SETTING PRICE RANGES TO BE CHARGED BY RETAILERS/WHOLESALERS BY PRODUCERS /MANUFACTURERS
The Competition and Tariff Commission (“Commission”) is a statutory body that administers the Competition Act [Chapter 14:28] (the Act), mandated to promote and maintain fair competition in all sectors of the Zimbabwean economy. It has come to the attention of the Commission that some producers and/or manufacturers are publishing recommended price ranges within which retailers/wholesalers must trade their goods/services, in the guise of cushioning consumers from likely exploitation by unscrupulous retailers. Whilst the initiative is deemed noble by consumers, however from the Commission’s perspective such an initiative can be used as a platform of operationalising a cartel – the worst evil of all conducts in competition policy law and enforcement circles.
Players in the downstream – namely retailers and wholesalers, can construe the recommended price ranges as the minimum and maximum prices at which the goods can be sold in the market, disadvantaging consumers. Whilst price ceilings can be viewed as a mechanism to protect consumers from exploitation by unscrupulous retailers, the same cannot be said for the conduct of recommending minimum prices to be charged on goods and services given the likely anticompetitive effects to arise from such initiative. While it is permissible to set maximum recommended prices, the Act views setting minimum resale prices as an unfair business practice, a conduct prohibited in the Act. Part VII of the Competition Act [Chapter 14:28] and related provisions on unfair business practices and minimum resale prices therein state as follows:
Section 42 – Unfair Business Practices
(1) The Acts or omissions specified in the First Schedule shall be unfair business practices for the purposes of this Act.
(3) Any person who enters into or engages in or otherwise gives effect to an unfair business practice shall be guilty of an offence and liable – a) in the case of an individual to a fine not exceeding level twelve or to imprisonment for a period not exceeding two years or to both such fine and imprisonment; and b) in any other case to a fine not exceeding level fourteen.
First Schedule – Paragraph 9. Resale Price Maintenance –
Specifying the minimum price at which a product must be resold to customers.
Accordingly, specifying minimum and maximum price ranges to be charged by wholesalers/retailers can be construed as setting minimum resale prices, an initiative which stifles competition amongst retailers/wholesalers. Floor price setting acts as a disincentive for efficient operators and innovators, as failure to charge the lowest possible price defeats the whole essence of promoting competition and enhancing consumer welfare.
In such instances, the Commission reserves the right to commence investigations where producers/manufacturers of products set minimum prices to be charged by retailers/wholesalers. Depending on the outcome of the investigation, it can issue ‘Orders’ in terms of section 31 of the Act. Accordingly, players in the market are therefore urged to desist from recommending minimum and maximum price ranges given the possible negative implications, specifically not the minimum price. The acceptable approach in line with the Act is the recommendation of a maximum price and not a range of prices.
For further details please contact the following
Competition and Tariff Commission
Unit L, Block 1 Second Floor
Celestial Office Park
1908 Borrowdale Road Borrowdale, Harare.
Tel: 0242-853127-31, 0242-8644137945