Radio interview with our director, Steven Brown and Luke Grant from 2GB 873AM.
Luke:
Now, we know the story that’s been dominating much of the headlines today, it’s the ACCC, they’re on the case of pricing of rapid antigen COVID tests. They’ve said that they are closely monitoring the pricing of these tests as much of the country moves away from the PCR testing. Now, it’s blatantly obvious that these rapid antigen tests have been hard to come by since the spike of Omicron cases, but for retailers and suppliers to take advantage during such a serious situation, I think for many, including me, is appalling.
Luke:
The price gouging only adds fuel to the fire of the government being under prepared for this predictable rise in demand for rapid tests. The ACCC are vowing to, quote unquote, name and shame retailers and suppliers in the act and are encouraging consumers to contact them and report the price gouging. So far, more than a hundred complaints, we’re told, have been made. Consumer watchdog chairman Rod Sims stated today that the more complaints received from individuals, that would allow them to get involved and take the appropriate action, whatever that might be.
Luke:
Let’s have a chat to someone who knows about this stuff, commercial lawyer and principal of Lynn and Brown Lawyers, Steven Brown, who will shed some light on this topic for us, and I’m delighted to say, back at work today. Steven is on the line. Steven Brown, thank you for your time.
Steven Brown:
Hello, Luke and listeners.
Luke:
So this is an issue that’s obviously very emotional. People are worried, and that’s okay, about their health, understandably, and they want to make sure they’re okay and don’t make their family sick. And through the pandemic, Steven, as you well know, some of the rules of the way we go about things have changed dramatically. Is it okay to have an expectation if you’re Joe or Jill Punter that even though there’s a high demand, there should be courtesy to the consumer. Is anything wrong with that concept at all?
Steven Brown:
Well, there’s certainly nothing wrong with the concept. The question that usually comes across my desk, though, is it legal or is it illegal, what’s happening with the trade of the consumable product? And very tricky for the ACCC to police this year, because there is clearly a worldwide shortage of these rapid antigen testing kits, and it’s also heightened the difficulty in determining whether or not there’s price gouging.
Steven Brown:
And price gouging of itself is not necessarily illegal, but it could be illegal in certain circumstances, which perhaps we’ll have a quick chat about. But what makes it also difficult is some of these tests are better than others, so maybe if they’re a better test and more likely, you could legitimately charge more for it. And also the fact that they’re being sold in different size packages makes it different for different volumes of it, and as usual, with anything you buy, the bigger the volume, the cheaper the individual portion of the product should be.
Luke:
Right, so let’s perhaps start there. We’ve often seen, haven’t we, these packs that say, you know, they might have five things in, and each individual item is labeled not for individual resale or sale. Is it illegal to open a packet which contains five, let’s call them things, and sell them as individual things, even though they might carry the label not for individual sale?
Steven Brown:
Yes, generally. It would generally be considered to be unconscionable conduct, and that is unlawful and that is something that the ACCC can prosecute people for, but historically, very difficult to prove in a court unconscionable conduct. But yes, if you broke it up, a five pack, and tried to sell each individual one at the individual price, which we’re talking individual price 10 to $20 a product, whereas a five pack you can get for about $50, so you’re probably almost sort of doubling the return of the distributor, if they tried to break it up. So there is clearly a temptation, and the ACCC have said today that is one of the things that they’re going to be focusing on, trying to stamp out if that is occurring, because they believe that they can prosecute people for that.
Luke:
All right. So if talk about unconscionable conduct, which I’m sure has an appropriate legal definition, but I’m also now thinking if I’m the retailer, I can give one person five tests, or I can give five people who need them one test. What’s unconscionable about that?
Steven Brown:
Yeah, certainly nothing on the face of that unconscionable, but how are you pricing it? That’s where-
Luke:
That’s the issue.
Steven Brown:
… The unconscionability will come in there. And the other thing that the ACCC will be looking at closely, is there cartel conduct going on here? So that is where competitors are price fixing, so if people collude, different business collude to set the price that they’re going to sell something for, that is unlawful, or if they’re controlling the output or limiting the amount of goods that are available to buyers, that is also considered cartel conduct and unlawful in Australia.
Luke:
Okay. So if there’s a shortage of these things, and we work in a supply and demand economy, within reason, obviously, how in that context do we define price gouging? I mean, if you’ve got five of these things and they’re the last five on Planet Earth, they’re obviously worth a lot more when there’s 5 billion left on Planet Earth?
Steven Brown:
Exactly, and that is not unlawful, then. If there is a genuine limited supply, and there hasn’t been any collusion about that supply, then the price that is charged is dictated by market forces, and that’s what we get from living in a free economy such as Australia, then the market forces can dictate and they’ll increase the price, if the supply is legitimately limited. And the governments have got some things to look at here, when we’ve got a Queensland company that produces these RATs and they have signed up a contract last year to send 100,000 of them to the US and are looking at another 100,000 of them that will all go to the US market.
Luke:
Yeah, that’s extraordinary, that. In fact, I spoke to the boss of a test manufacturer in Queensland probably a year ago, and the US government threw them millions of dollars. They did get some money from the federal government, but the US government wanted them to set up a facility in the US, which they did. This is an organization, I’m sure [inaudible 00:06:51], which is called Ellume. So we can’t sell those tests here, but they can make them and have them sold in America. It’s quite bizarre. So are you saying there that this now is a real live, great example of how perhaps laws around all of this need to be tightened? Do you think there’s more government can do, is that fair to say, Steven?
Steven Brown:
Yeah. And I think on one of your programs today there was some discussion with one of the head of the… Director of a pharmaceutical company that was talking about removing GST on these products. We do know that both the Victorian government and the New South Wales state governments have got a significant amount of supply coming in at the end of January, but, you know, too late. We need them now.
Luke:
Yes.
Steven Brown:
And yeah, a lack of foresight, maybe.
Luke:
Yeah. Well, I think for a long time, these things were not pooh-poohed, but they were certainly seen as the less reliable alternative. It’s amazing, when the queues get so long at the reliable alternative, quick, get the other one, and that’s become a thing. Do you imagine that anyone will be prosecuted? Is it likely that the ACCC will do anything other than make a noise and try and get a better deal for consumers through the media and coverage?
Steven Brown:
Well, I think, yes, you’re correct. I think that will definitely happen. What the ACCC chair Rod Sims has said today is that the evidence they have at the moment of widespread price gouging is very limited. So if they find the evidence, I have no doubt that they’ll prosecute people, because they’ll want to make an example of this, and if they can prosecute a couple of people successfully, or at least charge a few people, that will create a great deterrent in the marketplace.
Luke:
And there’ll be people, no doubt, on places like eBay, I don’t know this, but there could be, who think, “You beauty, it’s time to cash in.” Surely the ACCC isn’t going after whoever they might be, rather, larger retailers. Would that be a better target? Or could it be that the mum-and-dad business that thinks it’s okay to make a dollar during this, they might be called out?
Steven Brown:
Yeah, look, I think they’re going to go principally after the big suppliers and look at them and communicate with them, try to find out stock levels, predicted costings, what they’re actually paying for them wholesale as well, to get a better idea of what is the appropriate price in the marketplace. And by that, they’ll need to know stock levels, predicted future stock levels, and wholesale pricing.
Steven Brown:
But they’ve come out and said that they’ll also be approaching people like eBay and Kogan to have them remove individual listings, if there’s a backyard operator who’s going out there and buying 20-pack kits and then trying to sell them individually online, to get the websites themselves to try and stop that occurring. Because if that becomes widespread, the volume would be difficult for them to manage, no doubt.
Luke:
Yeah. And just this whole idea of price gouging, I’m learning from you on the run. By the way, I am talking to Steven Brown, a lawyer and principal of Lynn and Brown lawyers. The price is something that’s got to be set. We talked about supply and demand and future supplies, et cetera, et cetera. If we have a body like the ACCC, I am playing devil’s advocate to some extent, deciding what the price of something can be, then that’s not the free market I assumed that we thought we had in mind when we set this whole thing up. Or does the fact that this is such a important product during a pandemic override all of those implied freedoms, you’d think, in an open market economy?
Steven Brown:
It’s an interesting debate, isn’t it? We see it play out for many years over the price of petrol and how that fluctuates, and whether or not that’s being done properly. And we know, for a long time, the ACCC have looked at that and probably thrown their hands in the air in the end, knowing there’s little they can do. I think you’re treading a very thin line when you start to regulate pricing. It’s where do you stop? Yes, I completely agree with you. We’re dealing with a pandemic, a very serious situation we’re dealing with here, and therefore there are fairly extenuating circumstances, but where do you draw the line of what is extenuating and what is not?
Luke:
Yeah. Yeah, it’s a tough one, isn’t it?
Steven Brown:
Yeah.
Luke:
And if you had a client who said, “Listen, I’ve got the five tests left on the planet, and there’s not 5 billion others. I actually want to charge a thousand for these,” and they ask you for that sort of advice, do you strictly advise based on the law? Or is there this, “Now, hang on a sec, these will go one day and then you’re going to want customers again, so please be reasonable?” Is that the best advice?
Steven Brown:
I think that definitely is a consideration always. You make money today, but lose tomorrow, so just, always, everyone has to be very careful. People will have long memories of what’s gone on in this period, I think, and if people make advantage of it, it may come back to bite them.
Luke:
Yeah. And there’s no way, because we’ve heard this… This is the final question, thanks again so much for your time, Steven, but there’s no way government, can they just say, “Righto, they’re two bucks a test. That’s a maximum fee allowable by regulation or legislation. We’re going to make that a thing?” That can’t happen, can it?
Steven Brown:
Well, if they took control of the supply of the product, [inaudible 00:12:58] the ones that are coming in at the end of January in Victoria and New South Wales are likely to be free supply. And there’s also questions about those people less advantaged, on disability pensions and such, whether they should be being provided them at a better rate or for free. So yes, there is powers within the government to regulate this, but they would have to then become the purchasers from the wholesalers, and effectively government subsidize it.
Luke:
Gotcha. Brilliant. Steven, excellent. I appreciate your generosity and your expertise. Thank you so much.
Steven Brown:
Appreciate it, Luke. Thank you.
Luke:
Good on you. How good, commercial lawyer and principal of Lynn and Brown Lawyers, that’s Steven Brown.
