FAQ: Pricing and the law in Ireland

March 10, 2022

In light of recent commentary and questions on price increases and the law in Ireland, we’ve put together some information on price increases, the law in Ireland and the role of the CCPC.

What is price gouging and is it against the law?

Price gouging is not defined in law but it’s generally understood as a situation where a trader charges prices at a level that is considered unreasonable or unethical. It is a term that is often used in situations where a trader makes very high profits as result of a crisis or disaster situation.

Generally, traders in Ireland are free to set and change their prices for goods and services. Lower prices play a key role in attracting consumers, and traders compete to keep their prices low enough to attract consumers.

In rare situations, where there is a dominant supplier of a good or service, there may be circumstances where a trader is considered to be in breach of competition law by charging excessive prices. These are a very specific scenarios and cases of this type are rare across Europe. Price-fixing, where traders collude to fix prices at a certain level, is described as a cartel and this is illegal. Participants in a cartel can face criminal prosecution.

Is the CCPC a price regulator?

The CCPC is not a price regulator and does not have a role in monitoring price levels across the economy. As businesses in Ireland have the power to decide how much they will charge consumers for products, this means that the CCPC does not have a role in reviewing or approving price increases. In very specific circumstances, where businesses form a cartel and collude to fix prices, the CCPC can investigate and refer a case to the DPP for criminal prosecution.

What role does the CCPC have in relation to pricing?

Irish consumer protection laws on pricing oblige traders to clearly display prices to consumers before they make a transaction. Where this is not done, the CCPC can take enforcement action against traders. The CCPC does not have any role in controlling how businesses set their prices or capping the prices that a trader can charge for a particular product.

Are there any limits on the prices that traders can set in Ireland?

Generally, there are no limits to the prices that a trader can set and the level of profits they make. Usually traders with excessively high prices will lose out on business to lower priced competitors, therefore keeping prices competitive.

Allowing companies to freely compete with one another drives companies to innovate, be more efficient and results in significant benefits to consumers.

In emergency situations Governments may intervene to set prices on certain products. Setting prices in complex markets where prices fluctuate every day is extremely challenging. This can distort the market, impact on supply and risk eliminating the significant benefits that competition delivers for consumers. This is why governments tend to take other actions to address such situations e.g. changes to the tax system.

What is price signalling?

Price signalling occurs when businesses make their competitors aware that they intend to increase prices. Price signalling can happen in public, through announcements or comments on prices, or in private through direct contacts between companies. If a business knows that their competitor is increasing prices then they may be encouraged to also increase prices, since their customers are less likely to move to their competitor. Price signalling is against the law. In 2021, the CCPC completed a price signalling investigation into the private motor insurance Industry, securing legal commitments from 6 motor insurers on a range of compliance reforms.

What is a cartel?

Cartels are a serious form of anti-competitive behaviour which occur when competitors agree to fix prices, share markets, restrict output or share commercially sensitive information with each other. In Ireland, engaging in prohibited cartel activity is a criminal offence, which is punishable by fines, and for individuals a term of imprisonment of up to 10 years, following a criminal conviction by the courts.

To successfully investigate and prosecute a cartel requires tangible proof of an agreement between competitors to coordinate their anti-competitive activity. Information showing that certain traders have increased their prices does not, in itself, constitute evidence that a cartel is in existence. The CCPC encourage anybody with evidence of collusion between traders in any sector to submit it to the CCPC. You can find out how to submit information on cartels on our website.

Are traders obliged to pass on reductions to VAT or other excise charges to consumers?

No, traders are obliged to set their prices independently and based on their own particular circumstances. They are free to set and review their prices at any time. This means that while traders may pass on savings made as a result of changes to excise rate, there is no obligation on them to do so. Traders must adhere to a number of requirements on how they indicate or display their prices so that consumers are very clear on the price charged before they make a purchase and they may choose to take their business to a lower priced competitor if they wish.

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