The initial shockwaves of the COVID-19 pandemic, declared in March, prompted authorities across Europe and in America to take urgent steps to protect consumers. Such measures included cracking down on anti-competitive behaviour and temporarily relaxing rules which might otherwise be detrimental to the public interest. Two months on, as countries around the world cautiously ease ‘lockdown’ measures, disturbing stories continue to emerge of competition law abuse, including profiteering on essential products, highlighting significant gaps in existing regulatory powers. While some countries have introduced tough temporary powers, the UK now seems to be hesitating.
Early Fighting Talk
On 23 March, the European Competition Network, representing the European Commission and EU Member State competition authorities issued a statement threatening action against companies taking advantage of the pandemic by ‘cartelising’ or abusing their dominant market positions to profiteer. At the same time, the ECN acknowledged that the exigency of the current situation meant some co-operation between competitors was essential if consumers were not to go short.
In the US, many states already had civil anti-profiteering laws effective during periods of heightened tension such as states of emergency, with some bolstering existing legislation with additional measures against excessive prices, and with federal steps taken to outlaw the personal accumulation and sale of scarce medical items.
In the UK, the competition watchdog, the Competition and Markets Authority outlined its approach to business co-operation in response to COVID-19. Its chairman stated the CMA would do whatever it could to act against rip-offs and misleading claims, using any or all of the tools at the its disposal, while its chief executive threatened to “…do whatever is required to stop a small minority of businesses that may seek to exploit the present situation…”. There were calls by Parliamentarians for wartime-style measures against price-hikes. The Government’s warning that price controls were being considered was a clear shot across the bows of those seeking to profiteer from the current emergency.
Notwithstanding this sabre-rattling, the CMA confirmed that it would not take enforcement action for appropriate and necessary co-ordination in the interests of consumers and dealing with critical issues arising from the pandemic. The UK Government underpinned this message by bringing forward a statutory instrument disapplying from 1 March 2020 onwards the Chapter 1 prohibition against anti-competitive agreements aimed at preventing or mitigating disruption to grocery supplies as a result of the pandemic.
“Rampant” Price Gouging
Despite the threat of condign punishment for profiteering, incidences of abuse were legion, with the consumer group, Which? drawing attention to excessive price raises or ‘price-gouging’ of everyday goods such as hand sanitizer and bleach described as rampant. At the end of April, the CMA’s COVID-19 taskforce, set up to identify, monitor and respond to consumer problems arising from the pandemic, issued an update on its work expressing concern that a small minority “may be” exploiting the situation by making bogus claims about goods and services, charging excessive prices and ignoring customers’ cancellation rights. The taskforce urged people and businesses who experienced unfair behaviour to report it via a dedicated CMA online portal.
As mainstream outlets experienced supply chain issues, consumers inevitably turned to online marketplaces to source essential products, with eBay and Amazon coming under particular fire from campaigners for not stamping out abuses. eBay suspended ‘bad seller’ accounts and introduced a ‘trusted vendor’ system for those seeking to sell items such as face masks, hand sanitisers and cleaning wipes.
Amazon expressed disappointment that vendors were artificially inflating the price of basic products, and, while confirming that it had removed tens of thousands of offers, was reported as admitting that it was struggling to prevent profiteering on its platform.
Despite the efforts of the CMA and online market giants, however, as people gradually adapt to travelling and working in a potentially dangerous environment, reports continue to emerge of extreme price hikes, with personal protective equipment such as masks and gloves – essential for protecting care providers from infection – offered for sale at extortionate prices.
Armed for Battle?
Across Europe, competition authorities have experienced similar problems. The Italian regulator has issued take-down notices to websites offering misleading coronavirus cures and opened formal investigations of eBay and Amazon for tolerating price-gouging. Others were more supportive of online platforms with the Dutch regulator acknowledging the active steps being taken to prevent traders charging exorbitant prices. The French authorities were more interventionist, introducing temporary price controls on sanitising gels and actively monitoring mask prices on e-commerce sites.
In the UK, the CMA maintained that it has a range of enforcement options at its disposal, including issuing warning letters, working with enforcement partners, consumer bodies and trade associations, and taking action under its competition and consumer protection powers. It has also repeatedly suggested that it would advise of the UK Government any legislative changes that may be required. In mid-May, it emerged that the CMA had indeed lobbied the Department for Business, Energy and Industrial Strategy (BEIS) for emergency, time-limited powers to tackle price-gouging. Its Chief Executive acknowledged that “consumer and competition laws are not really designed for emergencies” and effectively admitted the CMA lacked the weapons to take on non-dominant profiteers.
Government’s Lukewarm Response
In contrast to the swift and decisive action of the US, French and other authorities, and despite the UK competition watchdog’s assessment that they needed new powers, BEIS’ response to the CMA’s plea has been lukewarm. A government official confirmed that it was not something which they were actively pursuing at present and a BEIS spokesperson highlighted that “the CMA deals directly with firms to address any complaints and we continue to keep the issue under review.”
By its response, it is clear that BEIS expects the CMA to use its existing regulatory toolbox and considers that the CMA’s ability to communicate directly with online retailers (as it has done to date) and manufacturers’ ability to stipulate maximum retail prices provide sufficient means to tackle profiteering.
The CMA has since backtracked, denying that it sought a change in the law from BEIS, and instead suggested that it had merely sought to advise the government based on outcomes arising from the work of its COVID-19 taskforce.
As the world’s economies slowly emerge from this unprecedented period, and official inquiries begin considering the decisions which were taken during the pandemic and the lessons to be learned, people may well ask whether the acute shortages faced over the past few months, some of which jeopardised public health, could have been avoided and whether additional measures should be enacted to avoid such failures in future. Judging from the government’s reaction so far to the regulator’s request for additional consumer protection powers, the CMA may gaze enviously at its continental and North American counterparts a while yet.