The Tribune

• Urge Gov't: 'Don't leave us hanging on'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Food stores yesterday told the Government "don't leave us hanging on" as its tough talk about enforcing the expanded price control regime failed to materialise into fines and inspections.

Philip Beneby, the Retail Grocers Association's (RGA) president, told Tribune Business he was unaware of any of its 130 members being subjected to financial penalties or enforcement actions despite the industry-wide position that the revised price controls would not be implemented by the Government's November 1 deadline.

Speaking as Michael Halkitis, minister of economic affairs, asserted that the Davis administration "will not tolerate people disregarding the law" through non-compliance with the newly-amended price control regulations, the Association president said it has heard "absolutely nothing" from the Government in response to its proposed alternatives.

Food retailers had proposed a joint venture with the Ministry of Social Services, whereby the sector will provide a 10 percent 'free' food top-up to whatever low income consumers spend in food stamps. Other proposals included a drastically slimmed-down price control list, with higher mark-ups for Family Island retailers and perishable items, plus the elimination of VAT on "breadbasket" food items via zero ratings.

Bahamian food merchants, and their wholesale suppliers, have taken the stance that the Government's proposed price control expansion to 38 product categories cannot be enforced since negotiations/consultation with the Government remains ongoing. Asked whether any enforcement of the revised regime had occurred yesterday, Mr Beneby replied: "Not that I'm aware of."

Calling on the Government to inform the industry if it has changed its position, and will move to enforcement even though it has yet to respond to the food sector's proposed alternatives, he added: "They should correspond with us in terms of what they're doing. Don't leave us hanging on; say something. Many of the retailers feel they will not last long enough.

"There's a lot of uncertainty, that's all I can say; plenty uncertainty. The uncertainty is real. The sad part about it is it's being caused by the Government. That's the sad part about it. It's not anything we're doing to ourselves. It's being caused by the Government. It's very, very concerning.

"The very people they say they're trying to help are going to be the very people that they are going to hurt in the end. It's going to create a lot of unemployment. I'll tell you that. They're going to do what they're going to do because they've always done it. No consultation, no questions asked, so that just tells you they're going to do what they're going to do. What can you do?"

However, a former chief justice wrote almost 30 years ago to this day that the Government using its price control powers "in bad faith, capriciously, arbitrarily, whimsically or with any ulterior motive" could be subjected to a successful legal challenge via Judicial Review in the Supreme Court.

Sir Brian Moree's opinion from 1992, which was being circulated in industry circles via social media, is understood to already be in the hands of legal representatives for the food retail and wholesale sector. It could form a template, some three decades later, for legal action should the Government move to ram its 38 product category expansion down the private sector's throats.

Some of the conditions required for a legal challenge, as cited by Sir Brian, could be in play presently. And he also wrote that "it becomes apparent that the unreasonable fixing of maximum prices may amount to a deprivation of property", which could violate the Bahamian constitution's Article 27.

"Overall, therefore, I am of the view that the discretion vested by the Price Control Act in the minister responsible for consumer protection is not unlimited and is subject to Judicial Review by the courts," Sir Brian wrote in a document dated December 1, 1992. "The discretion must therefore be exercised in accordance with the intention of Parliament.

"Where the discretion is exercised in bad faith, capriciously, arbitrarily, whimsically or with any ulterior motive, or where the discretion is exercised in a manner that is unfair or unreasonable, the courts will interfere by means of their power of Judicial Review to restrain the exercise of the same.

"As the discretion vested in the minister under the Price Control Act was intended by Parliament to be exercised for the purpose of regulating the prices of goods and availability of services, the use of the same by the minister to regulate prices, whether intentionally or not, with the result that a party affected would be forced to abandon a business venture, would be unreasonable and ultra vires the minister, and would therefore be subject to Judicial Review."

The legal opinion was produced for Ronald Lightbourn, of Lightbourn Trading Company, who wrote to then-prime minister, Hubert Ingraham, on November 20, 1992, echoing what food retailers and wholesalers are experiencing now. He wrote: "We wholesalers have not been pressing your new government on the subject of price control, but we are stressed to the limit and can hold off no longer.

"All price-controlled items are being sold at about 6 percent below our operating expenses, and represent 30 percent of our total turnover - much higher if groceries only are taken into account... We do expect you to be fair by allowing us to cover our operating expenses (18 percent) and make a small margin (2 percent) as well. These are gross margin percentages, 20 percent gross being the equivalent of 25 percent mark-up."

Returning to the present day, the Retail Grocers Association has warned that the Government's initial proposal will expand price control to roughly a further 5,000 items, leaving between 40-60 percent of inventory subject to mark-ups where it is being sold below cost or at a loss.

With a greater proportion of stock being sold at a loss, this will make the food and pharmaceutical industries' ability to survive increasingly precarious without significantly adjusting their business operating models and slashing costs. As a result, the Bahamian private sector is adamant that the Government’s proposal will place companies, jobs and incomes in peril unless all parties can achieve an acceptable compromise for easing the cost of living crisis impacting consumers.

This could also result in product shortages through retailers and wholesalers refusing to stock loss-making items, while these firms also have to increase prices and margins on non-price controlled items to compensate for selling these goods as effective “loss leaders”.

Under the Government’s initial proposal, food wholesale margins, or mark-ups, are capped at 15 percent for all 38 product line items listed, while those for retailers are set at 25 percent across-the-board. Those goods impacted, some of which are already price controlled, are baby cereal, food and formula; broths, canned fish; condensed milk; powdered detergent; mustard; soap; soup; fresh milk; sugar; canned spaghetti; canned pigeon peas (cooked); peanut butter; ketchup; cream of wheat; oatmeal and corn flakes.

The remainder are macaroni and cheese mix; pampers; feminine napkins; eggs; bread; chicken; turkey; pork; sandwich meat; oranges; apples; bananas; limes; tomatoes; iceberg lettuce; broccoli; carrots; potatoes; yellow onions; and green bell peppers.