ON MAXIMUM RETAIL PRICES
The Competition and Tariff Commission (“CTC”) is a statutory body that administers the Competition Act [Chapter 14:28], and mandated to promote and maintain fair competition in all sectors of the Zimbabwean economy. Competition policy and law’s goals are to ensure that markets function effectively through correcting market failure, for the benefit of consumers. It addresses the supply side of the market so that consumers have adequate and affordable choices.
Following recent announcements of “recommended maximum wholesale and retail prices” for various goods and services, CTC would like to urge all players involved to guard against the likely resultant anti-competitive effects of this conduct. Historically, CTC has observed that whenever a ‘recommended maximum price’ is announced, retailers or wholesalers, have a tendency to all charge that maximum price under the guise of complying with the stipulation. While players may use similar formulas to determine prices at which they sell their products, certainly two or more players cannot charge the same price for identical products, given the different overheads base, capacity utilization levels, economies of scale and other costs incidental to operations. In this respect, inspite the ‘recommended maximum price’, the Commission expects all players in any sector with maximum “recommended maximum prices”, to charge significantly different prices, that facilitate the competition process. In instances where players charge exactly the same prices or price fixing, they will be deemed to have colluded – an offence prohibited under the Competition Act [Chapter 14:28].
Concurrently, the CTC has also observed the rampant unsupported price increases on goods and services, equated to excessive pricing in competition law and policy, to the detriment of consumers. Excessive pricing is defined as a price for a good or service which bears no reasonable relation to the economic value or reasonable relation between price and economic value of that good or service, and higher than that value. Such a conduct leaves consumers with no alternative as all players – producers, wholesalers and retailers – charging excessive prices eliminate the consequent competitive prices for basic goods and services and product choice associated with a competitive environment.
In competition policy and law, price fixing together with excessive pricing are both conducts which eliminate and/or stifle competition amongst players in a sector. Price fixing defeats the promotion of competition and enhancement of consumer welfare. Excessive pricing is anti-competitive as it rules out the setting of prices according to cognisable competition considerations. In this respect, the Commission will not hesitate to embark on investigations in sectors identified as colluding or price fixing or excessively pricing, with a view to remedy such anti-competitive practices within the confines of the Act. All producers, wholesalers and retailers are therefore expected to comply with the Competition Act with immediate effect or else face the wrath of the law.