products and services are fairly priced. 

Furthermore, the Federal Government recently invoked its powers to prevent price gouging on medical products like face masks and hand sanitiser under biosecurity laws.  This means that anyone who on-sells essential products at more than 120% of the price for which they were purchased can face fines of up to $63,000 or five years’ imprisonment.  Online marketplaces like eBay and Gumtree are likely to be the subject of closer monitoring by law enforcement authorities, given that these platforms tend to be a key marketplace for on-selling products.  These measures do not apply to manufacturers or legitimate business activities.

If you are increasing prices for any of your products or services as a result of the higher demand experienced during the pandemic, be careful not to make false or misleading statements about why the price had to increase (e.g. because of increases in supplier costs) where they do not account for the whole increase.  Similar to fears of overcharging at the time the GST was introduced, and related to credit card surcharges, the ACCC will actively take action against companies that blame their price increases on factors that only account for part of the price hike.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.