Excessive Pricing

Excessive Pricing categorizes a situation where a dominant undertaking, often a legal monopolist, is able to reap supra-competitive profits, not being sufficiently challenged by normal forces of competition. The supra-competitive profits are thought to produce deadweight losses and allocative in-efficiencies as well as harm to consumers in form of undue wealth transfer. Most OECD-jurisdictions prohibit excessive pricing and/or price gouging, minus USA, Canada, Australia, New Zealand, and Mexico. Important to note in regard to USA is the fact that although excessive pricing is not banned on the Federal level, some 36 states contain different statutes prohibiting excessive pricing and/or price gouging. In regard to Canada, the Canadian Patent Act prohibits excessive pricing of patented pharmaceuticals. There are significantly different views on prohibition of and enforcement against excessive pricing in competition law and economics literature.