With the rapid global spread of coronavirus (COVID-19), the sudden demand and consequent strain on supply chains has had a significant impact on the retail sector. With certain products flying off the shelf, some retailers took (and are taking) the opportunity to maximise the financial return in these uncertain times (e.g. there have been reports of products such as hand sanitiser selling for 50 times their retail value).
Whilst some activities may be permissible, other approaches can potentially fall foul of consumer protection legislation, as well as creating adverse reputational damage in such a high-profile and unprecedented set of circumstances. In particular, the UK Prime Minister Boris Johnson, has specifically challenged behaviours of this type and has indicated the government may be looking at legislation to clamp down on inflated prices and "stamp out the disgusting scourge of black market profiteering".
CMA: Investigation and Enforcement
These comments have been echoed by the Competition and Markets Authority (CMA), which has responsibility for protecting public interests by investigating consumer complaints and conducting research and monitoring activities to determine malpractice.
CMA Chairman Lord Tyrie issued the following statement "We will do whatever we can to act against rip-offs and misleading claims, using any or all of our tools; and where we can’t act, we’ll advise government on further steps they could take, if necessary".
The CMA's activities related to COVID-19 to date include:
- launching a taskforce to identify firms "charging excessive prices or making misleading claims about their products" and has stated it will take direct enforcement action where necessary; and
- launching an online reporting service through which businesses and consumers can report unfair practices related to COVID-19 including unfair pricing (including details or normal and inflated prices).
Where the CMA finds a breach of applicable laws around treating consumers fairly, it may take enforcement action using its consumer powers (i.e. requiring companies to make undertakings or imposing a statutory order), or make recommendations to the appropriate government or regulatory body (such as Trading Standards Services, the FCA and the ICO). Further, certain failures to comply with the CMA's investigative powers can also be criminal offences, punishable by a fine (up to the statutory maximum) or up to two years' imprisonment (or both).
Pricing Practices Guidance
As well as CMA investigation and enforcement, retailers should also be mindful of the 'Guidance for Traders on Pricing Practices' issued by the Chartered Trading Standards Institute (CTSI) at the request of the Department for Business, Energy and Industrial Strategy. Amongst other things, this guidance highlights the need for traders to take special care where targeting price promotions at consumers which may be considered to be vulnerable and makes it clear that 'vulnerability' may be "situational". As such, it is entirely possible that exploitation related to COVID-19 may fall within this and so be construed against traders subject to regulatory actions.
If you have any questions or need any support, do not hesitate to get in touch on the contact details shown below. For more insights relating to COVID-19, please see the DWF COVID-19 Legal Insights Hub.