UK competition watchdog seeks powers to tackle coronavirus profiteering

The UK competition watchdog has lobbied the government for emergency powers to crack down on companies profiteering from the pandemic after finding itself hamstrung by existing laws. Read more: UK competition watchdog seeks powers to tackle coronavirus profiteering

UK competition watchdog seeks powers to tackle coronavirus profiteering

The UK competition watchdog has lobbied the government for emergency powers to crack down on companies profiteering from the pandemic after finding itself hamstrung by existing laws.

The Competition and Markets Authority has asked the government for “emergency time-limited legislation” to pursue retailers bumping up prices for products such as hand sanitisers and face masks in response to the virus.

The CMA received 21,000 complaints between March 10 and April 19 related to Covid-19, including alerts about price gouging. The average price increase across all such reports was 130 per cent — and in the case of hand sanitisers, an average of 367 per cent.

It has promised to take enforcement action where necessary. But competition lawyers say the watchdog is all but powerless to penalise offenders because of the limited nature of competition and consumer laws in the UK, which do not cover price gouging.

CMA chief executive Andrea Coscelli said he had spoken to the Department for Business, Energy and Industrial Strategy (BEIS) to advise them of the need for temporary new laws: “Consumer and competition law are not really designed for emergencies,” he said.

“Part of our role is to use everything we have but if there are gaps, to explain to the government what those gaps are. Ultimately though it’s for the government and parliament to decide.”

In March, Boris Johnson, prime minister, told the House of Commons that new laws were needed to tackle “profiteering”. Business secretary Alok Sharma also met Amazon and eBay in April to discuss price gouging on their sites.

However, the business department is understood to be lukewarm on the idea of laws on price controls. One government official said it was “not something we are actively pursuing at the moment”.

In a statement a spokesperson said: “The CMA deals directly with firms to address any complaints and we continue to keep the issue under review.”

The CMA’s request adds to a shopping list of consumer-focused powers that chairman Andrew Tyrie had asked BEIS for last year in order to turn the agency into a beefed-up champion of consumer interests.

Nicole Kar, competition partner at Linklaters, said the CMA “urgently” needed new tools, adding that the UK currently had “no legal weaponry” to combat “Covid-19 price gouging”. She pointed to emergency laws passed in the US and France among other countries to intervene on prices as a result of the pandemic.

Nelson Jung, partner at Clifford Chance, said rules to tackle unfair pricing were “deficient”.

“These retailers are often small, their behaviour is also not subject to competition rules on abuse of dominance. This means that the CMA has to rely on consumer protection legislation which is arguably deficient in this regard,” he said.

The CMA has written to companies and engaged with marketplaces such as Amazon and eBay, which have removed listings with unjustifiable price rises and cancelled sellers’ accounts. Ebay has limited the sale of goods like hand sanitisers and masks to a list of trusted businesses.

Amazon said the company had “blocked or removed hundreds of thousands of offers and pursued legal action against hundreds of bad actors across a number of countries”.

Lucy Powell, Labour’s shadow minister for business and consumers, said “unscrupulous businesses” were “taking advantage of the coronavirus pandemic to line their own pockets”.

She added: “Measures introduced by online marketplaces such as eBay and Amazon are insufficient . . . it is vital that ministers crack down on this disgraceful behaviour, and give the CMA the powers they need to stand up for consumers through this crisis and beyond.”

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UK competition watchdog seeks powers to tackle coronavirus profiteering

Source : Business Matters More   

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UK public supports windfall taxes to claw back £300BN coronavirus costs

More than half of the UK public would welcome a windfall tax on companies such as food retailers that have thrived during the coronavirus crisis, according to an opinion poll. Read more: UK public supports windfall taxes to claw back £300BN coronavirus costs

UK public supports windfall taxes to claw back £300BN coronavirus costs

More than half of the UK public would welcome a windfall tax on companies such as food retailers that have thrived during the coronavirus crisis, according to an opinion poll.

The YouGov survey also found that 61 per cent would approve of a wealth tax for those with assets of over £750,000.

The poll comes as the Treasury considers ways to deal with a deficit that is expected to soar to more than £300bn in the current financial year.

While chancellor Rishi Sunak has indicated that he intends to borrow most of the money needed to fill that hole, the government has been studying options for tax rises or public spending cuts, according to a Treasury document leaked last week.

Some 53 per cent of people polled supported the idea of an “excess profits tax” on industries that have thrived during the crisis, with only 13 per cent opposed to the idea and 16 per cent ambivalent.

The policy was equally popular among Conservative voters — at 54 per cent — according to the polling, commissioned by leftwing campaign group Neon.

Gabriel Zucman, an associate professor at Berkeley University in the US, recently advocated an excess profits tax, saying this was put in place during past “periods of crisis” such as the two world wars and the Korean war.

“The idea is you have some corporation that disproportionately benefits from the crisis, either because their competitors are shut down or because they exploit the crisis by hiking prices,” he said.

One former Tory cabinet minister told the FT that he expected most — but not all — of the pandemic funding to be paid for by borrowing but predicted a windfall tax.

“I would expect a handful of tax rises when this is all over, including a windfall tax on the supermarkets and online retailers,” he said. “When you think about it there aren’t many areas that could sustain a rise in taxation but there will be a case for some of those retailers who have done well in recent months.”

The City is already braced for a potential excess profits tax, which was raised during a recent earnings call with Ocado, the online retailer.

“I am not sure [talk of a windfall tax] is necessarily relevant when we are trying to serve more of the nation,” said Ocado’s chief financial officer Duncan Tatton-Brown during the call.

“We are a good citizen, so if the government decides it’s right to have a windfall tax then we’ll pay it . . . but I don’t believe we’re benefiting from a windfall.”

Supermarkets have thrived during the lockdown with a big spike in sales in March reminiscent of the Christmas shopping surge. According to the Office for National Statistics, food stores saw the strongest growth on record in March, while non-food retailers have had a dismal spring with their shops remaining closed until June at the earliest.

The supermarket chains have benefited from some of the rescue measures from the Treasury that are available to all struggling companies — such as a holiday on business rates.

Food retailers argue that their record March may not translate into a profit boost over the full year because of the money they have spent hiring tens of thousands of new staff, expanding home delivery services and putting in place social distancing measures in stores.

Tesco, J Sainsbury and Wm Morrison have all stated that these additional costs will almost exactly cancel out any benefit they receive from paying no business rates on their stores in the year that began in April.

The UK government in April brought in a new digital services tax levied at 2 per cent of online revenues for major internet companies including Amazon, which has enjoyed relative success during the lockdown.

However, Mr Tatton-Brown pointed out that Ocado — like many other internet retailers — had not benefited from state support. “We’ve received no rates rebate, we haven’t delayed VAT payments, we haven’t taken any loans, we haven’t furloughed any staff.”

Robert Palmer, executive director of campaign group Tax Justice UK, said the survey suggested that the public wanted an end to “business as usual”.

“It is clear that Brits want to see those who can afford it to shoulder a greater part of the burden to help pay for public services,” he said. “Those making super-profits during this time of crisis should be expected to contribute more.”

Read more:
UK public supports windfall taxes to claw back £300BN coronavirus costs

Source : Business Matters More   

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