The Tribune

By YOURI KEMP

Tribune Business

Reporter

ykemp@tribunemedia.net

THE GOVERNMENT wants to avoid “a combative relationship” with the food distribution industry as it seeks to determine what the industry’s price controls will be once the expanded regime ends on April 17.

Michael Halkitis, minister for economic affairs, yesterday told the Prime Minister’s Office’s media briefing that the Government hoped to come to “a meeting of the minds” with food retailers and wholesalers over a more “permanent” solution to the price control controversy that erupted last October when the Government expanded regulation without prior industry consultation.

“That expanded list goes until April 17. Between now and then we’ll seek to come to some meeting of the minds on a permanent expanded list or permanent solution. We’ve been discussing the matter, and we have been assessing some of the impact, and some of our people have been having meetings, gauging the impact on what has been happening and getting some feedback - particularly from small operators - and trying to figure out what is best going forward,” he said.

“What is the best formula going forward? Because, frankly, what we found is that it tends to impact the smaller retailers more than the bigger retailers, so going forward we have to figure out a way to balance that out.”

Food merchants and their wholesale suppliers last year warned that the 38 selected categories for expanded price controls included more than 5,000 product line items, and would lead to between 40-60 percent of a retailer’s inventory becoming price controlled with mark-ups below their cost of sales.

This would result in a large portion, or the majority, of their inventory being sold at a loss. Besides threatening hundreds of industry jobs, and the very survival of many operators, the Retail Grocers Association and its members also warned that the original proposal could result in food shortages as retailers/wholesalers decline to stock loss-making items while also increasing prices on non-controlled items, thereby further fuelling the cost of living crisis.

However, Mr Halkitis yesterday argued: “We think it was the right cause of action, given the inflationary environment at the time and given that the Government had already done things like reduced duties on food items from the last Budget, intervened in terms of shipping and with shippers to get shipping rates down, and prices remained stubbornly high. So in the Government’s view we had to do something to give some immediate relief, albeit temporary, in that case.”

In practice, Tribune Business understands that while the Government gazzetted the expanded price control regime last year, it has not been enforcing it and the food retail and wholesale industry have continued to operate under the margins and mark-ups existed prior to its unveiling.

Mr Halkitis, meanwhile, said the Government had used “the temporary period” afforded by the expanded price control regime to “beef up” its price control and consumer protection divisions so that they can “enforce” it moving forward. “We had four days of training and, today, they are actually out in the field,” he added of the new recruits.

“I had said, during the period of the expanded price control regulations, what we were doing was making sure that we put more people in the department, trained them up and made sure that when we revert to the old margins, or when we come up with a new solution, we have enough people, properly trained, properly equipped, who can go out there and do the inspections.”

“Going forward, we don’t look for a combative relationship with the industry. We would very much like to move to a more collaborative working relationship. That’s what we aim for.”