Many have expressed concern that retailers are now incentivized to unilaterally increase the prices for products critical to the COVID-19 response. Canada's competition enforcer, the Competition Bureau, does not have clear jurisdiction to regulate prices or otherwise directly prevent price gouging. However, the Ontario government is now expressly prohibiting price gouging for "necessary goods" (as defined). In particular, through an emergency prohibition order made under the Emergency Management and Civil Protection Act on March 27, 2020, certain persons are prohibited from selling "necessary goods" at "unconscionable prices".
The emergency prohibition order applies to "persons who own or operate a retail business" (i.e., retailers) and "persons who did not ordinarily deal in necessary goods before March 17, 2020" (i.e., prospective retailers of the necessary goods). The emergency prohibition order does not apply to sales or offers to sell that are made by a manufacturer, distributor or wholesaler.
According to the emergency prohibition order, "necessary goods" include:
- masks and gloves used as personal protective equipment in relation to infections;
- non-prescription medications for the treatment of the symptoms of COVID-19, as those symptoms are described by Public Health Ontario;
- disinfecting agents intended for cleaning and disinfecting objects or humans; and
- personal hygiene products, including soap products and paper products.
An "unconscionable price" includes "a price that grossly exceeds the price at which similar goods are readily available to like consumers". This language tracks one of the definitions of "unconscionable representation" in Ontario's Consumer Protection Act. A finding of unconscionability is highly fact specific, and relevant case law has been limited to date.
Moving forward, retail businesses selling any products in Ontario that may be considered "necessary goods" should consider the emergency prohibition order before unilaterally raising prices during the COVID-19 pandemic period. If a lower price was being charged before the emergency was declared, it would be advisable to ensure that any price increase is justified based on additional costs or any other legitimate business justifications. It is also advisable to ensure that any such justifications are well documented through ordinary course business documents.
The Ontario government is encouraging consumers to raise any price-gouging complaints through an online portal. Individual offenders of the emergency prohibition order can face a ticket of $750, or, if summoned to court and convicted, could face a maximum penalty of a $100,000 fine and one year in jail. If convicted, a company director or officer could face a fine of up to $500,000 and up to a year in jail, and a corporation could face a fine of up to $10 million.
Fasken's Antitrust/Competition & Marketing Group will continue to monitor these developments and will keep you apprised.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.