RATs! Price gouging and chaos – what is the ACCC and the AFP doing to control the madness?

Published On 28/01/2022 | By Jacqueline Ibrahim | Consumer protection, Enforcement

We have entered our third year of living with COVID-19 in Australia; RATS! Most Australians would have now undertaken a PCR test to confirm whether they have been exposed to the virus. However, the rapid spread of the Omicron variant has pushed testing clinics to their limit, reducing the accessibility and timeliness of results from PCR tests.

As a result, Australia has attempted to move away from its sole reliance on PCR testing. The nation has gravitated towards rapid antigen tests (RATs). However, supplies of RATs remains scarce, with consumers raising concerns about the exorbitant amount charged by some retailers for these essential goods. This issue has attracted the attention of the ACCC and, ultimately, the Australian Federal Police (AFP).

Rapid action: ACCC concerns about the pricing of RATs

In a media statement made in early January 2022, the ACCC acknowledged the significant public concern about the pricing of RATs. It also foreshadowed that it would examine claims that pricing levels reflected the challenges with securing supply of RATs.

Two weeks later, the ACCC confirmed that it has significant concerns about the retail pricing of RATs: see this ACCC media release. It noted that despite the wholesale cost of RATs ranging between $3.95 and $11.45 per test, some RATs have been sold for between $20-$30 each. ACCC Chair, Rod Sims, was quoted to say:

“At the extreme end, we have received reports or seen media coverage of tests costing up to $500 for two tests through online marketplaces, and over $70 per test through convenience stores, service stations and independent supermarkets, which is clearly outrageous.” 

Consumer complaints were also received by the ACCC about suppliers:

  • refusing to provide receipts (or providing incorrect receipts) for RATs;
  • splitting out and selling test packs individually; and
  • accepting payment with no intention or ability to supply RATs.

Of the consumer complaints received by the ACCC, pharmacies were the most reported traders (47% of reports). This was followed by convenience stores, tobacconists, supermarkets and service stations (30% of reports, combined).

Positive powers: ACCC’s ability to investigate

Price gouging is generally not subject to specific provisions that making it illegal. However, businesses must be aware of specific conduct which contravenes the Competition and Consumer Act 2010 (Cth) (CCA) and Australian Consumer Law (ACL). Specifically, while businesses are generally free to determine the price they wish to sell products, they cannot make false or misleading statements about the basis for high prices. They must also set prices independently of competitors. Further, extreme price gouging for essential products may amount to unconscionable conduct. This might occur where a business exploits highly sought-after goods in the pandemic to maximise profits at the consumers’ detriment.

Per its enforcement policy and priorities, the ACCC typically focuses its investigations on matters “that will, or have the potential to, impact vulnerable consumers, harm the competitive process or result in widespread consumer or small business detriment.” A key focus of the ACCC in 2021 revolved around consumer issues in the context of COVID-19. From the RAT pricing inquiries outlined above, it is evident this is still a priority for the ACCC moving forward.

Fighting the spread of excess pricing: why are the AFP involved?

The ACCC often works closely with other government agencies in respect of competition and consumers issues. This is particularly the case where it lack a direct enforcement mechanism.

Currently, the ACCC is working with the AFP on matters that may breach the determination made by the Health Minister, Greg Hunt, on 7 January 2022. That determination specifically prohibits price gouging by persons who have purchased RATs in retail transactions. It also prohibits the non-commercial export of RATs out of Australia (subject to certain exceptions).

The determination characterises price gouging as involving a person supplying, or offering to supply, a RAT for over 120% of the price for which the RAT was purchased by that person in a retail transaction. Under the determination, the AFP have to power to force those caught in price gouging to surrender stock. Seized stock will either be destroyed (if defective) or otherwise provided for use in the national medical stockpile. Penalties may also apply, including up to five-years imprisonment, a fine of up to $66,600 or both.

The determination aims to ensure there are sufficient supplies of RATs and deter price-gouging in Australia. It will remain in force until 17 February 2022, unless extended.

Controlling the RATs

The AFP have recently reported that they have launched two investigations under the Minister’s determination, based on referrals from the ACCC.

However, given the determination only applies to those persons who supply RATs following their purchase in a retail transaction, the price gouging prohibitions do not apply to retailers (who purchase RATs from wholesalers). As such, the determination does not address concerns about excess prices that retailers may charge for RATs. Accordingly, any potential wrongdoing by such retailers or wholesalers remains in the hands of the ACCC.

The ACCC continues its investigations of the supply of RATs by retailers for potential breaches under the ACL. This includes matters which might amount to misleading or deceptive conduct or unconscionable conduct.

Let’s hope the end to pricing concerns is rapid.

This blog is co-authored by Lindsay Thomson, a summer clerk at King & Wood Mallesons.

Image credit: Covid-19 Antigen Rapid Test by dronepicr / Creative Commons CC BY 2.0 / Remixed to B&W and resized

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