Increasing prices during COVID-19 (part 1)

As COVID-19 spreads, prices for some items are increasing across the country. There may be severe consequences for businesses if a price increase is deemed to be unconscionable conduct under the Australian Consumer Law (ACL) or the reason provided for the price increase is misleading. This bulletin focusses on the former.

Unconscionable conduct

Unconscionable conduct is a contravention of the ACL. Examples include conduct that fails to measure up to a ‘reasonable standard of conscience’. It generally involves a party who has been subject to a particular disadvantage being unconscientiously taken advantage of.

Therefore, a pricing decision during this time that would effectively victimise or exploit consumers may amount to unconscionable conduct. For example, excessively and unjustifiably raising the prices on products that are:

  • critical to the health or safety of vulnerable consumers; or
  • necessary to help or save consumers.

Consequences of unconscionable conduct

For corporations, the maximum penalty per instance of unconscionable conduct will be the greater of:

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

The ACCC may also issue infringement notices where it has reasonable grounds to believe a corporation has engaged in unconscionable conduct. In most cases, the penalty in an infringement notice will be fixed at $12,600 for corporations and $126,000 for listed corporations.

Any complaints so far?

It has been reported that a complaint has recently been made to the ACCC seeking clarification whether unconscionable conduct had occurred after a facemask supplier allegedly marked up its wholesale prices by 1500% following increased demand due to the bushfires and COVID-19 crises. Similar cases may soon follow suit.

Next steps

If your business is contemplating a significant price increase in relation to essential items during this extraordinary time, it is worth first considering whether such decisions might amount to unconscionable conduct. An informed and considered approach to significant price increases may help avoid damaging enforcement action and reputational damage.

Continue to part 2 of this bulletin which discusses how businesses that justify a price increase by falsely referring to supply issues or other reasons related to COVID-19 may also be contravening the ACL.