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Friday, April 19, 2024

ECCP: Price Act hurts biz, needs tweaks

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THE European Chamber of Commerce of the Philippines (ECCP) sees a need to amend the Price Act, as the current “procedures” in the Department of Trade and Industry (DTI) “curtail” business prerogatives to make decisions according to the needs of businesses, especially amid the current global trend of rising production costs.

“The ECCP maintains its position that the bills amending the Price Act should support instead a ‘notification’ of price adjustments, instead of ‘approval’, which is what is currently being practiced,” the 2023 ECCP advocacy paper read.

“We believe that the prerogative of manufacturers to determine pricing should be maintained as long as it is not grossly unreasonable, more so now with businesses struggling to cope with the current global trend of increasing cost of production,” the paper added.

With this, the ECCP is re-submitting its recommendations as detailed in the previous position paper it provided to Congress in May 2021.

Among the chamber’s recommendations is to “limit the definition of the Basic Necessities and Prime Commodities (BNPC) only to goods vital to the needs of consumers for daily existence and sustenance, or those which are deemed essential.”

As such, the ECCP is urging lawmakers to be “selective” in determining the products covered, and not to unnecessarily expand or reduce the categories of products in the list, nor to include products with relatively higher price levels or variants of goods catering to high-tier consumer segments such as luxury and/or premium items.

“Expanding the list to include non-essential goods will unintendedly impose artificial price caps on a host of other categories of products considering the current cumbersome regulations for seeking approvals to make price adjustment on all products in the BNPC list,” the ECCP Advocacy Paper read.

While consumers may benefit from this lower cost of goods, this is “temporary at best”, as this may discourage businessew s from further investing and innovating due to low returns on investment to cover increasing production costs, ultimately resulting in the detriment of both consumers and businesses alike in the long-term, ECCP pointed out in its Advocacy paper.

“We reiterate our position that the law should focus only on the ‘base’ products within the category in order to limit the imposition of artificial price caps on a market that should be open and free with having the freedom to introduce different brands, variants, sizes and formats, and even new technology or innovations within the category, that cater to the wide range of consumers belonging to different socioeconomic classes with varying preferences and needs,” ECCP said.

Further, the ECCP said it looks forward having a “simpler and more practical” process for the industry and other stakeholders to have a say on the inclusion or exclusion of types and brands of goods in the basic necessities and prime commodities (BNPC) list, with businesses being allowed to offer a list of its base products that should be included in the BNPC list.

In relation to the previous recommendation, “we are also of the opinion that the imposition of price control should only apply to basic necessities and not extend to prime commodities as the latter are deemed not vital for the daily sustenance or existence of consumers during a crisis.”

While the chamber said it understands that prime commodities are “necessary” to many large consumer segments, this class of items should not be automatically included in the price freeze.

“We strongly recommend that price ceilings will continue to be imposed only on basic necessities without fixing price ceilings on prime commodities,” ECCP noted.

“Expanding the scope of price control, in our opinion, will only result in more red tape in the country with more manufacturers required to submit [suggested retail price] SRPs for even more categories of products to the DTI, thus creating a significantly long list of products required to be monitored by the agency’s field officers,” it added.

Meanwhile, ECCP noted that in 2017 the DTI made a proposal to deregulate the process of obtaining approvals for adjustments of suggested retail price (SRP) for basic necessities and prime commodities (BNPC)37 and has even drafted a Draft Administrative Order in this regard.

The chamber noted the SRP of BNPC were set by manufacturers but subject to evaluation and approval as to their “reasonableness” by the Trade department. It noted that any intent to adjust SRP required approval from the agency which took “two to three months to hurdle.”

ECCP said with the process now, manufacturers are asked to delay their price adjustments (despite submitting substantiation documents) for six months to a year.

“Given the current procedures in the DTI, any bill that will continue to authorise the need to get express approval from government to implement price adjustments will curtail business prerogative to make decisions according to the exigencies of business and goes against allowing market forces to dictate price movements,” the 2023 ECCP Advocacy Paper noted.

Image credits: Nonie Reyes

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