Price gouging on necessary goods during the COVID-19 pandemic

Against a backdrop of potential shortages of necessary goods and stockpiling for resale during the COVID-19 pandemic, the regulation of price gouging has received new prominence across Canada, with Ontario specifically issuing a price gouging order under its emergency legislation. In contrast to some European jurisdictions, price gouging is not addressed under competition law (in Canada, the federal Competition Act).  Instead, it is governed by a patchwork of provincial legislation and regulations, with some provinces having price gouging prohibitions specifically tied to emergency situations, while others include such protections in general consumer protection legislation. In this Insight, we review what retailers and other sellers need to know about price gouging across Canada.

Ontario

On March 27, 2020, Ontario issued a price gouging prohibition under its Emergency Management and Civil Protection Act. Regulation 98/20: Order under subsection 7.0.2(4) – Prohibition on certain persons charging unconscionable prices for sales of necessary goods (the “Regulation”). The Regulation prohibits businesses from selling or offering to sell certain “necessary goods” at “unconscionable prices.”¹

Ontario’s Regulation applies to owners and operators of retail businesses, as well as to persons who did not ordinarily sell “necessary goods” before March 17, 2020. “Necessary goods” are defined to include the following:

• Masks and gloves used as a personal protective equipment in relation to infections.
• Non-prescription medications for the treatment of the symptoms of the coronavirus (COVID-19), as those symptoms are described by Public Health Ontario.
• Disinfecting agents intended for cleaning and disinfecting objects or humans.
• Personal hygiene products, including soap products and paper products.

The Regulation does not apply to sales or offers to sell made by a manufacturer, distributor or wholesaler. In addition, the Regulation defines “unconscionable prices” as prices that grossly exceed the price at which similar goods are available to like consumers.

Fines for price gouging by individuals can range from $750 to $100,000. Individual offenders can face a ticket of $750, or, if summoned to court and convicted, they may face a fine of not more than $100,000 and one year in jail.² Non-compliance with an Emergency Order under the Act, which includes price gouging,³ may also result in director liability of $500,000 or liability of up to $10,000,000 for a corporation.⁴ That said, courts have a discretionary power to increase any of these penalties by an amount equal to the financial benefit that was acquired by or that accrued to the person as a result of the commission of the offence.⁵ Importantly, a person is guilty of a separate offence on each day that an offence occurs or continues, with the result that a person violating an Emergency Order faces potential exposure to significant multiples of the above maximum fines.⁶

To date, no fines have been levied on any businesses under the Regulation. However, the Province of Ontario is encouraging consumers to report any suspected price gouging. The Regulation remains in effect for the duration of the declared emergency under the Emergency Management and Civil Protection Act (the “Act”),⁷ which is currently set to expire on May 12, 2020.

British Columbia

British Columbia’s Business Practices and Consumer Protection Act ⁸ (the “BPCPA”) prohibits price gouging.⁹ Under the BPCPA, individuals convicted of price gouging are liable for a fine of not more than $10,000, or 12 months of imprisonment, or both. Corporations are liable for a fine of not more than $100,000.¹⁰

During the COVID-19 pandemic, British Columbia has encouraged consumers to report price gouging.

Alberta

Alberta’s Consumer Protection Act ¹¹ (the “CPA”) prohibits price gouging. Any person (an individual or corporation) convicted of an offence under the CPA or its regulations, which includes price gouging, is liable to a fine of not more than $300,000, or three (3) times the amount obtained as a result of the offence, whichever is greater, or a prison term of not more than two (2) years, or both.¹² Each day that an offence continues constitutes a separate offence; however the total term of imprisonment may not exceed two (2) years.¹³

The Government of Alberta has reminded consumers that the CPA is applicable and that they are encouraged to report any suspected price gouging.¹⁴

Saskatchewan

Saskatchewan’ Consumer Protection and Business Practices Act prohibits price gouging.¹⁵ Penalties include fines and a possible prison term. More specifically, for a first offence, an individual convicted of price gouging is liable for a fine not exceeding $5,000 or maximum one-year prison term, or both. A corporation convicted of a first offence may be subject to a fine not exceeding $100,000. On a second or subsequent offence, an individual may be liable for a fine of not more than $10,000 or a maximum one-year prison term, or both. A corporation convicted of a second or subsequent offence may be liable to a maximum fine of $500,000.¹⁶

Nova Scotia

The Nova Scotia Emergency Management Act ¹⁷ prohibits charging prices for food, clothing, fuel, equipment, medical or other essential supplies or for the use of property, services, resources, or equipment that are higher than the fair market value of these goods immediately before an emergency.¹⁸ Nova Scotia declared a state of emergency pursuant to the act on March 22, 2020, which brought the prohibition into force. Individuals convicted of price gouging may be subject to a fine not exceeding $10,000 or maximum six-month prison term. Corporations are subject to fines not exceeding $100,000 or a maximum prison term of six months (for an officer or director). A court may also impose an additional fine in the amount of the financial benefit accrued from price gouging.¹⁹

The Government of Nova Scotia is encouraging consumers to report suspected cases of price gouging.²⁰

Newfoundland and Labrador

The Emergency Services Act ²¹ prohibits charging higher prices for food, clothing, fuel, equipment, including medical equipment, medical or essential supplies, or for the use of property, services, resources or equipment than exceed the fair market value of the same product or service immediately before the declaration of the emergency.²² It also creates a summary offence for failure to comply with the provision, and any person convicted may be liable for a fine of up to $5,000.²³

We note that to date Newfoundland and Labrador has only declared a state of public health emergency and is not yet operating under the Emergency Services Act. The Public Health Protection and Promotion Act ²⁴ does not address price gouging.

Nonetheless, Newfoundland’s Consumer Protection and Business Practices Act ²⁵ states that charging a price that grossly exceeds the price at which similar goods or services are available to similar consumers is a factor for courts to consider when determining whether an act or practice is unconscionable.²⁶ Engaging in an unconscionable act is grounds for a consumer to bring an action against the supplier for various remedies, including damages, an interim or permanent injunction, or an order rescinding the transaction.

If you have any questions or concerns about competition law compliance at this difficult moment, we are here to help you. For more information, please contact Sandy Walker, Adam S. Goodman, Simon Kupi, or Barry Zalmanowitz, Q.C.