Second of three parts
THE Department of Trade and Industry (DTI) fears that changing—or stopping—the Suggested Retail Price (SRP) scheme that it is now implementing will lead to unpredictable spikes in the cost of goods, to the detriment of Filipino consumers.
A study published by the Department of Justice’s Office for Competition (OFC) in June labeled the implementation of SRP as “restrictive to competition,” and was deemed “an over-regulation” on the part of the government.
The SRP scheme—implemented by several agencies, including the DT—prescribes a price schedule for select brands of basic and prime goods as set by manufacturers.
This price schedule is used by the DTI, the Department of Agriculture and other concerned agencies in monitoring the prices of covered goods in retail establishments. It represents the maximum price a covered good can be sold for, and factors in the retailers’ margin. The OFC, headed by Justice Assistant Secretary Geronimo L. Sy, said price monitoring—as a way to guide consumers, retailers and the private sector—should be sufficient.
The current setup, wherein penalties and fines are meted out by the DTI on retailers if the SRP is not complied with, makes the SRP a “de-facto price control,” the OFC said in its report.
Moreover, the implementation of the SRP requires manufacturers and goods suppliers to seek approval if any price adjustment is to be made on their retail prices, which they themselves submit to the DTI.
The approval process and penalties, according to the study, undermine the recommendatory nature of the SRP mechanism and give wide margin of authority in determining prices to the government. The main agency enforcing the SRP for nonagricultural basic goods and prime commodities is the DTI.
For the DTI, the implementation of SRP is necessary to keep prices at reasonable levels for consumers. Because of that, the list of products covered by the scheme should even be expanded.
“If it is working, and working efficiently, why change it? Maybe the challenge is to strengthen the use of SRP. And when I say strengthen, maybe we should expand the list of basic goods and prime commodities that would bear the SRP, so more consumers can look forward to reasonable retail prices and to ensure market competition on the market level for businesses,” Trade Undersecretary for Consumer Protection Victorio Mario A. Dimagiba said in an interview.
According to the Price Act, which is the basis for the implementation of the SRP scheme, basic necessities are goods vital to the needs of consumers for their sustenance and existence. Prime commodities are goods not considered as basic necessities but are essential to consumers.
Basic necessities under the SRP scheme include: bread, canned fish and other marine products, bottled water, processed milk, locally manufactured instant noodles, coffee, salt, laundry soap, detergent and candles.
Prime commodities monitored by the DTI are: processed and canned pork, processed and canned beef and poultry meat, condiments such as vinegar, patis, soy sauce, toilet soap, paper, school supplies, cement, clinker, galvanized iron sheets, hollow blocks, construction nails, batteries, electrical supplies, light bulbs and steel wires.
The present application of SRP, reasoned Dimagiba, cannot be seen as having a significant impact on market competition, as it covers just a handful of products and brands, and not even all the packaging sizes are covered.
“ The way we do it, not all basic goods and prime commodities have SRP. We just selected the smaller sizes and those affordable by the type of consumers that would benefit from an SRP,” Dimagiba said. For sardines, for instance, he said the DTI only monitors seven brands.
Moreover, contrary to the OFC study’s argument, the DTI underscored that the SRP is a powerful tool against anticompetitive behavior.
A case in point made by Dimagiba is the run-in of flour millers and bakers with the DTI two months ago.
The Cabinet agency had observed a marked drop of 28.8 percent in the global price of wheat and called on local flour millers to reduce their costs per bag of flour so bakers may also decrease their prices.
Despite repeated requests from the DTI to reduce prices, flour millers and bakers did not implement downward adjustments, prompting the trade office to place them under investigation for possible collusion and profiteering.
The drawn-out confrontation ended with flour millers and bakers reducing their prices within the recommended range of the DTI.
While two brands of bread are covered by the SRP (Pinoy Tasty and Pinoy pan de sal), the rest of the products being offered to the market are not. Flour is not in the scheme either, but is being monitored by the DTI’s Consumer Protection Group (CPG).
The absence of the SRP mechanism in this case, Dimagiba said, prolonged the process of reducing prices for consumers, as the trade office had to involve the National Bureau of Investigation to nudge suppliers to lower prices.
Price fluctuations of basic goods, prime commodities and brands that are not covered by the SRP scheme can also be observed through the market monitoring.
According to data from the DTI-CPG, in July, 60 supermarkets in the National Capital Region increased prices for select brands, basic necessities and prime commodities not covered by the SRP. The increase ranged from P 0.75 to as much as P 11.
The price increase per product type is as follows: (brands and unit packages not disclosed)
“There is competition in these goods, but is it reasonable? I don’t think so. We observed that basic and prime goods without SRP the prices move a lot week to week, month to month,” Dimagiba said.
“We’re maintaining what we have said in our position paper. Without it [SRP], manufacturers may be prompted to increase prices to unreasonable levels,” he added. The DTI-CPG, in a letter on the DOJ-OFC study, said even with SRP in place, market forces and competition in the retail market should still dictate the price. “Historically, the monitored prices of basic goods and prime commodities are below the published SRPs,” the letter read.
Additionally, Dimagiba said retailers mostly receive show-cause orders and notice of violations for goods not covered by the SRP, as these are the ones with unstable price increases.
On the argument of the OFC that imposing price ceilings lead to supply shortage and hoarding of goods and services, Dimagiba said the statement is sound but “the assumption is too theoretical.”
“There has never been a case of supply shortage as a result of the SRP. The assumption is theoretical and there is no basis in the actual context of the Philippine market,” Dimagiba said.
Another voice of opposition, however, is being raised by a sector that is feeling the squeeze of the SRP scheme: retail.
As the SRP is set by manufacturers, retailers are left with a fixed profit margin, as they are bound to adhere to the price schedule.
While big supermarkets can negotiate with manufacturers to lower their wholesale cost so they can follow the SRP, smaller retailers are faced with these difficult choices: sell at a loss, don’t carry the items, or ignore the SRP.
To be continued