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COVID-19: Protecting consumers against price rises and harmful practices

Posted on 28 April 2020

Who is monitoring prices and harmful practices?

The Competition & Markets Authority ("CMA") has a wide range of consumer powers, in addition to its powers to ensure that businesses comply with competition law.

In March 2020, the CMA set up a COVID-19 Taskforce. One of the key objectives of the Taskforce is to scrutinise market developments and identify harmful practices as they emerge. This can include investigating businesses that are charging allegedly unjustifiable prices or making misleading claims. If such practices occur, the CMA has promised to take action.

The key message from the CMA's Chief Executive, Andrea Coscelli is to "urge retailers to behave responsibly throughout the coronavirus outbreak and not to make misleading claims or charge vastly inflated prices."

Is there evidence that prices have been rising?

The CMA has stated that the majority of businesses have been acting responsibly during the pandemic, however, it does have concerns in relation to a small minority of businesses who may be exploiting the situation. That said, the CMA notes that in recent weeks the number of complaints in relation to pricing practices has decreased.

Since 3 April 2020, the Taskforce has tried to collect evidence on unfair price increases, by asking complainants, where possible, to report the original price and the raised price. Across 430 complaints, which included a range of different products, the average (median) price increase was 130%. However, some products have faced particularly large average (median) price increases:

  1. Hand sanitiser – an increase of 367%;
  2. Paracetamol – an increase of over 200%; and
  3. Flour – an increase of nearly 150%.

Interestingly, England has received more complaints per retail premise than Scotland and Wales. On average five out of every 1,000 premises have received a complaint in England whereas the average in Scotland and Wales has been only one out of 1,000. The CMA has not calculated this figure for Northern Ireland.

Can higher prices be justified?

The COVID-19 pandemic has placed unprecedented pressure on supply chains and these pressures may have resulted in there being legitimate and justifiable reasons for higher prices being charged. For instance, there may have been an increase in price that occurred further down the supply chain that has resulted in the retailer increasing its prices as it cannot absorb these additional costs.

The Taskforce has stated that it will consider the entire supply chain when investigating prices. This is because the Taskforce will likely focus any enforcement action on those businesses that are exploiting the pandemic to increase their profits, rather than businesses that are forced to raise prices for reasons outside of their control.

Is there evidence of unfair practices in relation to cancellations and refunds?

The Taskforce has noticed that in recent weeks there has been an increase in the number of claimants relating to cancellations and refunds. Currently, four out of every five complaints that the CMA has received are in relation to cancellations and refunds. Interestingly, the complaints are concentrated in relation a small number of large businesses.

The Taskforce has a number of concerns in relation to the travel sector. The Taskforce has noted that due to the pandemic, a number of consumers have had their travel and holidays plans cancelled by operators and airlines.  Under EU law consumers of package holidays and scheduled flights are entitled to a full refund.  However in light of the cashflow difficulties facing such businesses, consumers have faced a number of problems in obtaining such refunds, including

  1. Delays and complexities in making a claim for a refund;
  2. The charging of high cancellation fees where the consumer has wished to cancel; and/or
  3. Being pressured to accept vouchers or credit notes rather than cash refunds.

What action has the CMA taken to date?

The Taskforce is not only monitoring businesses that supply directly to consumers, but is also investigating pricing practices for the entire supply chain. To date, the Taskforce has focused on complaints into unjustifiable prices. Some of the actions that the Taskforce have taken include:

  1. Writing to 26 trade bodies and publishing an open letter to the pharmaceuticals and food and drink industries;
  2. Engaging with online platforms such as Amazon and eBay to ensure that listings which charge excessively high prices for essential goods are removed quickly; and
  3. Requesting information from 187 businesses, which collectively received over 2,500 complaints.

The Taskforce will consider taking enforcement action against those businesses that exploit the pandemic in order to charge higher and unreasonable prices. Businesses that are subject to enforcement action are likely to not only potentially face remedies imposed by the CMA but also to face negative publicity in relation to how they responded to the pandemic.

The key message from CMA Chairman Lord Tyrie is that the CMA "will do whatever we can to act against rip-offs and misleading claims, using any or all of our tools".

In the coming weeks, we can expect the Taskforce to focus more on alleged unfair practices in relation to cancellations and refunds. This is because recently there has been a rise in the number of complaints in relation to cancellations and refunds.

How can you make a complaint?

As of 19 April 2019, the CMA had received just under 21,000 COVID-19 complaints, of which 14,000 were made via the CMA's dedicated online platform. For consumers seeking to make a complaint this online platform, is particularly useful.

There are also likely to be a number of businesses who are facing increases in prices in terms of raw materials. While the online platform is one method for raising a complaint, it may also be prudent to discuss the issue with your legal representatives who may be able to advise you on other solutions available to you.

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