COVID-19: What measures may be taken under Irish Law in response to reports of “Price Gouging”?
20 March 2020
Following the outbreak of COVID-19 there have been reports of hand sanitisers and face masks selling at significantly higher retail prices than before the outbreak. This has led to accusations of “price gouging” and has caused some politicians to call on the Government to “cap” the prices of those products. So, what are the possible mechanisms under Irish law to counter “price gouging”?
Excessive Pricing as an Abuse of a Dominant Position
One possible response to “price gouging” may be if the Irish competition authority, the Competition and Consumer Protection Commission (“CCPC”) opens an investigation into excessive pricing as an abuse of a dominant position under Section 5 of the Competition Act 2002 (as amended) or Article 102 of the Treaty on the Functioning of the European Union.
Competition authorities in a number of EU member states have reportedly opened investigations into excessive pricing practices in the wake of the COVID-19 outbreak, namely:
- in Italy (relating to the marketing of hand sanitizers and disposable masks); and
- in Poland (regarding the supply of personal protective equipment to hospitals).
However, excessive pricing cases are typically difficult to prove because in forming a judgment that a price is excessive, the competition authority is required to set a benchmark price against which the actual price may be compared, and to establish a methodology for assessing whether the gap between the actual price and the benchmark price is excessive. Furthermore, even if a competition authority establishes that prices are excessive, remedying excessive prices will typically require that the competition authority becomes a price regulator (something most competition authorities are keen to avoid) or the lowering of barriers to entry (something which may be difficult to achieve.)
Excessive pricing has previously been addressed by the CCPC in two 2005 enforcement decisions, neither of which led to a finding of a breach of competition law: Greenstar (in relation to household waste collection charges) and Ticketmaster (in relation to booking fees).
“Capping Prices” under the Consumer Protection Act 2007
Under Section 61 of the Consumer Protection Act 2007, if “abnormal circumstances prevail or are likely to prevail in relation to the supply of a product”, the Government may by order (“Emergency Order”) declare that a state of emergency affecting the supply of that product exists. An Emergency Order may have an initial term of 6 months which could be extended by a maximum further 12 months.
If an Emergency Order is in force in respect of a product, the Government may fix the maximum price at which that product may be supplied by a trader to consumers. Such an order may:
- limit the application of the order to a class or type of the product;
- specify conditions by reference to which a maximum price is fixed and fix different maximum prices in relation to different conditions;
- apply to the whole State, to a particular geographical area in the State, or to the supply of the product by a particular class or type of trader;
- fix a maximum price by specifying it or by specifying the manner in which it is to be calculated; and
- provide for any incidental or ancillary matter (including a requirement that the product to which the order relates shall be sold only in specified units of weight, measure or volume) that the Government consider necessary or expedient to give full effect to any provision of the order or to secure compliance with it.
Price control is often seen as a highly interventionist remedy. However, given the immediate urgency surrounding COVID-19 and the public health implications arising from “price gouging” relating to important products such as hand sanitisers and face masks, it is conceivable that either or both of the above mechanisms may be relied upon at some point in the future to address the market failure.
The main shortcoming of seeking to apply these mechanisms is that in reality, the “price gouging” may not be occurring at the trader-consumer level of the supply chain, and indeed may not be occurring in Ireland at all (e.g. the Irish trader’s ultimate retail price may merely be reflecting the higher costs imposed on the trader by foreign suppliers). Therefore, the circumstances surrounding each individual product supply chain will be important in considering whether these mechanisms will work.
For further information please contact Eoghan Ó hArgáin, Head of the firm’s EU, Competition & Regulated Markets