Prices and costs to align?

Greece is looking to push through changes in the law that aim to help the government in its fight against rising prices, according to government sources, as the country’s inflation rate remains one of the highest in the eurozone. Government officials said that prices are often kept unjustifiably high by retailers and that it is currently considering changes to the law that will allow businesses to sell their products at below cost price. A law introduced at the start of 2001 specifies that supermarkets are prohibited from selling their products below cost price in order to avoid conditions of unfair competition arising from monopolies. Cost is currently defined as the price of purchasing a product minus the discount received by the retailer, as written on the invoice. Supermarkets, however, receive further discounts that do not appear on invoices. The proposed legal change specifies that cost will be defined as the price of the purchased product minus other additional discounts received, regardless of whether or not this is outlined on the invoice. Government sources say this change may help bring down prices by as much as 5 percent. The Parliament’s rubber stamp is expected to be given immediately as part of a Development Ministry law which relates to unfair competition practices. There are three types of discounts that wholesalers and producers offer supermarkets. Firstly, there are direct discounts on the wholesale prices; secondly there are additional discounts offered if supermarkets reach a sales target relating to the producer’s products. Lastly, there are also discounts on hand if supermarkets promote the producer’s products in their aisles or in the catalogues they distribute. Market regulations allowing supermarkets to sell below cost have been introduced in the past but have not been effectively enforced, as supermarkets argued that the regulation is complex and inconsistent. This view was accepted by the previous, Socialist government. Development Ministry officials said, however, they are confident the right formula can be found which will accurately determine the discount levels obtained by supermarkets. Other industry sources argue that this proposed change will give the upper hand to the sector’s bigger players, who can adopt a more aggressive pricing policy given the higher levels of capital they have available. Such tactics are unlikely to be followed by the broader sector, given the possible consequences. «What is important is that consumers gain and that they have access to cheaper products. If some retailer can sell cheaper, then why bother him? The market finds its own equilibrium point,» a government official said. Since the law which forbids supermarkets from selling their product below cost prices was introduced in January 2001, much water has passed under the bridge. On many occasions in the past, disagreements have arisen between supermarkets and producers as to who is responsible for price rises. Suppliers argue that supermarkets have larger margins and the ability to cut prices, while retailers point the finger at their wholesalers. While the Development Ministry is looking into how it can help fight inflation in the leadup to the Olympic Games, there are many concerns about other recently introduced market regulations and their impact on prices. Some of these rules brought in more money for some businesses but reduced protection for the consumer. One example was a market regulation dictating that a recommended retail price be put on bottled water. This move resulted in price hikes of up to 60 percent. Previous Development Ministry officials had reintroduced the recommended price label for bottled water in an attempt to prevent sellers from taking advantage of thirsty consumers, particularly in tourist areas, by selling half-liter bottles for as much as 1.50 euros. As a result, the recommended retail price was adopted by all sellers in Greece. This price change delivered a very generous return, since a half-liter of bottled water up till then was sold for 0.30 euros while now its price stands at 0.50 euros.