Putin follows the footsteps of first secretaries in freezing price hikes
The Moscow Times reports that for 60 days, producers and suppliers of products in Russia will be prohibited from increasing prices by more than 30 percent without economically justified reasons. This is as per a draft bill presented to the Kremlin by the Federal Antimonopoly Service (FAS).
The FAS will monitor a list of goods which may include items such as meat, milk, eggs, bread, and tea. The draft bill asserts that decisions on unjustified FAS enforcement will be based on data sourced from the Ministry of Development.
Prohibition on arbitrary price hikes
The draft bill explains that the rapid increase in prices of goods is often attributed to the speculative policies of market stakeholders against consumers.
In the event of identifying misconduct, warnings will be issued to the companies involved. They may also incur monetary penalties, up to 0.03 percent of the revenue from sales of goods, with a minimum fine of 50,000 rubles. There are plans to impose these restrictions by the end of 2024.
This year, prices of eggs and chickens inflated by more than 30 percent. According to the National Poultry Breeders' Union, by the end of October, the cost of 1 kg of broiler carcass in bulk rose to 210 rubles, constituting a 48 percent increase from the prior year. Furthermore, egg prices soared by 36.63 percent from January to the end of November, as revealed by data from Rosstat.
Amid rising prices, Russian President Vladimir Putin, who is planning to campaign for his fifth term in March 2024, instructed the government to boost the domestic sale of chicken meat and eggs. Producers attributed the price surge to an increase in transport and material and technical resources costs, in addition to more expensive preservation and equipment repair costs.
When the price of goods leaps by 10 percent, the government can now set the maximum acceptable cost. Authorities may also demand retailers to give up a 5 percent margin, as reminded by the Institute of Entrepreneurship and Economic Development (IRPE). Experts assert that one of the major changes of the FAS law is the introduction of the concept of an "economically unjustified price," which will enhance state control over market players.
However, Dmitry Leonov, vice president of the board of the Rusprodsojuz association, warns of a potential risk of such an initiative; large companies could be held liable without the need to demonstrate further factors. These factors could include collusion, a monopoly, or excessive market dominance. He explains that the main sale usually includes items with a 30-40 percent discount, so theoretically, every company could be held accountable, if another legal entity presents invoices for similar promotional products without a discount.
