Posted 17/01/2022 by Howard Maclean
On Friday 7 January 2022, the Health Minister made the Biosecurity (Human Biosecurity Emergency) (Human Coronavirus with Pandemic Potential) (COVID-19 Rapid Antigen Tests) Determination 2022. The Determination prohibits the non-commercial export of Rapid Antigen Test Kits (‘RATs’) out of Australia and prohibits the price-gouging of RAT tests by persons who have purchased the tests in a retail transaction.
The intention to legislate these measures was announced following the National Cabinet meeting on 5 January 2022:
National Cabinet noted the Commonwealth will prohibit price gouging of and the non-commercial export of RATs, similar to actions taken earlier in the pandemic relating to essential goods such as masks, other PPE and hand sanitiser. As was the case previously, price gouging will be defined as supplying or offering to supply essential goods at a price that is more than 120% of the initial purchase price (a 20% markup) and penalties for not complying with this direction will range up to five years imprisonment or $66,000.
This FlagPost will cover the legislative basis and operation of the Determination, as well as enforcement and penalties for breaches.
Legislative basis
The Determination is a human biosecurity emergency requirement made under section 477 of the Biosecurity Act 2015 (Cth) (the Act). A human biosecurity emergency was declared under section 475 of the Act on 18 March 2020, and has now been extended seven times, most recently by the Biosecurity (Human Biosecurity Emergency) (Human Coronavirus with Pandemic Potential) Variation (Extension No. 4) Instrument 2021. The human biosecurity emergency period is due to end on 17 February 2022, although the Declaration may be extended an indefinite number of times in up to three-month increments provided the Health Minister remains satisfied of the legislative criteria detailed in subsection 476(1) of the Act.
The Parliamentary Library has previously considered the operation of the human biosecurity emergency powers in a series of FlagPosts, and most recently in Appendix B of the Biosecurity Amendment (Enhanced Risk Management) Bill 2021 Bills Digest.
The Determination is a non-disallowable legislative instrument (subsection 477(2) of the Act).
The text of the determination is very similar to the Biosecurity (Human Biosecurity Emergency) (Human Coronavirus with Pandemic Potential) (Essential Goods) Determination 2020 (repealed effective from 2 February 2021), which applied virtually identical restrictions on price gouging and non‑commercial export of ‘essential goods’ (personal protective equipment, hand sanitiser and alcohol wipes).
Prohibition of price gouging
The Determination prohibits a person from engaging in price gouging in relation to a COVID-19 Rapid Antigen Test Kit. Section 4 (Definitions) states:
COVID‑19 Rapid Antigen Test Kits means a medical device that:
(a) is a single use lateral flow or immunochromatographic test kit; and
(b) is classified as a Class 3 IVD medical device (within the meaning of the Therapeutic Goods (Medical Devices) Regulations 2002); and
(c) is included in the Register (within the meaning of the Therapeutic Goods Act 1989); and
(d) has an intended purpose, accepted in relation to that inclusion, that relates to the detection of the novel coronavirus SARS‑CoV‑2 that causes COVID‑19.
Price gouging is selling, or offering to sell a COVID-19 Rapid Antigen Test Kit for more than 120% of the price the RAT was purchased for. Any part of the resale price ‘directly attributable to costs reasonably incurred by the person in transporting or delivering the test kit’ is not included in the 120% price gouging threshold.
Price gouging only occurs when the goods offered for resale were purchased in a retail transaction. The determination does not apply to retailers who purchase RATs from a wholesaler, and therefore does not restrict the prices they may charge for such RATs. Instead, the Australian Competition and Consumer Commission (ACCC) has indicated that it is monitoring the pricing of RATs and will take action under its existing powers, if necessary, rather than under this determination.
The Explanatory Statement provides that:
The term ‘retail transaction’ is otherwise intended to be interpreted according to its ordinary meaning, generally meaning transactions that are ‘consumer-facing’ rather than wholesale purchases made by a major supplier or a manufacturer of the goods…
This also ensures that entities that are integral to maintaining Australia’s supply chains for COVID‑19 rapid antigen test kits, including major suppliers (who generally purchase COVID‑19 rapid antigen test kits wholesale) and manufacturers of COVID‑19 rapid antigen test kits, will not be bound by this prohibition.
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Example 1: An individual foresees surging demand for RATs and purchases 100 RATs on 11 December 2021 from their local pharmacy at $7.50 per unit, and then resells them for $44 per unit online in mid-January 2022, plus postage. This is price gouging, as the resale price exceeds 120% of the original purchase price, and the goods were purchased in a retail transaction.
Example 2: A national retailer purchases 1,000,000 RATS on 11 December 2021 from the manufacturer of the tests at a unit cost of $5. The retailer then sells the RATs for $44 per unit online on 9 January 2022, plus postage. This is not price gouging under the determination even though the price increase far exceeds 120% of the original purchase price, as the goods were not purchased in a retail transaction. As noted above, it may attract the attention of the ACCC, which advises that ‘in certain circumstances, excessive pricing of essential goods or services may also be unconscionable’.
Example 3: An individual panic buys two boxes of 20 RAT tests from Costco as a private individual, at $7.50 a test on 29 December 2021. They then offer to resell their excess supply to friends and family at $7.50 per RAT, plus express postage, which costs another $7.74. This is not price gouging, even though the total cost is $15.24, since $7.74 of this cost is attributable to transportation costs and is not counted towards the 120% threshold.
Example 4: A local corner store buys 10 boxes of 20 RATs from Costco as a business, at $7.50 a test on 29 December 2021. They then offer the tests for sale individually at $30 dollars a RAT. It is not clear if this is price gouging under the determination as it is unclear if the purchase of RATs from Costco by a business is a ‘retail transaction’ or a wholesale transaction.
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Enforcement
A law enforcement officer (a member or special member of the Australian Federal Police) may issue a written notice to a person stating:
- the officer suspects on reasonable grounds that the person has engaged, is engaging or intends to engage in price gouging in relation to a RAT
- the person is required to surrender the RAT to the officer and
- the RAT will be destroyed or given away after 21 days, unless the persons satisfies a law enforcement officer on reasonable grounds that the person has not engaged, is not engaging in and does not intend to engage in price gouging in relation to the RAT.
If an officer is satisfied on reasonable grounds that the person has not engaged, is not engaging and does not intend to engage in price gouging in relation to the RAT, they must withdraw the notice, and return any RATs surrendered to that officer.
If the officer is not so satisfied within 21 days after the RAT has been surrendered, then the officer must give the RAT to the National Medical Stockpile. If the officer believes on reasonable grounds that the RAT is defective or that there is a risk that the RAT is defective (and because of that risk, the goods should not be used), then the RAT must be destroyed.
A law enforcement officer may also issue a notice requiring a person not to ‘dispose of, or deal with’ a RAT if they suspect, on reasonable grounds, that the person has engaged, is engaging or intends to engage in price gouging in relation to the RAT. If the officer later becomes satisfied on reasonable grounds that a person has not engaged, is not engaging, and does not intend to engage in price gouging, then the notice must be withdrawn.
Exceptions to the Prohibition on non-Commercial Export of RATs
Section 8 of the Determination provides that a person must not export a RAT from Australia during the human biosecurity emergency period, with several exceptions set out in Section 9 , where the RAT is:
- for personal use by a departing passenger or crew member on a ship or aircraft
- for personal use of a relative of the person exporting the RAT, and the export is not by post
- for personal use of an employee of the person exporting the RAT, and the export is not by post
- for the non-commercial use of a humanitarian organisation or agency, and the export is not by post
- exported by the manufacturer of the test kit, and the export is not by post
- exported by a person who exports RATs in the ordinary course of their business, has an Australian Business Number and is registered for GST.
Consequently, the prohibition on export only applies in a narrow set of circumstances.
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Example 5: a person departs Australia as a passenger onboard an aircraft, departing for Fiji. They carry 10 RATs intended for use by friends already in Fiji. This is a prohibited export as there is no exemption for export of kits intended for use of persons who are not relatives or employees of the exporter.
Example 6: an export business that has an ABN and is registered for GST purchases a large number of RATs domestically and then exports them overseas in order to take advantage of higher prices in a foreign market. This is not a prohibited export, as the business falls under the exemption for exporters under subsection 9(6).
Example 7: a person exports 10 RATs to a parent overseas intended for their personal use via post. This is a prohibited export, as while a person is permitted to export RATs for personal use by relatives, they may not do so via post.
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Offences
Under section 479 of the Biosecurity Act, a person who intentionally engages in conduct that contravenes a human biosecurity emergency requirement commits a criminal offence punishable by a maximum penalty of imprisonment for five years and/or a fine of 300 penalty units ($66,600).
Commencement and duration
This requirement commenced at 1 am 8 January 2022. It remains in force for the duration of the ‘human biosecurity emergency period’ which, under the current human biosecurity emergency declaration, will last until 17 February 2022. The Governor-General may extend a declaration indefinitely (with each extension being for no longer than three months) if the Health Minister remains satisfied that the conditions that required a declaration of a human biosecurity emergency continue (section 476 of the Biosecurity Act).