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Tuesday, February 11, 2014

Charge those who overcharge

Published: Saturday January 25, 2014 MYT 12:00:00 AM 
Updated: Saturday January 25, 2014 MYT 7:46:16 AM

How long more before the Government applies anti-profiteering rules?

IT’S only January but “profiteering” is already a strong candidate for the Most Used but Least Understood Word of the Year award. We hear it all the time these days. It has become a pervasive bassline in the soundtrack of our lives, featuring in particular in the song titled, “Oh No, They’ve Raised the Prices Again”.

Every time we hear that we have to pay significantly more for goods and services as a result of the subsidy rationalisation programme, we complain that the businessmen are profiteering. The perception here is that the price hikes are disproportionate to the cost increases, if any, that supposedly justify the higher prices.

Often, this is the cue for public officials to respond by promising enforcement action against the people who have unleashed the scourge of profiteering upon us. Typically, the officials cite the Price Control and Anti-Profiteering Act 2011 (PCAPA) as the weapon that will be wielded in waging this war.

The thing is, we have yet to hear of anybody who has actually been hauled up for profiteering. What has happened so far is that traders have been penalised for infringements of the price control provisions of the Act. Such offences include not adhering to the prices and charges set by the Government for certain goods and services, and failure to properly display the prices and charges for these goods and services.

Many of the price control provisions are not new. They were part of the repealed Price Control Act 1946. Essentially, the PCAPA is an update of the Price Control Act, with the addition of provisions to address profiteering.

When we grumble about indiscriminate price hikes by businesses, we’re certainly not only referring to the price-controlled items that come under the Act (for example, live and dressed chicken, imported mutton, eggs, tomatoes, shallots from India and potatoes from China).

We’re also upset about having to fork out more for everyday expenses such as meals, groceries, vegetables, seafood, transportation and stationery. And the fear is that the list will keep growing, and that every price hike will lead to another and another.

The introduction of the goods and services tax (GST) in April next year is likely to be another convenient excuse for overcharging.

It’s interesting that the anti-profiteering rules are meant to go hand in hand with the GST regime. The idea is to deter businesses from exploiting the consumers’ unfamiliarity with the GST by raising prices and blaming it on the new tax.

In fact, the PCAPA and the Goods and Services Tax Act had been targeted for simultaneous implementation, but the Government decided to hold back its GST plans. As such, the former was first to come into force in April 2011.

However, there’s nothing in the anti-profiteering provisions that say they’re only applicable in tandem with the GST.

The explanatory statement to the Bill that became the PCAPA says it was formulated to reform the law on price control and to enact provisions relating to prohibition on profiteering.

It adds: “The purpose of the Bill is to enable the Government to determine prices of goods or charges for services and at the same time to curb profiteering activities, thereby protecting the interest of consumers.”

The consumers need that protection now. The title of the Act itself sends the message that profiteering is a no-no. Do we have to wait until April 2015 before we can see the anti-profiteering rules in action? Is the Government still not ready to crack down on profiteering when the law is already in place?

The PCAPA defines profiteering as making an unreasonably high profit when selling any goods or services. But that alone doesn’t help. The Act provides for a mechanism to determine whether a profit is unreasonably high, Different types of mechanism may be prescribed to cater for different conditions and circumstances. The Domestic Trade, Co-operatives and Consumerism Minister has the authority to prescribe the mechanism.

Elements that may be taken into account in working out the mechanism include taxes; the supplier’s cost; supply and demand conditions; conditions and circumstances of geographical or product market; or any other relevant matters in relation to the prices of goods or charges for services.

Back in June 2011, an article in a newsletter by law firm Shearn Delamore was positive about the introduction of the PCAPA because of the anti-profiteering feature. At the same time, the writer pointed out that the effectiveness of that feature had yet to be seen and tested because there was no word on the mechanism for determining an unreasonably high profit.

“This concern, if not addressed urgently, will obstruct the effective operation of the anti-profiteering provision and defeat its objectives,” wrote Foong Pui Chi. Well over two years later, that sentiment is just as relevant, if not more so.

Executive editor Errol Oh knows it’s incredibly tricky to balance pro-business policies with consumer protection. It’s a test of a nation’s maturity.

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