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Price Regulated Items – Part II

  Consumers having the purchasing power are purely interested in the prices at which goods and services are offered and whether it suits their pocket. Whilst consumers often tend to
29 Oct 2018 11:54
Price Regulated Items – Part II

 

Consumers having the purchasing power are purely interested in the prices at which goods and services are offered and whether it suits their pocket.

Whilst consumers often tend to feel that the prices of certain items are too high, however, it is imperative to note that in the Fijian market, the price of certain items fluctuates due to number of reasons, such as, the importation cost, processing cost, cartage cost and so forth.

This is purely because Fiji is classified as a price taker rather than price setter.

This is the reality of small island states and it simply demonstrates how small economies like Fiji are at the receiving end of price fluctuations.

For example, products such as rice, wheat and split peas are not grown locally but they are imported, processed, packed and retailed locally in the Fijian supermarkets.

Due to various associated costs which are taken into consideration while price authorisation is done, the prices of the items fluctuates.

Nevertheless, consumers need to realse that while the prices of items at times increases, it decreases as well.

This is again based on the international prices of items which are beyond Fiji’s control.

Fiji is more susceptible to the swings of supply and demand on a global stage.

However, at the Fijian Competition and Consumer Commission (FCCC), we continue to look for best practices for pricing to ensure consumer affordability.

For any economy to grow and develop, a competitive environment is needed.

When different producers or vendors are forced to compete, it creates a better outcome for everyone, higher quality goods, increased efficiencies, a wider selection to choose from, and lower prices. But effective and fair competition is not automatic.

The FCCC is here ensure market competition, safeguard consumers’ interests and ensuring fair prices. The FCCC works towards ensuring that every Fijian benefits from a healthy and well-regulated market.

 

Why regulation of prices is important in Fiji:

To correct market failures or anomalies in the market.

This occurs when the market prices are not competitive due to the existence of a player with a dominant position and the same is abused.

In such instances, the prices are not set at what the competitive market prices should be, but higher prices are charged putting the consumers at a disadvantage. Price regulation then ensures a fair and reasonable pricing.

Prevent the exercise of market power:  an important goal of regulation is to ensure that prices are fair and reasonable, where competitive forces are insufficient. Regulatory price control mechanism encourages prices that reflect what one would observe in a competitive environment.

Promote competition: to promote competition in Fijian markets by creating a level playing field for players with different sizes of operations by ensuring the purchase costs are similar (slight differences may be noted due to the differences in volume, buyer loyalty, etc).

Affordability: to make basic items affordable to the public and also to ensure that prices are attractive for investment decisions.

Geographical dispersions: the geographical dispersion of islands in Fiji means that a lot of rural and maritime areas are serviced by a small number of traders or monopoly traders.

For example, in towns and cities there may be a number of traders selling kerosene, but in most rural and maritime areas there may be a few smaller players and most commonly a single seller is accessible to the public.

Price regulation helps ensure that the rural and maritime Fijians benefit from similar prices as are enjoyed by the urban population.

Price regulation ensures equitable returns for businesses with fair and reasonable prices 
 charged to consumers.
Price regulation also acts as a counter inflationary measure.

 

Process of price regulation

Taking a look at the regulated items in the market, it is equally important to note how the costs are determined.

The Price Control and Monitoring team at the FCCC considers various factors before determining prices for regulated items in the following sectors:

Basic food items

Hardware items

Stationeries and textbooks

Motor vehicle and accessories

Agriculture pesticides and fertiliser

 

For instance, in determining the price of potatoes per kg the contributing factors considered are tabulated on table 1 above.

In other words, if a trader imports 1kg potato at $1.60, the costs associated in clearing the items once exported to Fiji encompasses; freight, insurance, duty and clearance charges including Bio Security fee, Terminal Handling Charge, Forklift, Cartage, wharfage, tractor etc.

Overhead costs such as utility bills, labour, damages sustained during shipment are also contributing factors in calculating costs. In this instance the total landed cost of 1kg potato for a trader comes to $1.75 which is an increase of nine per cent from the $1.60 which was the initial cost from supplier.

The FCCC employs the Cost-Plus pricing method in determining maximum prices at which traders can retail the product.

This basically is a percentage added to the landed costs to determine the retail price and the profit level of the trader.

In this instance the FCCC allows a wholesale mark-up of four per cent and a retail mark-up of eight per cent for the potato submission. in doing so, it is ensured that while consumer affordability is maintained, the trader is also not losing out.

Once the prices of the regulated items are decided, the retailer is notified of the same and in doing their business, traders have to ensure they do not sell the regulated items at a price above the maximum decided by the FCCC.

Further, all price regulated items are to be clearly marked by way of a sticker in trading outlets notifying the consumers of the regulated items.

For more information/details on Fijian Competition and Consumer Commission Act 2010, visit our website on http://www.fccc.gov.fj

Feedback:  maraia.vula@fijisun.com.fj

 

 

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