Punishing profiteers: prohibitions against price gouging and export of medical supplies during COVID-19
New prohibitions against price gouging and export of medical supplies during COVID-19
With the increase of COVID-19 cases in Australia, it is increasingly important that personal protective equipment and disinfectants are available to front-line health professionals and law enforcement, who are most at risk of contracting the virus. There has been growing public concern that these products are being purchased in large quantities by some people with the intention of on-selling them at exorbitant prices.
On 24 March 2020 the Prime Minister announced that the Commonwealth Government would take action to help prevent exploitative price gouging and exporting of products that are essential to preventing and controlling the spread of coronavirus, including face masks and hand sanitiser.
The Commonwealth Government has now introduced laws that make it illegal to engage in the following activities during the period from 18 March 2020 to 17 June 2020 (unless extended):
- “price gouging” in relation to the on-sale of “essential goods” acquired at the retail level; or
- exporting “essential goods” that are used to prevent the spread of COVID-19.
What are “essential goods” that are subject to the new rules?
Essential goods are:
- the following equipment that, when worn, is capable of limiting the transmission of organisms to humans:
- disposable face masks;
- disposable gloves;
- disposable gowns;
- glasses; or
- eye visors; and
- the following disinfectant products:
- alcohol wipes; and
- hand sanitiser.
What types of sales are caught by the new price gouging rules?
A new determination under the Biosecurity Act 2015 (Cth) provides that a person will engage in price gouging if they:
- purchase the essential goods in a retail transaction on or after 30 January 2020; and
- supply or offer to supply the essential goods during the period from 18 March 2020 to 17 June 2020; and
- supply or offer to supply the essential goods for more than 120% of the purchase price (not including reasonable additional costs such as transportation or delivery).
If a person does not comply with these new price gouging rules, they will be subject to penalties of up to $63,000 and/or five years of imprisonment per offence. They can also be required by law enforcement officials to surrender the essential goods to the Commonwealth.
The new law only applies to the resale of goods by people or companies who acquired the goods at a retail level. It does not apply to the supply of goods by manufacturers, and does not apply to the resale of goods by suppliers who acquired the goods at a wholesale level.
If essential goods continue to be in short supply over the coming months and businesses look to source them through retail channels, it will be important that they are aware of these new laws.
What exports are caught by the new export prohibition?
New regulations under the Customs Act 1901 (Cth) make it illegal to export essential goods during the period from 31 March 2020 to 17 June 2020, unless one of the following exceptions applies:
- the goods are exported by the manufacturer of the goods (provided the export is not by post);
- the exporter exports the goods in the ordinary course of their business (provided the export is not by post);
- the exporter is a passenger on a ship or aircraft (or a member of the crew of the ship or aircraft), and the goods are the personal or household effects of the person and are for the personal use of the person;
- the intended recipient of the goods is a relative of the exporter and the goods are for the personal use of the relative (provided the export is not by post); or
- the exporter is a humanitarian organisation or agency and the exportation is not for commercial purposes (provided the export is not by post).
The penalties for any breach of these export restrictions include fines of up to $210,000 or three times the value of the relevant goods (if known).
If the essential goods were exported before the commencement of the new regulations (between 30 January 2020 and 30 March 2020) and are still in the possession of customs, the determination under the Biosecurity Act allows the Commonwealth to seize the goods. It is unclear if the penalties of up to $63,000 and/or five years imprisonment per offence will apply in this situation.
These prohibitions are part of a wider trend to secure essential medical supplies in Australian and prevent price gouging for consumers. We expect the Government and its agencies will be active in enforcing these prohibitions.
For a further update on competition and consumer law issues amid the COVID-19 pandemic, please see our KWM alert.
By Jodi Gray, Special Counsel, and Phillip South, Solicitor.