Watch On Traders

Wholesalers will soon have to justify their mark-up margins, a cost which gets passed onto consumers. In his 2017-2018 Budget address, Attorney General and Minister for Economy Aiyaz Sayed-Khaiyum spoke
05 Jul 2017 11:00
Watch On Traders
Attorney-General, Aiyaz Sayed-Khaiyum

Wholesalers will soon have to justify their mark-up margins, a cost which gets passed onto consumers.

In his 2017-2018 Budget address, Attorney General and Minister for Economy Aiyaz Sayed-Khaiyum spoke in depth about practices of unscrupulous business houses, whose dishonest practices meant Fijians were losing out on duty decreases that the Government gives.

When the Government had reduced duty on cereals to zero per cent, the prices of cereal did not come down. The same happened for a number of other food and non-food products.

“That is because four or five food importers control 60-70 per cent of the market, and they are often exclusive suppliers of some of these items,” Mr Sayed Kahiyum said.

“They dictate prices, and they maintain their power by threatening retailers: “Sell it at our price or we’ll cut you off?,” he said.

In order to remedy this situation Government made it an offence following the last Budget for businesses not passing on Value Added Tax and duty reductions.

“To give this measure more teeth, for the first time we have set up a separate unit in the Fiji Revenue and Customs Authority and the Ministry of Economy to work very closely with the Commerce Commission to ensure that those in monopolistic positions cannot dictate prices.”

For example, it was revealed that a supermarket sought quotation from Woolworths in Australia to buy condensed milk. The same condensed milk is sold in Fiji for around $8 during times of festivities such as Diwali, Eid and Christmas when the demand is high.

If the supermarket buys it from Woolworths in Australia, they will be able to sell it in Fiji for $3 a can. This demonstrates the level of mark-up wholesalers do, the cost of which is paid by Fijians.

What will happen now?

The Commerce Commission will be empowered to monitor the prices of wholesalers and those who hold sole distribution rights, and anyone who holds monopolistic positions will now have to justify their prices.

The Commerce Commission will work with FRCA to go behind the screen to investigate abuses and develop appropriate regulations to ensure prices are not dictated through monopolies or cartels and to ensure compliance with the law.

“So in the near future the prices you will see on the supermarket shelves will not be the ones dictated by these bandits,” the minister said.

The Commerce Commission will be provided with the landing cost of items imported into Fiji. They will then monitor the cost it is sold off by the importers- the wholesalers to supermarkets. And, if they find that the mark-up is massive, the wholesalers will need to justify it.

This is a massive task and cannot be achieved overnight. However, consumers will no doubt see a reduction in prices of a large number of imported items for both food and high demand non-food items in a few months’ time.

What was happening?

Some companies had also been setting up buying houses off-shore, so they buy products overseas through these companies and sell goods to themselves.

So effectively, they buy an item twice and try to claim that their mark-up is less than it is. They over-invoice and shift their profits.

“Their greed is pricing many Fijians out of the market for things they should be able to afford. This will not continue, and we want to assure all Fijians that we will have a fair and competitive market,” Mr Sayed-Khaiyum said.

“Recently, for example, FRCA found anomalies at one supermarket chain that resulted in penalties and fines for that supermarket that will total $53 million. This is just from one supermarket chain.  Imagine how many more that are out there, that we can prosecute. And they are already starting to pay those fines.”

“There are still cartel retailers in Fiji where two or three suppliers of a particular product can agree not to sell a product below a particular price.

“This is price-fixing. It has no place in a free economy, and our Government will no longer tolerate companies that want to make enormous margins through greed.

“They hold back the economy. They hold back growth. They hold back the ability of ordinary Fijians to spend in other areas. We are providing additional funding to the Fiji Commerce Commission, and FRCA to establish a unit to enforce the law. The Ministry of Economy will also establish an Economic Intelligence Unit.”

Edited by Karalaini Waqanidrola


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