Price Gouging During a State of Emergency

Municipal & Planning Law Blog

August 01, 2013

 

During the recent flooding emergency in southern Alberta, a state of local emergency was declared by the City of Calgary under the provisions of the Emergency Management Act.  During that emergency, a number of stories emerged about merchants charging grossly inflated prices for basic supplies, such as water and lodging.  In one widely-circulated example, a liquor store in an area hit by blackouts was reported to be charging $20 for bags of ice (pictured above).

In response to allegations of gouging, the head of the Calgary Emergency Management Agency was quoted as saying:

"Under the Emergency Management Act in the province of Alberta, price-gouging or price-fixing above normal levels during a state of local emergency is illegal, and it would take some co-operation between ourselves and police, but individuals could be prosecuted for that.”

In fact, the Emergency Management Act does not speak to price gouging or price fixing at all, and does not create an offence as suggested.

The statute that should have been referred to in these circumstances is the Fair Trading Act.  That Act makes it an unfair trade practice to charge an excessive price for goods or services provided that certain conditions are met: 

 6(1.1) It is an offence for a supplier to engage in an unfair practice.
(2) It is an unfair practice for a supplier, in a consumer transaction or a proposed consumer transaction,
                                 …
(d) to charge a price for goods or services that grossly exceeds the price at which similar goods or services are readily available without informing the consumer of the difference in price and the reason for the difference;

In these circumstances, in order for a conviction under the Act, the Crown would have the burden of proving that the price charged grossly exceeds ordinary price for the goods or services.  There have been relatively few prosecutions under the Act and the Courts have expressed concern over the lack of a definition of "grossly exceeds". For example, in one case the Court acquitted the defendant because the Crown did not meet its burden of proof on this point, having this to say about this issue:

There is a fundamental ambiguity in the phase “grossly exceeds”. Does it mean 1½ times, 2 times, 3 times, 3½ times, the price for which similar goods are available? What are the objective criteria for determining whether a price “grossly exceeds” the usual price? There is nothing in the legislation to assist the Court. 

 

In addition, even if the Crown's burden above is met, there are a number of defences available: if the retailer is able to show that the goods or services are not readily available, or if the difference in price and the reason for the difference is disclosed, then the offence may not be proven.

 

With assistance from Amanda Vogeli, summer student