You can't write out words: why did business change its mind about arguing with the authorities about fixing food prices

The publication of Izvestia about the appeal of business to the Ministry of Agriculture with a request to abandon the idea of fixing food prices in long-term contracts caused a wide resonance in the industry. After the release of the material, the Association of Retail Trade Companies (ACORT) retracted its words, stating that the editorial board had published erroneous information, and that the organization "did not prepare or send an appeal" to the agency, despite the fact that Izvestia had a draft document, and Chairman of the ACORT Presidium Stanislav Bogdanov gave a detailed comment. Companies feared that due to such regulation, goods would flow to the gray market, and retail chains would face losses and a difficult-to-predict situation. The Ministry of Agriculture explained to Izvestia that this measure would help stabilize the cost of products by fixing prices annually. The reason for the dispute is in the editorial's material.

What kind of initiative is this and why is the business scared?

Fixing prices for food products in long—term contracts can lead to problems with the supply of products - such a warning is contained in a prepared letter from the Association of Retail Companies (ACORT) addressed to the head of the Ministry of Agriculture Oksana Lut. Izvestia reported this on October 27 in the article: "It's worth it: retailers warned about problems with price fixing products".

The reason for trade concerns was the amendments that the ministry proposes to introduce into the law "On the Basics of State Regulation of Trade activities." They are designed to legislate the share of direct long-term contracts with a fixed (formula) price of retail chains with suppliers for socially significant goods.

"The experience of previous years (price fluctuations for buckwheat, sugar, sunflower oil, eggs, etc.) shows that such phenomena are difficult to predict, cannot be regulated, and when attempts are made to introduce them, they lead to an overflow of regulated products to the gray market and negative changes in the investment plans of business entities. In this regard, the purpose of the draft law, defined as ensuring the stability of market prices (in a market economy), seems unattainable," the letter says.

On Friday, October 24, the AKORT press service provided Izvestia with an agreed comment from Stanislav Bogdanov, Chairman of the association's presidium, and also confirmed the preparation of such an appeal.

In particular, he noted that the preparation of the appeal is related to the concern of all participants in the distribution chain about the risks that arise from the introduction of a mandatory share of long-term contracts with a fixed or formula price between retail chains and food suppliers.

— The proportion of such contracts varies throughout the year depending on seasonality and negotiation campaigns with suppliers. For example, when stocks of domestic borscht vegetables run out, long—term contracts are terminated and a new negotiation campaign for the new season begins," explained Stanislav Bogdanov.

According to him, the obligation to ensure year-round 80-90% of sales of goods under long-term contracts for all product categories is difficult to fulfill.

— This eliminates the consumer from the equation, who must have a wide choice and decide for himself which goods to buy. If suppliers are forced to enter into long-term contracts with online retailers, there is a risk that it will become unprofitable for them to work with legal retail. The assortment will decrease, spontaneous trade will grow, or a black food market will appear," Stanislav Bogdanov explained.

According to him, price fluctuations for basic foodstuffs are of a complex nature, which is influenced by many external factors: global economic conditions, climate, regional peculiarities, inflationary costs, and the personnel situation.

— It is difficult to predict and take into account all these factors in advance over an annual period, and the proposed ban on renegotiating contract terms may put both manufacturers and trade at a disadvantage. Any inaccuracy or error in the price formula can lead to significant losses, jeopardizing the stability of supplies," emphasized Stanislav Bogdanov.

The Ministry of Agriculture told Izvestia that the legislative initiative is being worked out jointly with State Duma deputies and the Ministry of Industry and Trade in order to maintain a stable price situation for socially important food products.

"It is assumed that manufacturers and retail chains will independently determine the price of products for a long—term period," the ministry told the editorial board, refraining from commenting on the position of the business.

Reaction to the publication on the market

After the release of the material, which received wide response in the media and Telegram channels, ACORT decided to change its position. The association first asked to add in the text that the letter was prepared not only by ACORT, but also by industry unions, and then suggested removing Stanislav Bogdanov's comment altogether.

Some time later, the association issued a rebuttal. In it, she said that Izvestia had published erroneous information, and also that it did not correspond to reality — AKORT allegedly did not prepare or send an appeal to the Ministry of Agriculture. By the way, the fact that the document has already been sent to the Izvestia department has not been reported.

At the same time, the editorial board has a letter from the association, an agreed comment by Stanislav Bogdanov, as well as screenshots of correspondence with ACORT. We invite readers and actors to familiarize themselves with them.