Moscow Drafting Legislation Allowing Government to Control All Consumer Prices

Paul Goble

            Staunton, August 14 – Faced with mounting popular anger about increasing inflation, now at its highest level in six years, the Federal Anti-Monopoly Service is drafting legislation giving the Russian authorities sweeping powers to regulate virtually all consumer prices, something Moscow has not done since Soviet times.

            According to Forbes, the measure was discussed at a conference the Anti-Monopoly Service convened yesterday with retailers, even as officials raided stores and supermarkets to monitor prices (forbes.ru/biznes/437377-fas-gotovit-zakonoproekt-ob-ogranichenii-nacenki-na-produkty-v-torgovyh-setyah and finanz.ru/novosti/lichnyye-finansy/v-rossii-gotovyat-zakon-o-totalnom-gosregulirovanii-cen-na-produkty-1030730934).

            At the FAM meeting with retailers, the latter were told to reduce their mark ups voluntarily because if the service finds they are too high, the retailers could be charged with monopolistic practices and fined billions of rubles in the case of the larger chains, Forbes reported.

            The Russian legal code already allows the government to regular prices, but the new measure is needed because it addresses not the total price but the mark ups retailers add to the prices they pay to wholesalers. Retailers are opposed because they say if they have to cut prices in one place, they will be forced to raise them in others.

            Moreover, the retailers suggest, putting such a system in place will interfere with their relationships with wholesalers and may lead to shortages. That could infuriate the consumer just as much as or even more than controlling prices, although polls show that inflation is now high enough that a significant fraction of Russians favor going back to Soviet-style controls.

            The government is moving in this direction because most Russians believe that inflation at the retail level is far higher than the authorities say and want action now, something those in power feel they have no choice but to take into consideration given that the Duma elections are now only a month away.

            But if the introduction of these measures isn’t handled with extreme care, price control systems like the Soviet one in the past will lead to a rise in the number of empty shelves and of black market deals, and there is a all too real risk that those may anger the electorate against the politicians even more than the current levels of inflation do.