Coronavirus: Calls for price controls dismissed as ‘economically illiterate’
Economists have hit back at Which? after the consumer watchdog said that the government should enforce price controls on certain items to prevent so-called “price gouging” during the coronavirus pandemic.
The calls came after the consumer group said it had found that items such as handwash, cleaning products, and baby formula were selling at vastly inflated prices online.
However, such measures would be “economically illiterate”, said Eamonn Butler, director of think tank the Adam Smith Institute:
“When there are shortages, prices rise. That encourages customers to use things more sparingly, or find alternatives, and it encourages producers to supply more of the scarce product, which is exactly what you want to happen.
“If you legislate to make scarce things cheaper, you will only succeed in making them even scarcer. If you think the shelves were bare after all the panic buying three weeks ago, just wait until you see the effects of price controls.”
The UK’s markets authority has already set up a special taskforce to crack down on companies seeking to profit from the coronavirus by pumping up prices.
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The Competition and Markets Authority (CMA) said that action would be taken against firms which breach consumer protections or competition laws.
It will also advise the government on emergency legislation in the event that it cannot address the issue through its existing powers.
Last month Prime Minister Boris Johnson hinted that such measures were being considered in response to irresponsible behaviour from some retailers.
Sue Davis, head of consumer protection at Which?, said that the time had come for the government to step in:
“It is time for the Government, working with the CMA, to step in with strong action to stamp out price gouging and keep the price of vital goods reasonable during this difficult time.”