So-called “excessive price” prohibitions are premised on a theory of harm that is generally rejected in competition law. Indeed, Canada’s Competition Act does not even contain a prohibition against excessive pricing. Among the many reasons for not prohibiting excessive prices are that to do so would undermine investment incentives (both of firms already in the market and potential entrants). Further, the phenomenon of excessive prices, in the absence of exclusionary conduct, is generally viewed as a temporary phenomenon that will be corrected by the market. Also, the legal uncertainty associated with the vagueness of the ‘excessive’ element in the concept could easily result in regulatory overreach.
In the context of COVID-19, the traditional arguments against prohibiting excessive prices have given way to a more consumer-oriented approach with respect to those supplying consumers directly. In response to concerns that retailers may be incentivized to substantially increase prices for products critical to the COVID-19 response, three Canadian provinces (i.e. British Columbia, Ontario & Nova Scotia) have specifically prohibited selling essential goods at unconscionable prices, or at prices markedly higher than fair market value. Other provinces appear to be more actively seeking to enforce pre-existing price gouging prohibitions in their consumer protection legislation, particularly in regards to necessary goods.
Yet, as already noted, it is unclear what constitutes an ‘excessive’ or ‘unconscionable’ price. Despite the fact that some provinces have had prohibitions on price gouging in their consumer protection legislation for decades, those provisions have been rarely used and scarcely considered by Canadian courts. At the same time, failing to comply with these provisions can have serious consequences, including financial penalties, restitution and reputational harm – and in some cases criminal fines and jail time. There is also the possibility a class action lawsuit could be instituted by a consumer on behalf of a class of consumers. What follows is a description of the price gouging laws of each Canadian province, as well as a description of their enforcement approach, where available, in order to help businesses understand how to avoid liability in respect of this particularly vague area of law.
On April 17, 2020, British Columbia introduced the Prohibition on Unconscionable Prices for Essential Goods and Supplies (COVID-19) Order which applies to retailers and prohibits selling essential goods and supplies at ‘unconscionable prices’. An unconscionable price means a price that grossly exceeds the price at which similar essential goods and supplies are available in similar transactions to similar consumers. This definition indicates that the point of comparison is not a company’s prior, pre-COVID prices, but rather, the prices offered by its competitors in the market.
Consumer Protection BC is actively soliciting price gouging complaints from the public in connection with essential goods and supplies.
Interestingly, British Columbia’s Business Practices and Consumer Protection Act, which long pre-dates COVID-19, already prohibits price gouging. More specifically, it prohibits suppliers, in respect of a consumer transaction, from engaging in an unconscionable act or practice, which includes but is not limited to, whether the total price grossly exceeded the total price at which similar subjects of similar consumer transactions were readily obtainable by similar consumers. Grossly excessive prices are not defined in the legislation nor has the term been judicially considered in any detail. The definition of a supplier has been interpreted broadly and does not require privity of contract.
Alberta’s Consumer Protection Act prohibits suppliers, in a consumer transaction, from charging a price for goods or services that grossly exceeds the price at which similar goods or services are readily available without informing the consumer of the difference in price and the reasons for the difference. The term ‘grossly exceeds’ is not defined in the Act. In the absence of objective criteria, judges have been reluctant to find that prices “grossly exceed” usual prices. The Government of Alberta has advised, as an example, that where a contractor charges a homeowner $7,500 for roof repairs that would have been done by competitors for $2,500 (i.e. prices 3x those readily available) is grossly excessive.
A Calgary based supply company, and its owner, were the first to be charged with price gouging in Canada during the pandemic. A Consumer Investigations Unit (“CIU”) investigator visited the business after receiving an anonymous tip to Alberta’s Report a Rip-Off tip line. The investigator found several items being sold at prices that grossly exceeded their normal selling price by percentages ranging from 100% to 400%:
As a practical matter, the CIU has advised that it will first approach a business accused of price gouging and provide them with an explanation of the rules, then a written warning, followed by a cease and desist letter. Only if those warnings are not enough to stop the price gouging conduct will a company be charged.
Saskatchewan’s The Consumer Protection and Business Practices Act prohibits suppliers from taking advantage of consumers who are unable to protect their own interests if the price of the goods or services grossly exceeds the price at which similar goods or services are readily obtainable in a similar transaction by like consumers. Grossly excessive prices are not further defined in the Act or case law. Helpfully, the Consumer Protection Division of Saskatchewan’s Financial and Consumer Affairs Authority recently provided guidance on grossly excessive prices by stating that in the absence of a reasonable explanation and/or alternative purchasing options, a 100% or more price increase, when imposed during a pandemic, would likely be viewed as grossly excessive. Further, it indicates that suppliers who raise prices to cover their costs of acquiring inventory will not raise issues.
Saskatchewan’s Financial and Consumer Affairs Authority is actively seeking complaints from the public regarding grossly excessive prices during the pandemic.
Manitoba’s Lieutenant Governor in Council may make orders prohibiting the charging of unconscionable prices in respect of necessary goods, services and resources under the Emergency Measures Amendment Act. To date, no such order has been made.
Manitoba’s The Business Practices Act prohibits suppliers from engaging in unfair business practices. Unfair business practices include where a supplier takes advantage of a consumer if the supplier knows or ought to have known that the consumer was unable to protect his or her interests. A prescribed factor to consider in determining whether an unfair business practice was engaged in includes whether the total price grossly exceeded the total price at which similar goods are readily obtainable in a similar transaction by like consumers.
As discussed in our prior blog post, Ontario Implements Price Gouging Measures: What You Need to Know, Ontario introduced an emergency prohibition order made under the Emergency Management and Civil Protection Act on March 27, 2020 prohibiting retailers from selling necessary goods at ‘unconscionable prices’. An unconscionable price includes a price that grossly exceeds the price at which similar goods are available to like consumers.
Consumer Protection Ontario, the City of Toronto and local police services are actively soliciting complaints from consumers regarding price gouging in respect of necessary goods.
Like British Columbia, Ontario’s consumer protection legislation already contained provisions prohibiting excessive prices, albeit somewhat indirectly. Ontario’s Consumer Protection Act prohibits persons from making unconscionable representations where the person making the representation (or the person’s employer) knows or ought to know a number of factors, including, among others, (a) that the price grossly exceeds the price at which similar goods or services are readily available to like consumers, (b) that the consumer transaction is excessively one-sided in favour of someone other than the consumer, and (c) that the terms of the consumer transaction are so adverse to the consumer as to be inequitable.
Quebec’s Consumer Protection Act prohibits merchants from exploiting consumers by charging excessive prices for products or services. Further, it prohibits all situations in which the disproportion between the value of the respective obligations of the parties is so great as to amount to exploitation of the consumer or where the obligation of the consumer is excessive, harsh or unconscionable. While ‘exploitation of the consumer’ and ‘excessive obligation’ are undefined in the legislation, case law suggests the prohibition would include situations where the consumer pays a price that is excessive in relation to the market price. By way of example, the courts have held that where the price of a good or service is double the market value of the good or service it would be deemed excessive. That said, there have been cases where a price that is less than double the market value has been sanctioned as being disproportionate or excessive (e.g. 1.5 time the market value).
Importantly, under Quebec’s Consumer Protection Act, punitive damages can be awarded where a merchant is found to have intentionally or ignorantly violated the excessive pricing provisions and even where the consumer has not been awarded contractual remedies or any compensatory damages.
Prince Edward Island
Prince Edward Island’s Business Practices Act prohibits persons from engaging in unfair practices, including unconscionable representations. An unconscionable representation includes where the person making the representation (or his/her employer or principal) knew, or ought to have known, that the price grossly exceeds the price at which similar goods or services are readily available to like consumers.
Nova Scotia’s Emergency Management Act prohibits, during a state of emergency, persons from 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 this emergency. A provincial state of emergency was declared by the Minister on March 22, 2020 by virtue of the COVID-19 pandemic, bringing this prohibition into effect.
Newfoundland and Labrador
While Newfoundland and Labrador’s Emergency Services Act does contain a prohibition against price gouging, the province chose to declare a “state of public health emergency” pursuant to the Public Health Protection and Promotion Act as opposed to a “state of emergency” under the Emergency Services Act. Unlike the Emergency Services Act, the Public Health Promotion and Protection Act does not contain a prohibition against price gouging.
Newfoundland and Labrador’s Consumer Protection and Business Practices Act prohibits suppliers from engaging in unconscionable acts or practices. Unconscionable acts or practices include circumstances where the supplier, in a consumer transaction, knew or ought to have known that the price grossly exceeded the price at which similar goods or services were available to similar consumers.
New Brunswick does not have laws which would prohibit price gouging.