Laws that are “dangerous” and counterproductive for APC

TAHITI, July 31, 2024 – The government is preparing a national bill on price regulation for certain products and services. Following last week’s Cesec meeting, the Polynesian Competition Authority issued a rather negative opinion this Wednesday on the text of the law adopted by the Directorate-General for Economic Affairs. Although the government’s intentions are laudable, the Authority believes that the promulgation of this text could bring many undesirable and counterproductive effects to consumers.

Apparently, the bill aimed at amending the country’s competition law to regulate the prices of certain products is not consistent. A week after his visit to the Economic, Social, Environmental and Cultural Council (Cesec), the text provoked the wrath of Christophe Plée, who likened it to “communism”The Polynesian Competition Authority (APC) issued a less venomous but equally cautious opinion on Wednesday. The authority questioned “New equipment relevance” and argues that the reasons given for enacting the law do not justify an attack on corporate freedom.

It is important to note that, like Cesec, the request for comments was issued under the emergency procedure, requiring submissions within two weeks, and no reasons were given. This is unfortunate for the APC, especially on a bill “may have a significant impact on the competitive operation of markets and businesses”. This situation raises questions about the approach of the government, which seems to be doing its utmost to ignore the recommendations of different institutions. In fact, the text has been prepared for several months by the General Directorate of Economic Affairs (DGAE). In addition, according to reports Tahiti Information There were no consultations with private companies last week, nor with the APC, and it is hoped that “Participate in upstream preparations”As with the tax law, the government appears to be acting alone on sight.

“Instead of reassessing existing systems to define their effectiveness and how to improve them, we added another system without first conducting an impact study. We cannot justify an attack on freedom of movement simply because the previous system did not work. The Administration has already said this in previous opinions: We must review these measures upstream, everything to do with exemptions, TDLs… to limit barriers to entry as much as possible and open up competition. Assign to Tahiti Information APC Chairman Johanne Peyre. She also wants to review the Authority “The government and the DGAE can still support them in drafting these projects with the goal of better serving the public interest, the Polynesian economy and addressing the high cost of living.”

A law that wants to be good…

The APC believes that the law is “Danger” In many ways. It aims to regulate the prices of certain products and services, determined by the Council of Ministers and benefiting from different specific tax or tariff systems. The State explains that it is impossible “Ensure its effectiveness, especially its impact on beneficiaries”because most can be resold “free”except PPN and PGC, which are already regulated. In addition, DGAE has asked many traders and importers to place orders after checking marketing profits.

Until then, no problem, the government’s goal is still laudable, as it wants to reduce prices for consumers. But it is clear that if the intentions are good, the overtly inflammatory nature of the text of the law reinforces that, and if it is passed, it will have a disastrous impact on the economic structure of Polynesia. According to the APC, the bill has the potential to expand “Rent through profit” These systems have created many benefits for private companies, but without any guarantees that these adverse effects will be offset. Moreover, under this law, each government department can define the products it wishes to exempt and control. Without detailed objective criteria (as is currently the case), this can lead to discretionary decisions, giving the government enormous leverage in negotiations with private companies.

…but with harmful effects

In addition to this assumption, which is not very reassuring for the economic world, the principle of fixed profits can lead to many undesirable effects for consumers, especially in markets with weak competition, such as Polynesia. The APC identifies four main risks: shortages of goods and services, where low profits may prevent wholesalers from importing certain products; circumvention, which encourages importers to introduce similar but unprofitable products; a decline in product quality, where wholesalers prefer to import products with lower costs but higher profits; and finally, the compensation effect, where companies transfer the lost profits to unregulated products, affecting the wallets of consumers.

Moreover, even if the APC does not cite them, the risk of creating a parallel market (where products may be secretly resold) is a concern, and the distortion of market signals is crucial for the transmission of consumer preferences.

Specifically, for the APC, regulating prices is a temporary solution limited to certain sectors to solve pricing or supply problems. The country’s draft law was scheduled to be reviewed in Tarajoy at the end of this year, but for the Authority, it contained too many ambiguities and the Authority submitted a document with 16 suggestions for improvements. Now it is up to the government to decide whether to consider these factors. It should also be noted that the government has repeatedly declared that it wants to rely on competition to develop the economy; on the other hand, the bill tends to regulate and control the economy.