What can governments do to prevent pandemic-driven price gouging?

Hand sanitizer, gloves, masks and other medical equipment are in high demand — and in some cases are being offered at high prices.

For now, many supermarkets and sellers are avoiding increasing their prices substantially, and social media users have shamed those that have. But aside from appeals to their corporate consciences, the federal government and provinces do have regulatory and legislative tools to prevent retailers and distributors from dramatically raising their prices.

Competition watchdog issues a warning

On Friday morning, following a CBC inquiry, the Competition Bureau issued a bulletin assuring Canadians it stands ready to act to protect customers.

"As Canada responds to the COVID-19 coronavirus situation, I would like to assure Canadians that the Competition Bureau remains vigilant against potentially harmful anti-competitive conduct by those who may seek to take advantage of consumers and businesses during these extraordinary circumstances," said the statement issued by Commissioner Matthew Boswell.

Boswell said the bureau wouldn't hesitate to crack down on misleading advertising and would hold companies accountable for any instances of collaboration to fix prices — what's known as collusion. Boswell declined an interview request but said consumers can contact his office with complaints.

Bureau spokesperson Jean-Philippe Lepage confirmed the competition watchdog has received some COVID-19-related complaints already, but wouldn't say how many.

In 2017, the grocery chain Loblaws and its parent company, George Weston Ltd., confessed to taking part in what the bureau alleged was an industry-wide bread price-fixing scheme that involved five major grocers and two bakeries. Loblaws — which has promised not to raise prices during the pandemic — received immunity after admitting to wrongdoing.

As the threat of retailers conspiring to inflate prices for medical supplies looms, the U.S. Federal Trade Commission recently warned it would hold manufacturers and distributors accountable if they're caught taking advantage of the emergency.

"Individuals or companies that fix prices or rig bids for personal health protection equipment such as sterile gloves and face masks could face criminal prosecution," the FTC said in a statement.

Sometimes, collusion is good

In some circumstances, however, consumers can benefit from businesses working together in an emergency. Companies may need to coordinate their activities to share information about product levels, prevent shortages and avoid driving up market prices.

"Not all co-ordination between competitors is bad," said Steve Szentesi, a Toronto based competition and anti-trust lawyer. "If it is pro-competitive and it has consumer benefits, there may well be instances where companies should coordinate." 

In its Friday statement, the Competition Bureau assured businesses that it would "accommodate pro-competitive collaborations" that deliver affordable goods and services. 

What if retailers raise their prices individually?

Aside from stopping pricing cartels, there's little else the Competition Bureau can do. Nothing stops a producer or retailer from raising prices on their own, said Oliver Borgers, a competition lawyer with McCarthy Tétrault. 

"A price surge as a result of natural market forces is not something that is regulated by Canadian competition laws or otherwise," he said.

Canada's competition laws, Borgers said, generally don't interfere with the free market.

Governments have sweeping 'emergency powers'

Several provinces have declared states of emergency. Such declarations give provincial governments the power to regulate property and civil rights. Many provinces now have the right to control the prices of essential services. Ontario Premier Doug Ford hinted at this during a press conference Wednesday, addressing concerns over price surges.

"These people are going to be held accountable on social media," Ford said. "And when we get over it — because we'll get over this — they'll be held accountable by the people of Ontario ... the government will hold them accountable as well."

John Lawford, executive director and general counsel of the Public Interest Advocacy Centre, also said the federal Emergencies Act gives Ottawa the power to influence prices by controlling the distribution and availability of goods and services.

"They could take over businesses and frankly run them from the federal government level," Lawford said. "Basically, the federal government could nationalize industries. Like they could nationalize grocery stores if they wanted to, and run them."