Archive for April 29th, 2008

Gonzi’s new style of governance :) …

April 29, 2008

Bread price hike ‘stopped before election’ (The Malta Independent 29/04/2008)

by BERNARD BUSUTTIL

 

The Commission for Fair Trading yesterday held that the government made the main wheat importer freeze its prices in December in order to buy time ahead of the general election.

 

In a ruling handed down yesterday on an application by the director of the Office of Fair Trading filed on 20 December last year, the commission found that the government in December made the Office for Fair Trading issue a prohibitory injunction against Federated Mills plc, who had informed the office that the mills would charge bakers a higher price for their flour.

 

Instead of accepting the legitimate request and subsidise the difference as it had done in three instances, said the commission, the government made the office issue an injunction preventing the company from raising the price and obliging it to keep selling the same amount of flour mix used for making traditional Maltese bread (hobza tal-Malti) a staple food in the country’s diet, as before.

The commission said the government thus bought time so that it would not face a rise in the price of bread, which was “not an ideal situation at such a sensitive and critical time”.

 

The commission held that given Malta’s belief in a free market, the government should shed the Office for Fair Trading from its responsibilities in order to render it a truly independent watchdog.

 

It held that the wheat market was not a truly free one, as Federated Mills plc controlled 95 per cent of the country’s imports and the company is not a price setter, since the price of wheat was determined by external factors.

 

Although subsidies are allowed by EU law, said the commission, they distort the market as market forces are prevented from acting freely, thus delivering price signals that help set demand and supply.

 

It also ruled that the milling industry was a natural monopoly due to the country’s small market, which cannot entertain a free market. In fact, this was one of the factors that made a number of mills merge and form the company.

 

Thus, the commission held that Federated Mills plc did not abuse its dominant market position, and revoked the Office for Fair Trading’s decision and the injunction.

 

 

– Further comment is superfluous! Ralph