EKIP– Expert Club for Economics and Politics A Different Opinion
On October 31, 2018, a Bill to amend the Consumer Protection Act was submitted to the National Assembly (“NA”) [i] by a group of MPs from the United Patriots group, which gained wide popularity on social networks under the name “The Law on Surcharges”.
After Valeri Simeonov's statements about children with disabilities and their mothers and the data on corruption practices in the State Agency for Bulgarians Abroad, the Law on Surcharges can be described as another blunder by the " supposedly right-wing " Patriots.
The Law proposes that the Minister of Economy (i.e. a person from the Patriots quota before the expiration of the current government's term ) set maximum mark-ups for certain goods within 12 months.
The Council of Ministers is tasked with adopting:
- the list of essential goods subject to price regulation;
- the obligations of traders and producers of goods subject to price regulation;
- the categorization of commercial establishments according to their turnover; and
- the procedures for determining maximum mark-ups.
The law establishes an obligation for traders to charge a surcharge that is lower than or equal to that determined by the Minister of Economy.
Thus, the proposed text gives rise to numerous counter-arguments:
1) The Surcharges Act contradicts Article 19 (1) and (2) of the Constitution.
The economy of the Republic of Bulgaria is based on free economic initiative. Part of this freedom is choosing at what price to offer for sale the goods that you own.
Furthermore, according to the Constitution, the law must create and guarantee equal legal conditions for business activity for all citizens and legal entities. Therefore, the Constitution prohibits the National Assembly from adopting laws that directly or indirectly lead to different treatment of legal entities (including traders) solely on the basis of their turnover.
As can be seen from the text of the Law on Surcharges and the motivations for it, the aim of the proposers is to subject traders with a turnover above a certain amount to their control. That is, the Law and the regulations implementing it will not create equal conditions for all traders, but will discriminatoryly target only certain individuals.
2) The law on price increases is contrary to the TEU and the TFEU
The Law on Overcharges also contradicts competition law, as regulated in the Treaty on European Union and the Treaty on the Functioning of the European Union.
In the event of such regulation, it will create a competitive advantage for foreign and local suppliers of similar goods over those who are the addressees of the regulation.
EU competition law prohibits such regulation, as the entire EU territory is treated as a single market in which all participants must operate under equal conditions.
3) The law on mark-ups was proposed in contradiction with the Law on the Promotion of Economic Activities
According to Art. 25 of the Law on Normative Acts, " the development of a draft normative act shall be carried out in compliance with the principles of necessity, justification, predictability, openness, coherence, subsidiarity, proportionality and stability ". The explanatory memorandum to the draft laws must necessarily contain the expected results of the implementation, including financial ones, if any.
The draft law does not contain detailed explanatory notes. The preliminary impact assessment consists of one page and does not contain any data on estimated amounts for:
- the planned price reductions;
- savings by consumers;
- reductions in traders' profits;
- reductions in corporate tax revenues;
- reductions in VAT revenues.
Instead, it simply states that " the bill does not provide for any costs for the state ", and " the adoption of the bill will lead to a reduction in the created tension and reassurance for Bulgarian consumers ".
This does not constitute an analysis and preliminary assessment of a regulatory framework and directly violates the Law on Regulatory Acts. And an act of the National Assembly, which is adopted in violation of the Law on Regulatory Acts, contradicts the principle of the rule of law, regulated in the preamble and Art. 4 (1) of the Constitution. That is, in this way the bill also indirectly violates the Constitution.
4) The law on markup is unclear
The entire regulation of limiting markups is contained literally in 1 provision of the Markup Act.
The provision does not define what essential goods are, nor does it provide clear criteria for their determination.
The provision also does not define the concept of "surcharge".
This gives the Council of Ministers absolute discretion to determine which goods it deems to be essential and the Minister of Economy to determine their "surcharges".
The proposal also does not provide for the legal consequence that would occur if traders do not comply with the ban on maximum mark-ups. Typically, such regulations provide for administrative penalties for violations. The proposal, however, does not regulate this issue, and without an explicit statutory derogation from the National Assembly, the Council of Ministers, or a specific minister cannot arrange for himself or for other state bodies the right to impose administrative penalties for certain actions.
5) The law on mark-ups creates negative motives
The law on markup creates negative motives in at least two directions.
First, it creates incentives for small and medium-sized businesses not to undertake new investments and not to hire new people, as it outlines an uncertainty about the business climate regarding pricing.
Secondly, the bill also creates incentives for employers not to raise their employees' salaries, as they are a key element in the pricing of the goods and services they supply.
And the best social policy that a country can provide for its citizens is high employment and high incomes.
The conclusion is that the proposed regulations are neither lawful nor expedient.
Once again, we are witnessing how certain politicians use the power of the National Assembly as a political tool - for propaganda to consumers (i.e. voters) and control over big business (i.e. big resources).
[i] http://www.parliament.bg/bg/bills/ID/92794/
