by Tendai Matunhu

….Commission reserves right to set minimum prices

The Competition and Tariff Commission has indicated that it is the only entity with the exclusive rights to set price ranges in line with the Competition Act.

 “The Commission reserves the right to commence investigations where producers and manufacturers of products set minimum prices to be charged by retailers and wholesalers. Depending on the outcome of the investigation, it can issue Orders in terms of section 31 of the Act.

“Accordingly, players in the next market are therefore urged to desist from recommending minimum and maximum price ranges given the possible negative implications, specifically not the minimum price. The acceptable approach in line with the Act is the recommendation of a maximum price and not a range of prices,” says the Commission in a statement.

The Competition and Tariff Commission states that although it may be deemed noble by consumers for some producers and manufactures to publish recommended price ranges with which retailers and wholesalers should trade their goods and services, it can be used as a platform of operationalising a cartel.

“It has come to the attention of the commission that some producers and manufacturers are publishing recommended price ranges within which retailers and wholesalers must trade their goods and services in the guise of cushioning consumers from likely exploitation by unscrupulous retailers. Whilst the initiative is deemed noble by consumers, however, from the commission’s perspective, such an initiative can be used as a platform of operationalising a cartel, the worst evil of all conducts in competition policy law and enforcement circles,” said the commission.

The commission states that, retailers and wholesalers can interpret the recommended price ranges as the minimum prices at which the goods can be sold on the market thereby disadvantaging consumers. It notes that price ceilings can be viewed as a mechanism to protect consumers from exploitation by unscrupulous retailers, but the same cannot be said for the conduct of recommending minimum prices to be charged on goods and services given the likely anti-competitive effects to arise from such initiative.

The Competition and Tariff Commission states that the Competition Act views setting minimum resale prices as an unfair business practice, a conduct prohibited in the Act. It states that the setting up of minimum and maximum price ranges to be charged by wholesalers and retailers can be interpreted as setting minimum resale prices, which they say is an initiative that stifles competition amongst retailers and wholesalers.

The commission also views floor price setting as disincentive for efficient operators and innovators, as failure to charge the lowest possible price defeats the whole essence of promoting competition and enhancing consumer welfare.

This comes after retailers and wholesalers where pegging unreasonable prices that were unreachable to many consumers.