Cop out on price setting issue

For Trade Secretary Ramon Lopez, manufacturers of consumer goods can be trusted to price their products reasonably and give their customers a fair deal.

Based on this premise, he has decided to put an end to the authority of the Department of Trade of Industry to set suggested retail prices (SRP) on prime and basic goods, and let the manufacturers do the pricing on these products.

In Lopez’s book, market forces should determine the prices of the products that Filipinos buy to meet basic living requirements because there are built-in mechanisms in the system that ensure the prices are equitably set.

By way of background, Republic Act No. 7581 (or the Price Act) provides that the government shall protect consumers “by stabilizing the prices of basis necessities and prime commodities and by prescribing measures against undue price increases during emergency situations and like occasions.”

A consumer advocacy group, Laban Konsyumer Inc., described the DTI’s move as self-serving because “it would allow companies to get away with profiteering and cartel behavior.

For an action that involves giving up a regulatory responsibility that has been in place for almost 25 years, it is reasonable to expect the DTI to come up with empirical data or research study that shows that issuing SRPs do not serve the purpose for which it was conceived.

However, outside of textbook economic theories, nothing has been presented to indicate that SRPs have impeded economic growth, adversely affected the buying public, caused employment dislocation, or onerously burdened the business sector.

Letting market forces decide on the price that manufacturers would sell their goods, and the price that buyers would be willing to buy them, applies only to economies that have strong consumer laws that are strictly enforced.

In addition, these economies have antitrust regulations that ensure that the playing field does not have “rent seekers” or business entities that use their heft or political influence to control the consumer market.

Obviously, under these ideal conditions, there is no reason for the government to get involved in determining or making suggestions on the selling price of basic or prime commodities.

Unfortunately, the Philippine economy is nowhere near that condition as to justify the government adopting a hands-off policy on the pricing of the basic necessities of daily living.

It’s bad enough that our consumer laws are weak and full of holes that leave the consumers at the mercy of manufacturers, dealers and retailers; worse, the agency that is tasked with enforcing them, the DTI, has fallen short in living up to that responsibility.

In fairness to DTI, though, its ability to protect the consumers’ interests is hampered by lack of funds and personnel, and the slow pace of justice in the country. As the saying goes, its spirit is willing but its flesh is weak.

Bear in mind also that it was only in 2015 that Congress enacted a law creating the Philippine Competition Commission (PCC) that is tasked to protect the interests of consumers and preserve the efficiency of competition in the marketplace.

Barring any judicial overreach that would emasculate the PCC’s powers, an honest to goodness a government office is now in place that will see to it that business entities do not engage in activities that shortchange or put one over the consumers.

Under these circumstances, it is doubtful if so-called market forces would have an influence on the local manufacturers in the pricing of basic goods or products. When the opportunity to make oodles of profits presents itself, it is naïve to think that the manufacturers will not take advantage of it.

After all, their reason for being is to make money for their stockholders orinvestors; the interests of the consumers are secondary. The motivation to do so becomes more inviting when the enforcement of consumer rules is weak and regulators think they have better things to do than see to it that the prices of basic commodities are reasonably priced.

The DTI should reconsider its decision to abdicate its obligation and responsibility to set SRPs for essential goods. It’s the consumers who need protection, not the manufacturers.