The OECD issues note on exploitative pricing in the time of COVID-19

One of the many consequences of the COVID-19 crisis is the disruption of supply chains. Together with increased demand, this has led to shortages in a number of essential products. These shortages are influencing the behaviour of firms and may have led to potentially exploitative prices in some cases. Distinguishing legitimate from illegitimate pricing practices, as well as how best to deal with the latter, creates substantial challenges for competition authorities. This note discusses these challenges and raises issues for discussion during a webinar meeting with competition authorities on 28 May 2020. It is part of a series of responses prepared by the OECD Competition Division to help guide the actions of governments and competition authorities as they react to the challenges presented by the COVID-19 pandemic.

The brutal disruption caused by the pandemic has led to difficulties in the production and distribution of a number of essential products. This, in turn, creates opportunities for companies to significantly increase the prices of these products. While price increases can reflect increases in the costs of market participants, and provide essential market signals to increase production and stimulate new entry, they can also reflect exploitative business practices without objective justification. This latter type of conduct can justify intervention by competition authorities.

This note focuses on how crises can lead to sudden price increases, and on the role that competition and public authorities will be expected to play in addressing them. It reviews the challenges of bringing exploitative pricing cases under competition law and analyses possible regulatory alternatives, while providing examples of past and current practice.

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Author

  • OECD - Competition Division (Paris)

Quotation

OECD, The OECD issues note on exploitative pricing in the time of COVID-19, 26 May 2020, e-Competitions June 2020, Art. N° 95263

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