World meat industry news

The Russian Federal Antimonopoly Service (FAS) may prohibit large companies from sharply increasing prices for food and other goods by 30 percent. According to the Izvestia newspaper, the regulator submitted a corresponding bill to the Government.

It is clarified that we are talking about increasing the cost to such limits over 60 days. Factors for the economic justification under which such a price increase is allowed are a significant change in demand or supply for products or seasonal factors for price increases, as well as fluctuations in regulated tariffs and increases in prices for raw materials and components. In the absence of such signs, the FAS will send a warning to the violating company to prohibit such actions and return prices to an acceptable level. If the manufacturer ignores the service's request or does not comply with it, he will have to pay a fine of up to 0.03 percent of the total revenue for the sale of the relevant products. However, this amount must be at least 50 thousand rubles. The list of goods for which these requirements will apply will be established by the Government. It is expected that this will include social types of food - bread, eggs, poultry, milk, tea and others. And the basis for determining whether prices rise is unreasonable will be data from the Ministry of Economic Development. However, these measures will not become permanent - they will be in effect from the date of adoption of the initiative until the end of next year.

The FAS itself believes that the reason for the rise in prices for Russian goods in most cases is the speculative policy of producers and other market participants towards consumers. However, they did not specify whether they had ever encountered a similar policy of raising prices and increasing them to such a level before. The office of Deputy Prime Minister Andrei Belousov reported that the regulator received the order to develop the bill in September. The Government reported that they had received the bill and were already discussing it. The Ministry of Industry and Trade said that it had already reviewed it and had no comments on it. The Ministry of Economic Development and the Ministry of Agriculture do not comment on the situation.

The Institute for Entrepreneurship and Economic Development (IEP) believes that the new bill will legalize the concept of economically unreasonable prices and expand the possibilities of control over pricing. However, they cited more frequent checks of retailers as a negative consequence. The latter can cause panic among them and demotivate them. Some retailers are confused about how the new measures will work in practice. They note that the Ministry of Economic Development analyzes retail prices based on Rosstat data, which give an overall picture and do not reflect the situation for individual stores and chains. Others say that sharp price increases are not typical for retailers, and chains tend to spread them out over a long period to maintain consumer demand. Rusprodsoyuz believes that the bill will allow the company to be held accountable without proof of additional violations, for example, antimonopoly and other collusion. It won't be very objective. We also note that the definition of an impermissible amount in the proposed bill is controversial. First of all, this is a very small share. In addition, even taking into account the minimum maximum fine for real monopolists, this amount may be disproportionately less than the actual fine, and therefore will not frighten such violators.

Let us recall that now in Russia there are two main tools for stabilizing prices. For example, if for some product they sharply increased by 10 percent, then the government has the right to independently determine the maximum permissible cost of this product. Retailers may also be required to limit the markup on socially significant products to five percent.