Removing Tea from price control list has resulted in increase in prices

23/07/2009 15:50

The Consumer Council of Fiji has called on the regulators to study market behavior carefully before removing food and non food items from the price control list.

This is after a price survey conducted by the Council revealed that the prices of Bushells and Punjas Ceylon Tea- which was removed from price control list by the Prices and Incomes Board (PIB) last month- had increased rather than decrease. For instance the fixed retail price for a 100g packet of Punjas Ceylon Tea was $1.13 but after the removal of price control, the price rose to $1.45. Similarly, the fixed retail price for 100g of Bushells Tea was $0.98 but increased to $1.43 after the price control was removed.

PIB explained that Bushells and Punjas Ceylon Tea were introduced into price control when there were only two brands of tea in the market and the suppliers of these brands retained large market shares.

Price control on these two brands of tea was removed because the regulators considered that the new brands of tea have sufficiently developed the market and that growing competition meant that the controls were no longer needed because price can be determined by the market. It was assumed that the increased competition will automatically reduce the prices of tea. However, the Council’s survey showed that the opposite has occurred.

What has further disturbed the Council is that the findings from the survey indicated that there is very little competition or price difference amongst the popular brands of tea.  A 200g packet of Bushells Tea is being sold at the supermarkets for $2.68, while 200g of Punjas Ceylon Tea is being sold at $2.66 and 200g of Royal Tea can be bought for $2.65. The Council does not see a difference of few cents in price as a sign of anti-competitive behaviour. The Council further believes that Fiji market is not big enough for perfect competition to take place.

The purpose of price control is to curb inflation and with rising prices due to factors such as devaluation, the Council believes that price control is the only way to protect low income and vulnerable consumers from being pushed further into poverty.  We should learn from experience particularly when Fiji dollar was devalued and traders increased the price of products not under PIB radar between 50 – 100% overnight which consumers watched desperately.