The Malta Chamber is urging the Government to “focus systematic measures against inflation and revoke price fixing.”

It warned that “price fixing is not a viable solution to the complex issue of inflation. Such a move will not yield the desired systematic control of increasing costs because it does not address the root causes of inflation.”

The Malta Chamber, in a statement on Sunday reiterated its steadfast stance that the control and reduction of inflation should be the “topmost priority to safeguard the competitiveness of the Maltese economy.”

Fiscal policies that fuel inflation by stimulating demand, coupled with a lack of preparedness for the impact of EU policies impacting transportation costs are “exacerbating the situation,” the Chamber said.

As businesses continue to battle to mitigate their rising costs and stay competitive whilst consumers become more selective in their choice of purchase in view of the rising cost of living, government is planning to intervene by means of price fixing on food as a means to mitigate inflation.

The Malta Chamber said it “firmly asserts its position against such direct intervention in the market, not only as a matter of principle but also because such intervention will only stifle competition to the detriment of all.”

The Chamber argued that “rather than protecting the consumer, such interventions direct the consumer to purchase a highly restrictive basket of food items selected by Government.”

“This approach, which seems more cosmetic than effective,” said the Chamber, “is essentially masking and not addressing the situation. The extent to which it can be successful in reducing the prices of such items is dubious because several retail businesses already apply substantial discounts to basic items as a matter of normal business.”

The Chamber noted that this will also make other items which may be superior in quality and nutritional value relatively more expensive, thereby “encouraging people to shift their consumption towards inferior products.”

The Chamber further warned that the approach chosen by the Government to “try to control inflation of food prices is regressive and reminiscent of decades ago when consumer protection came at the expense of consumer choice, and the Government controlled the market instead of promoting competition through proper monitoring and regulation, and instead of allowing the market to develop and operators to openly compete according to consumer preferences.”

Unwise attempts and ineffectiveness

The Malta Chamber argued that price fixing is “not a viable solution to the complex issue of inflation. Such a move will not yield the desired systematic control of increasing costs because it does not address the root causes of inflation.”

The Chamber noted that “the inflation in imported food prices that we have seen in Malta, apart from the growing logistical costs being an island economy and spiralling wage growth as a result of the tight labour market, is similar to what has been registered in other European countries where it was fuelled largely by higher energy costs and, even more importantly in the case of food items, by dramatic increases in basic food ingredients resulting from the war in Ukraine.”

“Further adding to is is poor crop yields in many parts of the world due to climate change and extreme weather events. The local subsidisation of energy and wheat does not shield us from these global impacts on imported food prices,” stated the Chamber.

The Chamber pointed out that “while some countries have toyed with similar ideas, these have been highly questionable. Such interventions fail to address the core issues and merely act as smokescreens, deflecting attention from the real economic challenges at stake.”

Collaboration Solution and Government Engagement

While the local market is relatively small, there is a large variety of brands imported by a number of companies that are well equipped to handle the distribution of food items in a cost-effective way, apart from the ever-growing number of retail outlets.

The Chamber said that there is active competition between brands and retail outlets, and the Malta Competition and Consumer Affairs Authority (MCCAA) keeps a close eye on concentration to ensure that the market functions well.

It insisted that “there are things that the Government could have done to improve transparency for the consumer without meddling into price setting through the proper channels for addressing market-related issues.”

Responsibility for such matters lies within the remit of the MCCAA, the Chamber said and it urged the MCCAA “to fulfil its role effectively and transparently and ensure that market abuse, if any, is identified and addressed promptly.”

The Chamber argued that “the way the Government negotiated the scheme is of particular concern. Market operators were contacted individually by the Government and prodded into complying.”

The Malta Chamber stated that it “immediately expressed its concerns to the Government.”

The Malta Chamber said it is always open to discussing effective solutions and supportive of sensible policies.

“The fact that Government did not seek to find a more effective remedy with the legitimate representatives of business, or within the national forum for social dialogue, which is MCESD, is highly disappointing,” it said.

The Malta Chamber insisted that a “unified approach will yield more effective and sustainable solutions and calls on the Government to revoke this decision and start the discussion at MCESD level.”

The Malta Chamber reaffirmed its commitment to supporting the authorities in “addressing any identified market abuse, thereby ensuring a level playing field and fully functioning competitive environment for the benefit of both the business community and consumers at large.”

The Chamber concluded by calling for a “united front in tackling such economic and social challenges and highlights the importance of collaboration between the Government and the business community to foster sustainable economic growth along with the related social considerations.

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