Law in a time of crisis: how to stop profiteering from panic

27th March 2020

One aspect of the unfolding COVID-19 public health crisis is the outbreak of panic buying and profiteering and with it, widely reported instances of attempts to profit from the current shortage of certain goods.

Is profiteering illegal?

Any individual engaged in a commercial activity selling to a consumer should fall under the Consumer Protection from Unfair Trading Regulations 2008 (“CPUTR”). These laws are designed to prevent manipulation of the retail sector by traders using unfair practices, and breaches are punishable with fines and/or imprisonment.

Schedule 1 to CPUTR sets out specific commercial practices that will always be considered unfair, for example:

  • Falsely stating that a product will only be available for a very limited time, or that it will only be available on particular terms for a limited time, in order to elicit an immediate decision and deprive customers of sufficient opportunity or time to make an informed choice.
  • Making a materially inaccurate claim concerning the nature and extent of the risk to the personal security of the consumer or his family if the consumer does not purchase the product.
  • Falsely claiming that a product is able to cure illnesses, dysfunction or malformations.
  • Passing on materially inaccurate information on market condition or on the possibility of finding the product with the intention of inducing the consumer to acquire the product at conditions less favourable than normal market condition.

CPUTR also protects the consumer in a number of other ways, including by ensuring a consumer is not manipulated into making a sale through the provision of false information or the omission of key information (Regulations 5 of CPUTR) and ensuring aggressive behaviour is not used (Regulation 7 of CPUTR).

So if the profiteer is acting in a way which is contrary to the above it would be a criminal offence in the event that it also distorts, or is likely to distort, the economic behaviour of the average consumer. In other words, if the unfair behaviour caused, or is likely to cause, the purchaser to buy the product in question when they may otherwise may not have done so.

For example, Regulation 5 of CPUTR confirms that a consumer cannot be given false information such that it deceives them into making a purchase that they would not have otherwise have made. An example of this would be saying that a product that has been sourced from a supermarket, such as toilet roll, will not be replaced due to product shortages. If this representation causes the consumer to purchase the toilet roll, it could be regarded as an offence.

What action is being taken to counter profiteering?

While CPUTR would provide a route to discourage many online profiteers, it remains unwieldy and open to interpretation in relation to trading activity and the definition of consumer.  Would, for example, an online trader selling items at a similar mark-up to supermarkets be considered to be trading unfairly?

To address this, the Competition and Markets Authority (CMA) has stated it will look to take action against unfair practices. Indeed, the government has set up a COVID-19 trading standards task force to address concerns.

And reassuringly, our courts will also continue to process important cases of significance to public order, particularly where such cases will deter harmful behaviour, so we could see action taken against traders.

If more decisive action is required, consideration could be given to the exercise of new emergency powers under the Coronavirus Act 2020 to authorise high street and established online retailers, and then prohibit any retail activity by anyone not so authorised.

In the meantime, anyone with concerns about such activity should capture the evidence and seek the advice of their local Consumer Protection / Trading Standards bodies, bearing in mind of course that our public servants will be exceptionally busy in the weeks ahead.  Concerns should also be reported to the CMA through this link.

This article has been co-written by Steve Parish and Tom Walker.

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