FAS has proposed a cunning mechanism for regulating food prices: what’s the catch?

The Federal Antimonopoly Service (FAS) intends to protect Russians from unreasonable increases in food prices until the end of 2024. The corresponding bill has already been submitted to the government. And against the backdrop of a sharp rise in prices for eggs and chicken, it will most likely be supported by the Cabinet of Ministers.

Antimonopoly officials seemed to know that such a thing would happen at the end of this year, since they had been hatching their initiative since the summer. What is it about?

The FAS intends to evaluate the actions of large companies in the event of an increase in prices for a certain list of goods by more than 30% within 60 calendar days. If the price increase is recognized as unfounded, antimonopoly regulation measures will be applied to retailers.

The ban on price increases itself, according to all the rules of the bureaucratic genre, is subject to a number of conditions. Firstly, if the increase is not related to objective economic prerequisites, and secondly, if this is confirmed by the Ministry of Economic Development in its analysis of the situation.

If all this is translated from bureaucratic language into human language, then we are talking about the banal right of the state to interfere in market pricing – and on legal grounds.

In the 33rd year of market reforms, we are returning to the old songs about the main thing. Determining the price of a product as a balance between supply and demand is pushed aside. And His Majesty the official comes to the fore, with his ineradicable desire to command something that has not yet been covered – in this case, food prices.

However, we have gone through this more than once. Let’s remember the end of 2020, when the excessively zealous prices for sunflower oil and sugar were manually corrected by the same FAS officers together with prosecutors. Or the hype with buckwheat, when they gave two kilograms and no more.

Someone will say: well, what’s wrong with the authorities interfering with such a sharp rise in prices? But let’s remember the results of such intervention. After such a “struggle” with them, prices stabilized for some time, and then began to rise again. You can’t fool the market! And they calmed down, whether with sugar, or with sunflower oil, or with buckwheat, only after supply appeared on the market, outstripping demand. Now here is a new item of “fight”: chicken eggs.

But even with them, it seems that we are stepping on the same rake. Freeze, limit, introduce liability… It’s good that at least in parallel the government is still taking purely market measures, zeroing out customs duties and opening the entry of imported eggs into the country – in order to quickly eliminate the deficit that has arisen…

However, let’s return to the rules for regulating prices for products. Analysts have great doubts about the rise in prices by 30% within two months. Neither retail chains nor their suppliers will allow this. What is the point of raising prices every day by 0.5%, for example, for milk or rice, if with a rise in price of 20% (it doesn’t threaten retailers!) you can switch to other products? After all, in the list of socially significant products we have 24 items, including bread, tea, meat… There is room to roam! Let’s say we raise the price per kilogram of pork by 10% – and this will give even greater profits than from the rise in price of chicken.

In general, the new-old initiative of officials is dust in the eyes of gullible consumers. Like, we take care of you and your wallets day and night…However, it, like all previous attempts to “protect” us from rising prices through command and administrative measures, is doomed to failure.

By the way, back in 2010, a decree of the Russian government determined the procedure for introducing maximum retail prices for socially significant products. Then it was planned that if within 30 days one of the products increased in price by at least 30%, the Ministry of Economic Development would set maximum minimum retail prices for 90 days.

Then it seemed that the problem of unjustified price increases in Russia would be solved finally and irrevocably. Retail chains, manufacturers and processors took on “voluntary” obligations not to increase the markup on socially significant products by more than 5%. But the music did not play for long. It quickly became clear that trade, not wanting to give up profits, immediately increases prices for other goods. And after the end of the moratorium on increasing the price of a certain product, it immediately begins to grow at cosmic speed.

And now, as they say, the same eggs, only in profile: not 30 days for the “illegal” price increase, but 60. It’s clear, that’s not the point. This “innovation” will not change its results.

So, perhaps, in our market economy, we can still entrust price regulation to the market. And should the officials themselves monitor the uninterrupted filling of this very market, zeroing out duties on time and avoiding shortages, not only on the orders of the president? And for low-income citizens who are unable to keep up with prices for even the simplest products, finally introduce food stamps for our daily bread. As, for example, this is done in America, which is unfriendly but remains economically the most advanced. There, officials do not regulate prices in each supermarket, and prosecutors do not participate in raids on retail shelves. Low-income citizens use their cards to buy domestic products from the consumer basket with large discounts. Which, by the way, stimulates the development of the national agricultural sector. This can be done in Russia too! And then you see, the offer of the product will not take long to arrive. And there will be no need for “egg landings” from Turkey or Iran. There will be nowhere to put ours.

But it seems that it is easier and more convenient to make price recommendations and call food market participants on the carpet. After all, if there is nothing to monitor, then why do we need such an army of officials?