The COVID-19 pandemic has delivered a seismic and unprecedented shock to the global economy, disrupting the forces of supply and demand. When the UK entered a state of lockdown in March, panic buying was a familiar scene in supermarkets around the country. As the focus now shifts to relaxing lockdown measures, demand for essential items – such as face masks and hand sanitiser – will likely increase once more as people spend more time outside of their homes, return to the workplace and interact with others.

Many businesses are supporting communities across the country during the crisis, such as setting aside essential supplies for the NHS and prioritising delivery slots for the vulnerable. However, some firms have used the pandemic as an opportunity to jack up the price of goods. Since mid-March, the Competition and Markets Authority (CMA) has received 21,000 price-gouging complaints and has launched investigations into 187 traders accused of unjustifiable price rises.

Despite its proactivity in responding to cases of price gouging, the regulator’s current legal powers are limited. There is no prohibition against high prices in UK consumer law unless they are unfairly hidden from purchasers and the CMA can only intervene using competition law when a ‘dominant’ firm is abusing its market power and charging ‘excessive’ prices. Proving that a firm is dominant and that its prices are excessive is difficult and cases often take many years. That’s why the CMA has advised the government on introducing “emergency time-limited legislation” which would give it greater powers to tackle price gouging.

The well-founded concerns of business regarding government regulation of prices have less relevance in a crisis, especially when it comes to essential products. In the short run, supply is unlikely to meet increased demand and panic-driven price rises bear little relationship to firms’ investment.

If the government acts on this issue, it should take note of successes from other countries around the world which could act as a template for the UK.

For example, South Africa has prohibited any firm that is found to be dominant in the context of a state of disaster from charging excessive prices for essential items during the crisis. The South African government has set a simple threshold linked to a product’s cost of production and the seller’s margins from before the crisis. This gives firms clarity on the prices they can charge and allows the regulator to quickly determine if a price is excessive without a lengthy investigation.

Similarly, France has capped retail and wholesale prices of sanitising gels. Meanwhile, Attorney Generals in the US have pointed out their determination to prevent price-gouging of essential products.

With the prospect of some lockdown measures being eased as early as next week, consumers will want to stock up on goods to protect themselves and their families as they venture outside again. The clock is ticking: legislation should be introduced that gives consumers the confidence they need when purchasing supplies. The test for good legislation in this area should be whether it convinces the public that, during the pandemic, the prices of essential products are broadly fair, is straightforward for traders to comply with and, crucially, is time limited. After the immediate crisis passes, market forces should once again determine prices.

Price gouging is when businesses heavily inflate the price of products or services that are in high-demand. 

This can lead to consumers paying over the odds, while the seller makes a profit.

The coronavirus outbreak has led to a number of online sellers hiking prices on items that have been difficult to get hold of.