The Commission for Fair Trading yesterday revoked an order stopping Federated Mills plc from raising the price of flour to bakers last December, noting that the increase would have come at a time when the country was about to go through a somewhat sensitive moment in its democratic process.

According to the commission's ruling the order was issued by the Office of Fair Trading last December 5 deeming the increase unjustified. The company had applied to increase the price of flour as of December 10.

The OFT had argued that Federated Mills had abused its position as the leading supplier of wheat in the country. It proceeded to issue an injunction against the company to ensure the price of flour would not go up.

The company took its case to the Commission for Fair Trade arguing. among other things, that the price of wheat on the international market had been rising, something that was completely independent of its powers.

In its deliberations, the commission noted that it was the minuscule size of the country that had forced a situation whereby a number of flour mills had to amalgamate because they were no longer feasible. Thus, perhaps, nobody had the intention of setting up a monopolistic enterprise, it added.

Furthermore, it could not be stated that the flour market in Malta was one that was particularly free and where the rules of fair competition could function. This was due to the fact that the raw material - wheat, whether hard or soft - was totally imported and therefore none of the local players was in a position to influence the quantity, the quality, the delivery or the price.

In fact, in order to make up for the higher prices charged by the external sources, the government extended a subsidy to bakers in line with EU rules. In this regard, the commission noted that if higher flour prices were counterbalanced by higher subsidies to bakers, what is known as the price signal would be absent. In a free market, coupled with fair competition, such price signal would serve to ease demand and, perhaps, also reduce the profits of the supplier.

"Thus, such intervention by the state, irrespective of its sanctioning by the European Community, would still continue to smudge the functions of a free market dictated by fair competition principles....," the commission noted.

The commission feels there are other more effective ways in which low-income individuals could be assisted to keep up with the cost of living without distorting the market.

It noted that the new price demanded by the company would have been sanctioned at a time when the country was about to face a rather sensitive time in its democratic process.

The company thought that the government would have intervened, as had happened on previous occasions, to further strengthen the subsidy and so neutralise the increase by giving more assistance to the Maltese consumer: the baker and his customers.

However, this time, "through organs at its disposal", the government decided to halt the increases temporarily and also issue an injunction so that it could win some more time without an increase in prices "and would not be faced with an uncomfortable situation in a critical and sensitive period", the commission said.

The commission said it would be wise if serious international advice were heeded and the office responsible for fair competition is removed from under the official direction of the government. Such an office should be independent of the government of the day and well equipped in order to be able to truly do justice with the consumer.

Finally, the commission said the financial analysis exhibited by the company were reasonable and correct professionally.

It found nothing abusive in the behaviour of Federated Mills pls. It revoked the decision issued last December 5 by the Office of Fair Trading as well as the injunction.

According to the government website, the commission is chaired by Magistrate Silvio Meli with Lino P. Briguglio and Carmel Farrugia as members.