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Ginger and garlic at the price of a trip to the restaurant

Ksenia Zakharova, lawyer

Under quarantine, small and large retailers rushed to raise prices for goods that were primarily bought by consumers. At the same time, the reasons for the price increase were substantiated in the same way - the increase in prices by suppliers of goods.

It has been a long time since the "mass purchase" to balance the price, but most stores leave the same price for products as it was at the beginning of the quarantine.

So it turns out that each store, large and small, can decide for themselves how much buckwheat will cost?

Mostly so.

Since the current legislation does not provide for state regulation of prices, when setting the price of a product, the store is guided by purely market prices. That is, the price of goods is regulated by the market, and as you know, the growth of demand entails an increase in price.

This was one of the reasons for the sharp rise in prices for goods in high demand during the quarantine period. However, is it legal? Is it possible to somehow influence such a sharp rise in prices?

Consumers should be assisted in this by the Antimonopoly Committee of Ukraine (AMCU), which is responsible for verifying the validity of price increases. However, the powers of the AMCU are limited to cases in which either anti-competitive concerted actions of several business entities or abuse of a monopoly position are traced.

If the abuse of a monopoly position is more or less clear, how does the AMCU define the same concerted actions?

One of the elements of anti-competitive concerted actions is the commission of similar actions by economic entities, for example, an increase in commodity prices on the same day or during a certain period, which may indicate the existence of consistent competitive behavior.

Since the commission of anti-competitive concerted actions is expressly prohibited by the Law of Ukraine "On Protection of Economic Competition", if there are grounds to believe that business entities commit such actions, the AMCU is obliged to inspect and assess the presence or absence of anti-competitive concerted actions.

During the inspection, the AMCU examines the existence of objective reasons for anticompetitive concerted actions, as well as the consequences for the market that caused such actions (prevention, elimination or restriction of competition).

If the AMCU decides on the presence of signs of anticompetitive concerted actions in the actions of economic entities, such entities face a fine of up to 10% of sales revenue for the last reporting year preceding the year in which the fine is imposed.

Enough theory. How to practice?

At the end of March this year, the AMCU announced the discovery of rising retail prices for some products, and the Kyiv Regional Territorial Office of the AMCU even opened a case against wholesale suppliers and the largest retailers in Kyiv. The head of the regional branch said that the reason for opening the case was a simultaneous increase in prices for certain goods, which may indicate anti-competitive behavior of market participants.

The further fate of this case is still unknown. Since the AMCU can consider a case for more than one month, and its decision can be challenged in court, it is impossible to predict whether such suppliers and shops will actually be punished.

If we are not talking about the synchronous actions of different stores, but about the actions of a separate store, which independently decides to raise the price, then the situation is more complicated. Usually, the market rule works - if it is expensive, then there is one who will be cheaper. However, this rule does not always work. For example, there are situations when there is only one grocery supermarket in a residential area, which sets a crazy price for the same buckwheat. In this case, the AMCU will decide whether the supermarket is a monopolist in the quarter and whether the quarter can be considered a separate market in which the supermarket has a monopoly position. However, most likely, the AMCU will not consider such a case.

Investigating the existence of grounds for investigating anticompetitive cases, the AMCU often sends various requests for information. The request itself does not indicate a violation and may be aimed at gathering the information needed by the AMCU. However, such requests should not be ignored, as failure to respond to it is also subject to a penalty as a percentage of revenue.

And how does the state react to unjustified price increases?

At the end of March this year, the Cabinet of Ministers of Ukraine was authorized to set maximum prices for wholesale and retail trade in anti-epidemic goods and / or goods of significant social significance.

22.04.2020 The Cabinet of Ministers has adopted a procedure for declaring retail prices for goods of significant social significance and anti-epidemic goods and, accordingly, a list of such goods.

The adopted resolution establishes the obligation for entrepreneurs to notify the State Food and Consumer Service in case of a change in the price of goods from the list. For example, in the event of a price change of 15 percent or more, the business entity must notify the State Food and Consumer Service 30 days before the application of such price. Interestingly, this resolution enters into force only on 19.05.2020, and its validity is limited to the quarantine period.

However, such a restriction can be circumvented by renaming products. The list includes, for example, rye-wheat bread, and the store may sell such bread under a different name, thereby raising the price without having to declare the price. However, such a renaming may result in a fine from the State Food and Consumer Service in the amount of 47,230 to 70,845 hryvnias. Therefore, whether it is expedient to bypass the procedure of declaring prices in this way, each entrepreneur decides independently.

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