The Giant Awakens - Law and Economics of Excessive Pricing & COVID-19 Crisis

Abstract

The COVID-19 crisis have once again elevated one of the most contentious themes in competition law and economics, namely how to deal with excessive pricing and price gouging, to the global stage. Dramatic, sudden price hikes on essential medicines and medical supplies (a practice known as price gouging, or excessive pricing) are reported in many countries affected by the crisis. The Competition Authorities have received many complaints in regards to excessive pricing / price gouging and some have already started investigations, others are closely monitoring the developments. Like a mythical giant, dormant but defiant, excessive pricing time and again captures the attention of policymakers, competition law practitioners and scholars, despite its demise being proclaimed as frequently by a certain strand of law and economics. Excessive Pricing and Price Gouging belong to the most written about, and least understood, issues in competition law and economics, with significantly conflicting views depending on the normative departing points regarding theories of harm, scope and object of competition law and legal-philosophical perspectives. Where one side of the axis elevates presumptions of supposed virtues of excessive prices, self-correcting markets and possible chilling effects on costly and risky innovation in face of vigilant enforcement, the other side of the axis point to wealth transfers as being the prima facie competition law concern, the errors in presumptions by the antagonists of enforcement and ultimately forwards the need to pursue competition law alongside fairness and social policy paradigm beyond a "purist" economic efficiency doctrine. The paper is structured as follows. Following the introductory section depicting excessive pricing theme in general, Section two revisits some examples of excessive pricing and price gouging during the COVID-19 pandemic. Section three offers a critical overview of law and economics theory informing much of the scholarly debate on excessive pricing as an anti-competitive practice. Section four presents an updated overview of the origins of the prohibition as well as recent enforcement actions in European Competition Law, demonstrating a shifting ground. Section five critically approaches the various arguments pro and con excessive pricing enforcement in the literature, finding the bulk of the normative and empirical arguments against enforcement not particularly persuasive. Section six concludes with a view on and beyond COVID-19 crisis with some law and policy recommendations.