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June 1, 2020

Provincial price control powers in the age of COVID-19

Among the many anxieties of the COVID-19 pandemic — illness and loss of work top among them — was, particularly in its early stages, security of access to food, prescription drugs, household goods such as cleaning supplies, and personal protective equipment (PPE). Such security of access has three dimensions: first, are the products actually available — are the shelves bare? Second, is it safe to go to the store or have essential goods delivered? And third, will prices go up so significantly that what is available is not affordable?

The pandemic ultimately did not impact the distribution system for food and household goods in a significant way. While mid-March did feature panic buyers raiding retail supplies of toilet paper and hand sanitizer, manufacturers could keep up with demand, and distributors could keep up with shipments. If anything, the pandemic exposed the very high degree of convenience and comfort Canadians normally enjoy in our shopping experiences: we all expect to show up at any grocery store, at any time, and find it fully stocked with everything we need, from bananas to bath salts, no matter how far those goods have travelled or how many people are involved in their production. The system supporting our consumption was largely invisible to the public before the pandemic started, and it has proven to be resilient and reliable.

This fact is a potent symbol of our national wealth and safety. Despite millions losing work and the burgeoning of a serious public health emergency — recognizing of course that we are not out of the woods yet — Canadians held fast as a society, safe in the knowledge that there were no food shortages or supply chain interruptions to endanger us. It is not hyperbole to say that food security is national security. We knew we would survive the lockdown in part because the system worked.

Remarkably, the provincial government did not need to use legal tools at its disposal to regulate prices in an emergency at the height of the lockdown. Retailers, either to be good corporate citizens or avoid bad publicity, or both, kept prices at pre-pandemic levels. Nationally, Statistics Canada’s tabulation of monthly average prices for food and other selected products shows no meaningful changes from March to April, save for a notable drop in the price of gasoline. Isolated cases of opportunists re-selling disinfectant wipes were rare and newsworthy.

Price-gouging at the apex of a crisis might be the most expected time for government intervention, but it is not the only one. A prolonged period of economic impairment also breeds price uncertainty. Reductions in suppliers as competitors go bankrupt can reduce downward price pressure. A second spike in positive cases could motivate those who did not panic-buy in March to do so, on the belief that the pandemic could last for a much longer time than originally believed. For goods that can be distributed or produced relatively easily, a long-term increase in demand should eventually motivate increased supply in response (driving prices down), but if the barriers to entry of a good or service are high, long-term demand could simply mean that such goods become more expensive. It’s easy to imagine that we might all be wearing masks, and possibly other PPE, for a long time. Demands to ensure the accessibility of PPE for everyone could also incentivize the government to fix prices and regulate distribution.

The price controls tools available to the provincial government are limited and blunt:

Section 12(3) of The Emergency Measures Act allows the government to fix a price for a necessary good, service, or resource; or to prohibit the charging of an “unconscionable” price; for up to six months. A declaration of a state of emergency is a prerequisite for the government to use this power; such a state of emergency currently exists in Manitoba. “Unconscionable” prices are likely to be interpreted as prices outside of a reasonable range.

Aside from this, attacks on prices must be made obliquely. The Business Practices Act gives the province broad powers to penalize any “unfair” business practice. This power is not generally understood as a tool to moderate prices; it targets dishonest sales techniques and false advertising. But it could be used to force sellers to honour their previously-advertised prices (blunting the effect of an overnight spike) and to prohibit a seller’s restriction of the supply of goods specifically to create an impression of scarcity. The Consumer Protection Act regulates a diverse litany of consumer contracts, including credit sales and mobile phone contracts. It’s a jumble of a law, and while it too does not address the price of goods or services, its regulation of business licencing could give the province a means to target fly-by-night resellers who seek to exploit market conditions for their own gain but are not legitimate businesses in normal times.

Nothing prevents the province from passing a law to regulate an industry or the trade of specific goods or services, provided any such law does not reach across a border or impact interprovincial trade. The province could probably not prevent a Manitoba paper mill from selling toilet paper to Saskatchewan, but it could require grocery stores to limit sales of toilet paper per customer.

Given the complexities of the Canadian economy, long-term price management — as an emergency device, or, historically, as a tool to fight inflation and regulate competition — would likely come from Ottawa. The province’s powers are geared to addressing profiteering and specific cases of unconscionable behaviour in the face of a crisis. But as the pandemic becomes an experience of a constant potential catastrophe, with the possible need for immediate lockdown looming in the background even as the situation appears to improve, the province might explore using its powers to intervene in the marketplace in previously unforeseen ways, or seek to give itself greater legal leeway to ensure price stability and consumer peace of mind. In the yet bigger picture, the long tail of the pandemic — a new experience for everyone in so many ways —  might mould a different understanding or expectation of how strongly the province should intervene in ordinary life in times of emergency. Where public attention turns, government interest will follow. Greater attention to the retail supply chain and the necessity of accessing essential goods in an emergency could inform the regulation of business practices in the months and years to come.

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