Ontario Announces Emergency Order Regarding Price Gouging
By: Jason Brisebois
The Province of Ontario has announced sweeping new measures aimed at penalizing price gouging practices by individuals and businesses during the ongoing COVID-19 pandemic. The measures were announced in conjunction with several photographs going viral of a high-end Toronto grocer charging roughly five times the standard price for disinfectant wipes.
On March 28, pursuant to powers available to Ontario under the Emergency Management Act, R.S.O. 1990, c. E.9, the Ford government introduced an emergency order on price gouging (the “Order”). Under the Order, individuals and businesses that charge unfair prices for “necessary goods” (as defined below) can face substantial penalties. Individuals found to be in violation of the Order can face a fine of up to $100,000 and one year in jail. Corporations, meanwhile, could face a fine of up to $10,000,000, and their directors and officers could face penalties of up to $500,000 and one year in jail. The Order defines “necessary goods” to include:
- masks and gloves used as personal protective equipment in relation to infections;
- non-prescription medications for the treatment of the symptoms of COVID-19;
- disinfecting agents intended for cleaning and disinfecting objects or humans; and
- personal hygiene products, including soap products and paper products.
Franchisors and franchisees alike, especially those in the grocery and retail sectors, should take note of this Order and ensure that all prices being charged to consumers are reasonable.
Tips for Franchisors
Although the Order imposes substantial penalties on any individual or business not in compliance, perhaps even more consequential for franchisors is the reputational damage that can accompany being found in non-compliance. Although occurring prior to the enactment of the Order, the Toronto grocer which was alleged to be price gouging was referred to by name in Premier Ford’s press conference, and has faced a barrage of negative press coverage as a result. Premier Ford has made it apparent that he intends to publicly shame violators of the Order.
To avoid the legal and reputational consequences that can result from non-compliance with the Order, franchisors should ensure they are implementing some or all of the following steps:
- review your franchise agreements to determine whether you’ve reserved the power to set exact or maximum prices for products for sale by franchisees, and provide pricing guidance as appropriate;
- confirm whether your franchise agreements specifically require franchisees to be in compliance with all governmental laws and orders, and remind franchisees that failure to comply with all governmental laws and orders could carry not just criminal sanctions, but also sanctions under their respective franchise agreement; and
- ensure that, in the event the franchise system does garner negative media attention as a result of a franchisee’s price gouging, the franchisor has a public relations strategy in place and unilaterally takes responsibility for providing the media with a response.
Jason Brisebois, Sotos LLP
Jason Brisebois is an associate with Sotos LLP in Toronto, Canada’s largest franchise law firm. He is head of the firm’s personal services franchise practice area, and practices business law with a focus on franchising, distribution, and licensing. He has been recognized as a 2020 “Legal Eagle” by the Franchise Times as a leading Canadian franchise law practitioner. Jason can be reached directly at 416.572.7323 or firstname.lastname@example.org.