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COVID-19 consumer protection enforcement: a tale of two countries

Canada could learn from its southern neighbour in enforcing anti-gouging laws, says Steve Szentesi

Steve Szentesi

Since the COVID-19 pandemic began escalating in Canada and the United States in March, consumer protection and competition/antitrust agencies also increased their enforcement of local and federal advertising laws.

Misleading claims, unfounded performance claims and price gouging for essential COVID-19-related consumer products are now key priorities for governments and enforcement agencies.

For example, in Canada the provincial government of Ontario issued an order on March 28 under the Emergency Management and Civil Protection Act prohibiting retailers and those who do not normally sell necessary goods from price gouging (selling at “unconscionable prices”) in relation to, among other things, personal protective equipment (PPE) such as masks and gloves, disinfecting agents, soap and paper products.

The Ontario government’s order was accompanied by stern announcements that it would not tolerate price gouging and would “hold offenders accountable for raising prices significantly” for necessary goods. Premier Doug Ford said his government was “putting an end to those trying to profit off one of the darkest periods” in Ontario’s history, and anyone caught price gouging the government would “slap you with a ticket or you could faces fines or jail time.”

Other provinces, including British Columbia and Alberta, likewise announced additional measures to stop price gouging, accompanied by similarly stern warnings. On April 19 B.C. announced that enforcement officers or the police could fine violators $2,000. In Alberta, Premier Jason Kenney said his government would “go after … and throw the book at” price gougers.

Government apparatuses were established in Ontario, B.C. and Alberta for price gouging complaints and enforcement, including information releases, overviews of existing and new rules, online reporting platforms; and more than 18,000 complaints were received by the three provinces by mid-April.

Yet, roughly two months after Ontario announced its price-gouging enforcement law, there appears to have been just one case of actual enforcement at the time of writing. One. And while the Toronto Star has reported that Ontario is investigating a number of cases, it is not known whether any legal enforcement has been commenced or, if warnings have indeed been issued, whether details of that will be publicly disclosed.

On May 8 the Alberta government announced that one Calgary-based supply company was charged with price gouging for charging $120 for 3M masks (allegedly a 400-per-cent markup) and $39 for hand sanitizer (reportedly, a 200-per-cent markup). The supplier was charged after ignoring a warning to stop and named in a public news release.

Since April 19, when the B.C. government announced sterner measures against price gouging, no enforcement-related press releases were issued by either the government or Consumer Protection B.C. Similarly, since late March, neither the Ontario government nor Consumer Protection Ontario had announced any price gouging-related investigations, warnings or penalties.

Federally, the Competition Bureau has announced that it was “cracking down on deceptive marketing claims about COVID-19 prevention or treatment” and “taking action to stop potentially deceptive claims that could give Canadians a false impression that products or services can treat COVID-19 infections or protect against the coronavirus.”

Unlike its provincial consumer protection counterparts, the Bureau has, to its credit, taken more steps to stop deceptive marketing and unfounded claims relating to COVID-19 related products. It has, however, issued only compliance warnings, including to a “major national retailer” and “businesses located in five provinces.” None of the businesses have been identified and it is not known whether enforcement measures are being taken.

While section 10 of the Competition Act provides that inquiries (i.e., formal investigations) shall be conducted in private, it is not clear why the Bureau does not disclose the results of its informal enforcement efforts.

By contrast, U.S. enforcement agencies have taken a tougher stance against both price gouging and deceptive marketing claims.

On May 5 the U.S. attorney general’s office announced that it was laying criminal charges against a Long Island resident for hoarding and price gouging of medical supplies in violation of the Defence Production Act of 1950. The office’s allegations against the seller include acquiring excessive amounts of personal protective equipment designated as scarce, and reselling the products well in excess of prevailing market prices: for example, a 1,328-per-cent markup on disposable face masks.

The U.S. Federal Trade Commission (FTC) has to date issued six successive rounds of letters to 93 businesses warning them to stop making deceptive or unsubstantiated COVID-19-related marketing claims or face enforcement action. Unlike in Canada, the FTC has named all of the businesses (including several in Canada) and posted the warning letters. The U.S. Justice Department is also actively soliciting complaints relating to price gouging for PPE.

Given the rapid spread of COVID-19 over the past two months and the potential impacts on consumers who cannot access to PPE and other essential COVID-19-related supplies, it seems incumbent on enforcement agencies to take rapid enforcement steps, lean toward the more aggressive end of the enforcement spectrum, and actively disclose its efforts (including names of businesses warned) to deter marketplace activities affecting the health of Canadians.

Or, to put it bluntly, price gouging and deceptive marketing that may lead to more Canadian COVID-19 deaths must surely be as much of an enforcement priority as climbing cherry trees in Toronto’s High Park, for which a resident was recently fined $1,100.

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