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DOJ wants requirement for price hike clearance removed

By: - Reporter / @T2TupasINQ
/ 05:10 PM July 13, 2015

THE Department of Justice through its Office for Competition (DOJ-OFC) has recommended the removal of requirement for manufacturers and retailers to seek approval prior to price increases.

In a 16-page report, the OFC said while it is important for government agencies to continue monitoring prices of basic necessities and prime commodities, requirement for approval for price increases “will discourage manufacturers from freely setting prices according to market dynamics.”

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“Rather, they should expand proactive market monitoring actions and also encourage reporting,” DOJ-OFC said.

The DOJ-OFC added that the government should also review the suggested retail price (SRP), policy saying that while its intent is laudable and has proven its worth during times of calamities and other emergencies, it could also prevent free competition and improvement in the quality of products.

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“Suggested Retail Price should just be a suggestion-not an imposition by government,” DOJ Assistant Secretary Geronimo Sy, head of the DOJ-OFC said in a statement released Monday.

The OFC said price controls should be imposed only during calamities, disasters and similar situations and over basic necessities and prime commodities.

“Price control distorts competition and does not help market determine the optimum prices of goods,” Sy said.

The DOJ also explained that even with the SRP in place, cartels in such basic commodities as rice, garlic and onion still exist.

In its report, the DOJ-OFC said a review of the laws, rules and current implementation of the SRP shows that a de facto price control is exercised by various government agencies even in the absence of an impending or actual crisis, calamity of exigency.

Likewise, the report noted that there are no adequate rules or guidelines on the imposition of the SRP (no prescribed period, process, standards, basis or conditions to guide an agency in determining the SRP) and that while the Price Act gives implementing agencies such as the Department of Trade and Industry discretion to issue SRPs anytime, the practice of government agencies has gone beyond the scope of the Price Act by impliedly prescribing SRPs as a de facto price ceiling with corresponding penalties.

It cited the case of the DTI wherein it has an enforcement procedure against those who are non-complaint with the SRP policy such as the 30-day advance notice to the agency before making any price hike or a denial or modification of the proposed price increase.

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“However, the DTI’s requirement for retailers to seek clearance for planned price increases negates the recommendatory nature of the SRP. Business agents are discouraged, if not effectively deterred, to set the price they deem appropriate for their product,” the DOJ-OFC report said.

In the case of the Department of Agriculture, the report said, it has publicly said it will file criminal and administrative charges, including profiteering against SRP violators, without it clarifying the elements involved in such practice.

The DOJ-OFC said such declarations might prevent small retailers and even sari-sari storeowners and ambulant vendors from determining reasonable prices for their products.

“The above-findings could result in over-regulation of market prices, which prevents natural supply-demand correction, promotes black markets and inhibits industry growth and product development,” the report said.

The DOJ-OFC then recommended that the government must emphasize the recommendatory nature of the “suggested reasonable retail price, use of an appropriate term to reflect this such as Reference Retail Price (RRP) and distinguish it from manufacturer-issued SRP, impose price controls only during calamities, disasters and similar situations over basic necessities and prime commodities as well as remove the requirement for manufacturers and retailers to seek approval for price increases.

It also recommended that the government must develop pricing practices guidelines in coordination with manufacturers and retailers as well as for the implementing agencies to tap, expand and promote existing government retail and distribution outlets.

Lastly, the DOJ-OFC said the government must expand existing reward and recognition programs for outstanding suppliers.

And to ensure that the public is well-informed of the prevailing market prices, the report said the government must enhance public information and education while on the other hand, strengthening the supply chain to prevent or deter artificial price hikes.

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