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Friday, February 7, 2014

What is a fair profit?

Posted on 2 February 2014 - 08:36pm
R. Nadeswaran
14. (1) Any person who, in the course of trade or business, profiteers in selling or offering to sell or supplying or offering to supply any goods or services commits an offence.
(2) For the purpose of this Act, “profiteer” means making profit unreasonably high.

15.(1) The Minister shall prescribe the mechanism to determine that profit is unreasonably high and different types of mechanism may be prescribed to cater for different conditions and circumstances as the Minister deems fit.
(2) In formulating the mechanism under subsection (1), the Minister may take into consideration the following matters:
(a) any tax imposition;
(b) the supplier’s cost;
(c) supply and demand conditions;
(d) the conditions and circumstances of geographical or product market; or
(e) any other relevant matters in relation to the prices of goods or charges for services.
Clauses in the the Price Control and Anti-Profiteering Act 2011

AT LEAST on two occasions previously, this column touched on the subject of certain aspects of the law and its implementation went on to illustrate why sometimes, the law is an ass. Now, after doing a lot of “homework”, there is a reason for a third.

The above excerpts are self-explanatory. Shortly after its implementation in April 2011, and after it was launched, the then Domestic Trade, Cooperatives and Consumerism Deputy Minister Datuk Tan Lian Hoe said with the introduction of the Act, action could be taken against traders who indiscriminately raised prices.

“Through this legislation, we aim to rein in irresponsible traders who engage in profiteering, especially during the festive seasons and in times of crisis,” she was quoted as saying.

Three years later, the authorities are still cracking their heads on how to stem the soaring prices, but there is bewilderment as to how this all-conquering piece of legislation is going to help. Both of the clauses (above) offer little assistance.

Before we scream “profiteering”, can anyone tell us what rate of profits would be deemed fair and what would be deemed profiteering? First of all, it must be admitted that these are subjective.

Even assuming that something has been done, the first question is: Has the minister set any mechanism?

If so, let’s take the humble ais kosong (iced water) for example. If the minister takes all the five factors into consideration, what would be a fair price for the consumer to pay? This writer would venture to say that even 5 sen crosses the boundary on “fair profits” as the price in restaurants varies from 40 sen to 80 sen and in some pubs, it goes up to RM2.

So, can the law be used in such instances? If so, why has no action been taken against operators? After all, the ministry claims its officers have inspected thousands of outlets.

Does opening a cup of noodles and pouring boiling water into it warrant a RM5 price tag? Does a transparent plastic bag for putting small quantities of liquids at airports being sold for 20 sen constitute profiteering? Ask Malaysia Airport Berhad because their notices at the LCCT say so!

On the same token, would paying RM20,000 for an Approved Permit to import a car be profiteering? After all, the government dishes them out free of charge and no one screams “profiteering”.

There are hundreds and thousands of goods and services where the prices cannot be determined by human beings. For example, if a doctor charges a certain sum for a certain kind of surgery, how is the minister going to determine what is a fair price?

What about the consultants engaged by government departments and agencies? How are their fees determined? Can the five factors justify RM7 million for an idea which is to be implemented by the government?

We are not in a socialist state where everything is determined by the government. It can only be done if the state buys up all the products. They can then be sold in state-run shops at fixed prices.

Ours is supposed to be a thriving economy in which market forces – supply and demand – should determine the price of goods.

But then, the Act was never promulgated for coming down on profiteers. There’s a different twist to it and Deputy Finance Minister Datuk Ahmad Maslan let the cat out of the bag.

“The prices will usually rise because they (businesses) do not scrap the 10% tax from the original system, but continue to add the 6% from the GST system to the price.

“So we will use the existing (Price Control and Anti-Profiteering) Act to ensure there is no abuse of the GST when it is implemented,” he said in reply to a supplementary question from Senator Datuk Abdul Rahman Bakar.

Enough said on profiteering and fixing prices of goods and services.

R. Nadeswaran read and re-read the amendments to the Price Control Act which was done while he was away in London and came to the conclusion that the law is indeed an ass. Comments:

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