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As the coronavirus pandemic continues to mount pressure on the global economy, people are continuously losing jobs as most of the sectors are devastated by the lockdown. However, even in this period of hardship, certain businesses which are allowed to operate during the restrictions are manipulating the prices of goods and services as they continue to enjoy a dominant position and charging disproportionately higher amounts from the consumers. As per some media reports, CMA, the UK watchdog has demanded special legislation to take strict action against businesses and individuals involved in profiteering. The regulator has stated that there is a segment of business class which is charging excessive prices, making misleading claims about goods or services, and ignoring customers’ cancellation or other rights.
The businesses were urged to adhere to ethical practices by the CMA, followed by setting up of coronavirus taskforce in March. The role of the task force was to monitor the market closely and quickly intervene if required.
Post lockdown induced by the novel coronavirus, the British Prime Minister, Boris Johnson urged shoppers to report excessive pricing and warned firms on profiteering. This was the time when people were panic buying and stockpiling essential items such as food staples and cleaning products. Johnson ensured that the British government is ready to crack down on businesses involved in profiteering.
From 10 March to 19 April 2020, the CMA has received almost 21,000 complaints both through email and its online platform with respect to unfair cancellation and refund policy along with unnecessary price hikes in the essentials category.
Due to lockdown induced by the Covid-19, such as Travel & Leisure, and Hospitality are some of the sectors which are severely impacted and saw major cases in terms of job losses. The halting of operations in this sector meant consumers were forced to cancel travel plans. There were a few instances in which businesses charged unnecessary high charges for cancellation, forced consumers to accept vouchers instead of cash refunds and introduced several unnecessary complexities for refund-related procedures. Nearly 20 per cent of the complaints received by CMA in a week’s time ended 19th April were regarding refunds. The task force received a lot of complaints regarding the price hike across personal hygiene products and food staples. Rice, Meat, Toilet Paper and Hand sanitisers were sold on unjustified prices as per the complaints data from the CMA. Hand sanitiser saw a meteoric rise in price by 367 per cent. Paracetamol and Flour also saw price hikes in the Food & Drugs category. Most of the complaints received by the CMA were from stores in England.
In March, the online grocer, Ocado was accused of reducing discounts and billing its customers with unnecessarily high prices as it witnessed an unprecedented surge in orders. As per media reports, the online grocer increased the base prices of more than 900 products and slashed the number of items in the discount category to nearly 1,300. The pricing went up by nearly 8 per cent across the product categories. However, the online grocer stated that the average pricing of the products had gone down compared to individual pricing. The trend was similar across other supermarkets as they also removed items from the discount category. A similar instance was reported in media about a protective gear manufacturer, who had hiked the price of PPE item by 725 per cent.
The British government has announced several stimulus packages. The interest rates were reduced so that the vulnerable person and businesses could have access to the credit. If we talk about profiteering, the Banking sector was no different. Barclays Plc was accused of charging base rate somewhere between 7 per cent to 12 per cent. However, the base rate prevalent in the economy is only 0.1 per cent. However, Barclays Plc claimed the interest rates offered by it were no different from the industry. The banks are expected to pass on the benefits of historic stimulus measures to the customers and have been warned against profiteering from the coronavirus crisis. This was after the government announced interest-free loans of up to £5 million for UK companies including an extended CBILS (coronavirus business interruption loan scheme).
Why competition is necessary for the industry?
Businesses within an industry compete on price, quality, and service to gain market share and attract new customers. If there is a lack of competition in the market, the business might collude and offer sub-standard products with irrational pricing to consumers. This would mean cheating consumers. Businesses in the absence of competition can collude to fix the price of goods & services, which is called price-fixing; in this case, consumers would have no other option and would end up paying unjustified prices.
Thus, the need for competition law arises, which ensures fair pricing of goods & services. Anti-competitive practices might lead to legal proceedings and big fines, along with reputation loss. CMA is always available to attend complaints from consumers on anti-competitive practices or any form of cheating. The kind of scenario the world is going through is a rare emergency. The legal framework is not designed to capture such emergencies. However, it is the responsibility of the Government and CMA to ensure the well-being of its people.
A brief introduction about CMA
Based in the United Kingdom, the watchdog, CMA (Competition and Markets Authority) was formed in 2013 to prevent anti-competitive activities and malpractices. The independent non-ministerial government department is responsible for promoting business competition for the benefit of people.
The UK watchdog ensures that the businesses are operating in accordance with the legal framework. The authority encourages healthy competition among the market players so that consumers are benefitted while buying goods and services.
CMA keeps a close eye on mergers and acquisitions in the industry to ensure healthy competition. Recently, CMA made serious objections to the merger of the leading retailer of sports, fashion, and outdoor brands, JD Sports Fashion Plc with Footasylum Ltd, as it firmly believed that this transaction would lessen the competition. The authority handles complaints and acts against the individuals and businesses, which practice anti-competitive behaviour. The prime objective of the authority is to make the businesses refrain from indulging in unfair trading and protect the consumers.
