Increasing prices during COVID-19 (part 2).

6 April 2020 | Reading time: 2 minutes

In part 1 of this series, we explored how a price increase for high demand items during the COVID-19 pandemic may be unconscionable conduct under the Australian Consumer Law (ACL). Businesses may justify a price increase by falsely referring to supply issues or other reasons related to COVID-19. This part 2 bulletin focuses on how this may also be a contravention of the ACL.

False or misleading price representations.

It is a contravention of the ACL to make a false or misleading representation about the price of goods supplied. This likely includes providing an inaccurate reason for a price increase.

The key consideration is whether the overall impression created by a business is false or misleading. For example, will consumers be misled by a representation that the price of essential items (such as hand sanitisers and surgical masks) has increased significantly due to a shortage of those items or a spike in the costs of raw materials, when it is simply opportunism by the business? Creating a false impression that the pandemic caused a price increase when it did not is likely to be false or misleading.

If a business is found to have made a false or misleading representation, it is likely to also have engaged in misleading or deceptive conduct.

A contravention can occur even if there was no intention to mislead.

What are the consequences?

For corporations, the maximum penalty per instance of making a false or misleading representation will be the greater of:

  • $10 million;
  • 3 times the value of the benefit received; or
  • 10% of the corporation’s annual turnover in the preceding 12 months.

The ACCC may issue a substantiation notice if it suspects a corporation has engaged in such conduct. Providing false or misleading information in response to a substantiation notice or failing to comply with the substantiation notice may result in an infringement notice.

Alternatively, the ACCC may directly issue an infringement notice if it has reasonable grounds to believe a false or misleading representation has been made. In most cases, the penalty in an infringement notice will be fixed at $12,600 for corporations and $126,000 for listed corporations.

Next steps.

The ACCC has noted it is conscious of the impact COVID-19 is having on consumers and businesses in Australia, and adjusted its regulatory focus accordingly.

If a business raises its prices of essential items, it should be prepared to provide an accurate reason for the increase and avoid making misleading claims to capitalise on the heightened demand for those items. Transparent communication will be critical to avoid enforcement action and reputational damage.

Continue to part 3 of this bulletin which discusses how rules against price gouging in relation to essential goods such as masks and PPE have commenced.

For details of all of our COVID-19 tips and updates, visit the Bespoke COVID-19 Hub.