Since April businesses in Malta began benefitting from a 25 per cent reduction in energy bills. Despite this, business organisations such as the GRTU and the Chamber of Commerce are demanding further reductions. Their representatives argue that the downward trend in the international prices of oil should bring about a further consequential reduction in local energy prices – at least for businesses. It is also argued that the cost of electricity “impinged heavily on the competitiveness of Malta’s business sector” (The Sunday Times of Malta, 13 September 2015).

Let me briefly digress and refer to a curious case.

Last year, on Facebook, a picture was circulated showing a Maltese product, a packet of Devon cream crackers offered for sale at an Aldi supermarket in Ireland for 26 cents. I wrote to Aldi customer care and it confirmed the price. It also confirmed that in the UK it was sold at 28 pence. During the same period a cursory examination of the prices at which this same product was offered for sale to Maltese consumers at various outlets showed that they hovered between 83 and 85 cents.

It is encouraging that Maltese products are available in establishments such as Aldi. A recent survey conducted by Kantar Worldpanel, a consumer research group, indicated that between July and September of this year more than 56 per cent of British shoppers visited Aldi and Lidl. It is claimed that profits for these German retailers went up by nearly 20 per cent. Aldi increased its grocery market share to 5.6 per cent in the UK.

Like business organisations, Maltese consumers do expect a consequential reduction in the selling prices of locally-produced goods and services as a result of a reduction in cost of energy

In this respect several positive considerations can be made. In the first place the successful exploitation of the EU internal market by some Maltese businesses following 10 years of EU membership. Secondly, some are able to offer competitive prices.

However, the big discrepancy between the selling prices at which the same product is sold in two different areas of the EU single market is conspicuous and cannot be ignored. Consumers legitimately ask: why a product manufactured in Malta is sold so much cheaper in Ireland and the UK?

I flagged this to the Consumer Affairs Council and the Malta Competition and Consumer Affairs Authority.

Consolidated Biscuits argued that the reasons behind this price discrepancy are two. First, the disproportionately high demand from the UK market, when compared to the local market, permits the Maltese company to have long production runs; and secondly it seems that Aldi could afford to sell the product as a loss leader. MCCAA has yet to express its opinion on the matter.

At face value, it is very difficult to comprehend, in the light of this case, the “lack of competitiveness” claims. On the other hand, it seems that certain practices carried out by businesses, for example that of fragmenting markets at an upstream level (production line), may be detrimental to Maltese consumers.

This is by no means an argument to counter calls made by businesses for a reduction in the cost of energy. The business sector, like the consumer, is likewise an important market player.

If it claims that it needs further support to reduce costs, this request ought to be noted and evaluated especially since it seems that energy bills occupy a substantial portion of costs in business operations.

In this regard the idea put forward that energy tariffs ought to be examined by MCCAA is interesting and merits consideration. However, like business organisations, Maltese consumers do expect a consequential reduction in the selling prices of locally-produced goods and services as a result of a reduction in cost of energy especially in the light of the fact that government’s policy is supposed to bring about pricing stability in the energy sector. For some reason, in this area, the chain breaks and ripple effect ceases.

Therefore, in order to be useful, if the idea of a study is to be carried forward it ought to be broadened in scope by also identifying any economic inefficiencies that may be present in the market including those that might be present in business operations.

Following this analysis, the MCCAA may subsequently be in a position to support business in identifying ways on how the benefits gained through improved, streamlined operations coupled by a reduction of its costs, including energy costs, may be passed on to the benefit of consumers.

Finally, I revert to the Devon cream crackers case. Since it seems that in Malta the selling price of the product is practically the same everywhere, it is interesting to examine why real competition seems to be absent at a retail level. Are retail outlets allowed to set their own selling price perhaps even to the same extent as Aldi?

Antoine Grima lectures on consumer law at the University of Malta.

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