The investigation is being carried out under the CMA’s competition law powers rather than under its consumer protection functions.

By John D. Colahan and Anuj Ghai

On 18 June, the CMA released an update noting that it had launched an investigation under Chapter II of the Competition Act 1998 into suspected breaches of competition law by four pharmacies and convenience stores. In particular, the investigations relate to suspected charging of excessive and unfair prices for hand sanitiser products during the COVID-19 pandemic.

As noted in a prior blog post, the CMA believed that there was a significant risk that prices would rise above justifiable levels in a number of sectors because of the COVID-19 outbreak, coupled with the restrictions on businesses and people. As of 17 May, the CMA had written to more than 200 traders about this issue. In its communication, the CMA asked for more information or expressed concern about what the CMA considered may be unjustifiable price increases.

Notably, the investigation is being carried out under the CMA’s competition law powers rather than under its consumer protection functions. Whilst the investigation is still at an early stage, in order to establish an infringement the CMA will have to show that not only were the prices charged “excessive” and “unfair” but also that the relevant traders were “dominant” for the purposes of competition law. At this stage, the CMA has not reached a view on whether there is sufficient evidence of an infringement of competition law for it to issue a statement of objections to any of the parties under investigation.

The investigation follows from the CMA’s establishment of a Taskforce in March 2020 to monitor and respond to consumer and competition problems arising from the pandemic. As noted in Latham’s April 2018 update, the Taskforce had received numerous complaints relating to allegedly unjustifiable price increases. The largest price increases (with a reported median rise of 367%) related to hand sanitiser.

As of 17 May, the CMA had written to 264 individual traders asking for more information, or expressing concern about unjustifiable price increases. (Additional information can be found in Latham’s May 22 update.) The CMA warned that traders would be “well advised” to heed its warnings given the possibility of enforcement action and the adverse reputational consequences of being perceived by customers as exploitative. The CMA has received a number of responses from the businesses to which it had written. Many of these traders attribute high prices to higher costs charged by suppliers, although according to the CMA, this does not adequately explain prices that far exceed the average. The CMA’s Taskforce is therefore seeking further evidence of claims about supplier pricing practices.

Amongst other actions, the CMA has written to a number of trade associations and published an open letter to the pharmaceutical and food and drink industries summarising its concerns and setting out its expectations of how traders should behave.

The CMA’s competition law investigation is likely to last for a few months during which period it will continue to gather information including through the issue of formal and informal requests to the parties.

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