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Anna Mallia | Wednesday, 10 September 2008

Liberalisation leading to cartels

If anything, with liberalisation we thought that we will be respected more as consumers but as more time passes by, the more we notice that cartels are replacing liberalisation and consumers are not being given the opportunity to shop around for the best prices.
Cartels are illegal and yet they are rampant in Malta. Take for example bank charges, insurance payments, and supermarkets: they seem to have all come to terms together to unite so that they will not fall. Prices are determined beforehand and the ‘take it or leave it’ attitude is very rampant in this country. Cartels are illegal in the European Union but it seems that nobody realises how in this country cartels have substituted liberalisation.
Liberalisation has been belittled in this country so that it refers to more selection in the products and not more selection in prices. Not only that, but much worse than this is the fact that certain items have not yet been liberalised: the school uniforms are one example. Our Office for Fair Trading seems to be dragging its feet on the matter, so that although we are in the EU, we still allow domination by one particular trader over another.
It is true that our Office for Fair Trading is poorly manned and needs human and other resources to be able to act as the regulator in questions of fair competition and fair trading, but this does not justify the lethargy of the department in taking a stand to protect the consumers. The few people who work there do a very good job but they are inundated with complaints and cannot cope with the workload.
There are funds available in the EU to assist the government in having the office properly manned, but so far the government has not deemed it fit to apply for financial assistance from Brussels to have a state-of-the-art office responsible for competition and fair trade, when ironically this is one of the strongest departments in the European Union.
Inside trading and inside information is also illegal in the European Union but this is also very common in this country. Take the case of a chairman of the public corporation who has access to all the files of the corporation, and whose term has not been extended but he is allowed to submit a tender for services to the same corporation.
The same with tenders for services in the local councils when the people who were awarded the tender are in a more advantageous position as they know the rates awarded in the previous tender, something that new tenderers do not know.
There is no doubt that national competitiveness is affected adversely by goods and services not being properly priced to reflect demand for them and in the utilisation of resources providing the supply of this type of goods and services.
Excessive prices by cartels and monopolies have been highlighted various times but to no avail. Something started to be done with regard to the pricing of medicines at a time when the general elections were approaching but the matter seems to have stopped there.
In the medicine business, this is definitely one sector where the consumer went down for two reasons: first of all the regulatory expenses imposed by the Medicines Authority have limited the choice of medicines for the consumers and secondly, it has increased the prices of the limited choices available. But it seems that Malta is still unwilling to sell the EU the fact that in Malta, business is limited and therefore the costs imposed on medicine ought to be revised because in the long run consumers are suffering.
We have had sectors privatised, auguring lower costs, but one monopoly has replaced another because we have not noticed any difference so far: one example is the cargo handling situation where our importers are constantly complaining about higher charges, contrary to what they expected would come out of the liberalisation. We cannot understand how certain services and certain prices of various medicines and other products should be the same in all the outlets where they are sold notwithstanding the liberalisation.
The government has repeatedly warned that it might resort to price orders to curb inflation when it was panicking that high inflation would not get it the rubber stamp from Brussels to introduce the euro. But now that the euro is here to stay, little mention is made regarding price orders, so that price fixing and cartels continue to reign in this country.
We all agree that cartels and price fixing by dominant firms should be controlled by the Office of Fair Competition and we also agree that the state of this office is degraded and “as good as non-existent” as the director general of the GRTU said way back in 2006. And now two years later, unfortunately little if at all has been done to make this office the regulatory authority dealing with cartels and unfair competition.
I know that price orders are not the solution but unless the government commits itself to strengthen the Office of Fair Trading, the Malta Resources Authority, the Malta Communications Authority and the like, it will only be natural to say that the government is leaving consumers with no option but to cry for price orders. The spending value of the euro is constantly decreasing and unless something is done and fast, liberalisation in Malta will be a disaster.
The normal economic equations of the free market definitely do not work here and probably this is because of the size of the country and this is why certain interventions may be necessary. There is nothing in principle under the EU law that would prevent a national government from introducing ‘maximum price’ legislation and we await the government to make a formal request to the EU Commission. I am sure that the Commission would look carefully at any such measures to determine whether they are in all their aspects compatible with competition and single market rules.
The ball is in the government’s court as it is only the government that can save us from these cartels!


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