World meat industry news

We are talking about cases where the cost of goods increased by 30% within 60 days for no apparent reason. The Federal Antimonopoly Service (FAS) has submitted such a bill to the government. The restriction should remain in effect until the end of 2024.

Violators will first be given orders, the next step is to initiate a case. But experts saw risks for companies with such regulation: businesses could be held accountable without further explanation.

Get to grips with yours

The government is discussing a new tool for stabilizing the cost of products: the FAS proposes to prohibit large companies from setting economically unreasonable prices for goods, as follows from the service’s bill (amendments to the Federal Law “On Protection of Competition”). It was developed on behalf of First Deputy Prime Minister Andrei Belousov. We are talking about a fairly sharp increase in the cost of goods - up to 30% for no more than 60 days, provided that it cannot be explained in any way by economic factors.

Among them, the service names a significant change in the demand or supply of goods, fluctuations in regulated tariffs, prices for raw materials and components, seasonal factors and others. The list of goods that the regulator will monitor will be established by the government. We can assume that these will be socially significant products - meat, milk, eggs, bread, tea and others. Moreover, the FAS will make a decision on unreasonable growth based on data from the Ministry of Economic Development, the draft says.

“The reason for the rise in prices for goods in a number of cases is the unfair behavior of market participants who pursue a speculative policy towards consumers,” says the explanatory note to the project.

The FAS did not specify to Izvestia exactly when they encountered such a significant increase in prices in 2022 and 2023, especially for the reasons stated above.

This year in the Russian Federation, prices for eggs and chicken increased most dynamically, but regulators did not record a 30% increase in retail prices. As follows from the latest Rosstat data for October, in 2023 the price of chicken eggs increased by 23.8% compared to last October, poultry meat by 22%, chilled and frozen chicken by 26.8%. The business explained that this dynamic is due to the rise in price of material and technical resources and their transportation due to the increase in the price of gas motor fuel. In addition, equipment maintenance costs have increased, as have the costs of cargo delivery, maintenance and vehicle fleet repairs.

If the FAS reveals signs of a violation, the company will receive a warning; ignoring it threatens to initiate a case. Fines may also be imposed: for legal entities - up to 0.03% of the amount of proceeds from the sale of goods (at least 50 thousand rubles), follows from the amendments to the Code of Administrative Offenses, which the service also presented. They clarified that the bill will make it possible to quickly suppress the dishonest behavior of individual business entities in the market, while such measures will be temporary. The law should come into force from the moment of its publication, at the moment it is expected that it will be in force until the end of 2024, it follows from the documents.

The office of First Deputy Prime Minister Andrei Belousov clarified that the FAS received the order to develop the bill in September. The Cabinet of Ministers has received the draft, a government source clarified. The Ministry of Economic Development and the Ministry of Agriculture did not provide Izvestia with comments.

Control tool

Now in the Russian Federation there are two tools for stabilizing prices: if for some product they sharply increased by 10%, the government has the right to intervene in regulation and determine the maximum permissible price for the product, and the second is a voluntary obligation of retailers to limit markups on socially significant products at 5%.

The main innovation of the FAS bill is the legalization of the concept of “economically unreasonable price,” primarily in relation to consumer goods, said the Institute for Entrepreneurship and Economic Development (IRPE). Essentially, this means a significant expansion of opportunities for regulators to intervene in pricing throughout the supply chain. Among the risks, the IRPE highlighted the strengthening of government control over market participants, primarily over retailers. For example, they will be able to be checked more often, the institute suggested.

The Ministry of Industry and Trade considered this bill, the department did not have any comments or suggestions, the ministry noted.

“Retail chains broadcast manufacturers’ prices on the shelf and are generally reluctant to increase prices, because this is their competitive advantage,” the press service added. — Some chains set a zero or even negative trade markup on first-price food products (basic ones, which are purchased first of all) at the expense of their own margin.

Indeed, a sharp increase in cost is not typical for modern retail, said Stanislav Bogdanov, vice president, director of government relations at X5 Group. 

A source in one of the large grocery chains noted that it is still unclear how, in principle, regulators intend to implement the new standards in practice. The Ministry of Economic Development carries out an analysis of retail prices based on Rosstat data, which reflect the dynamics of the market as a whole, and not for individual retail chains or stores, Izvestia’s interlocutor added.

The main risk that arises when implementing such an initiative is the opportunity to hold a large company accountable without the need to prove additional elements - for example, conspiracy, cartel, excess market share and monopoly position, believes Dmitry Leonov, deputy chairman of the board of the Rusprodsoyuz association. The main sales are goods with deep discounts of 30-40%, and hypothetically any enterprise can be held liable by attaching invoices from one legal entity for a similar product on sale and without a discount, he added.