Retail price scheme scrutinized

THE DEPARTMENT of Justice (DoJ) Office for Competition (OFC) has recommended a review of the present Suggested Retail Price (SRP) mechanism, saying that it has removed incentives to compete on price.

In a recently-released 16-page report dated June 29, the OFC said that, as it is, “the SRP amounts to undue interference in the market and restricts competition” by imposing “de facto price ceilings” even during non-emergency situations.

The study found that, while the implementing guidelines of the law gives government agencies discretion to issue SRPs “anytime,” these have instead “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 Department of Trade and Industry (DTI), which has an enforcement procedure against non-compliance with SRPs, as well as requirements for retailers to seek clearance for planned price increases.

These, the OFC claimed, led to over-regulation, discouraging new investors from venturing into industries where SRPs are imposed, as well as causing artificial shortages.

The OFC report recommended three approaches that “seek to strike a balance between improving market competition and providing protection to the public”:

• Implement the SRP only during emergency situations;

• Explore alternatives to SRP; and

• Remove any requirement to seek the agency’s approval prior to price increase and other penalties for violating SRP.

Besides these, developing pricing practices guidelines in coordination with manufacturers and retailers, as well as tapping existing government retail outlets as directed by the Price Act, could be done.

SRPs “should just be a suggestion, not an imposition by government,” OFC Head Assistant Secretary Geronimo L. Sy said in a Monday statement.

“Price control distorts competition and does not help the market determine the optimum prices of goods. It is only in certain cases like calamities or emergencies that intervention is essential to prevent abuses by suppliers,” Mr. Sy added.

The same statement quotes DoJ Secretary Leila M. de Lima as saying that even with SRPs, the rise of rice and garlic cartels have not been prevented nor deterred.

DTI RESPONDS
Sought for comment, DTI Undersecretary for Consumer Protection Victorio Mario A. Dimagiba said it was only abiding by the Price Act’s mandate and that OFC’s recommendations may require amending the law.

In a two-page letter to Mr. Sy dated June 15 and furnished to BusinessWorld, Mr. Dimagiba said DTI’s setting of the SRP for basic necessities and prime commodities “should be maintained.”

“Absence of SRP could prompt some manufacturers, distributors or retailers to take advantage and increase prices at unreasonable levels,” he wrote.

“Even with SRP, we observed that market forces and competition of brands in the retail market dictate the prices in the market. Historical data shows that monitored prices of basic necessities and prime commodities remain lower than the SRPs,” the letter further stated. — Vince Alvic Alexis F. Nonato, Businessmirror