In the fall of 2024, Minister of Economics Viktor Valainis (Union of Greens and Farmers) first spoke about the state's readiness to intervene in pricing — in the food segment.
Battle with Prices
Last year, a specific action plan emerged, which includes three directions. The first direction is stricter control over the relationships between traders and suppliers (manufacturers) of products and a ban on 'twisting the arms' of suppliers.
The second direction is the conclusion of some contract between the state and traders, according to which retail chains in each segment of basic food products offer the cheapest product.
And the third direction, included in the mentioned contract, is the creation of a tool to assist consumers in finding the cheapest goods.
It is worth noting that with the first step — the actual intervention of the state in the business relationships of traders and suppliers — politicians decided to wait after traders agreed to sign the contract (memorandum).
As for the memorandum itself, it was signed at the end of May last year! According to it, representatives of retail trade offer one product with a low price every two weeks in each category of food products. Fifty-three categories of such products have been defined — including bread, vegetables, meat products (in each type of meat), fresh berries and fruits, dairy products, and separately — milk, fresh fish, flour and cereals, chicken eggs...
After some time, the low-priced product from one manufacturer (supplier) is replaced with another low-priced product from another manufacturer (supplier).
If we talk about the tool to assist consumers, it involves creating an online portal where information about prices for the same basic food products from major retail chains can be found. And the buyer can compare which of the stores in a particular chain has discounts today, for example, on bread, sour cream, cheese, or vegetables.
In reality, the memorandum began to take effect closer to the end of summer when basic products appeared on the shelves of major retail chains at lower prices. Often, they were the first to disappear from the shelves — by evening, it was problematic to find such products in large shopping centers.
The Memorandum Did Not Scare Inflation
However, the memorandum did not stop the rise in food prices — inflation continued, and thus prices for both basic products and the cheapest products in each segment also rose. However, Minister of Economics Viktor Valainis points to a positive trend in the last three months, when price growth stopped, and for some products, prices, albeit minimally, even decreased.
Meanwhile, there has not yet been a real breakthrough in terms of prices. The government's hopes that the products of local producers would become cheaper have also not been realized.
It is clear that since there are only 7 months left until the elections, the authorities need to speed up — that is, act more energetically and decisively to achieve a SIGNIFICANT reduction in prices, not just a symbolic one within a percentage! Especially considering that due to huge utility bills, people with low and below-average incomes have even less money left for food...
What Do the Authorities Plan to Do? First — Update the Memorandum!
This year, in March, it is planned to sign an additional agreement regarding the low-price basket of food products, including expanding the range of products included in it, said Minister of Economics Viktor Valainis (Union of Greens and Farmers) in an interview on the Latvian Television (LTV) program "Morning Panorama" on Thursday.
Update the Agreement
"In March, we will sign a new, additional agreement with all involved parties," Valainis said, adding that an agreement has been reached that there will be more products in this low-price basket of food items. The minister also noted that the products included in the low-price basket should be more visible in stores. "If we are going with these categories of low prices, they should be quite well visible," Valainis said, noting that traders have confirmed their readiness to cooperate on this issue. The second — starting in July, as part of a pilot project, the value-added tax (VAT) rate on certain food products (flour, milk, poultry meat, fresh eggs) will be reduced. "And there will be an additional agreement on how the VAT reduction will occur — what obligations the trader, the producer, and intermediaries, logistics companies will take on," the minister said, adding that this process will be monitored.
The third — apparently, for greater 'cooperativeness' of traders, the Competition Council last week conducted procedural actions at the Maxima bureau. Detailed information from the cartel fighters is not yet available, but it can be understood that they suspected collusion between the two largest retail chains in the Latvian market — Maxima and RIMI. The retail chains themselves categorically deny the fact of collusion.
The Whip Has Been Taken Out
The fourth — Saeima deputies decided to dust off a 'forgotten' bill on banning unfair trading practices, and tomorrow the Economic Affairs Committee will consider it in its second reading.
The amendments provide for clarifying the ban on unilateral changes to contract terms. In particular, they will establish that the retailer (trader) cannot remove a supplier's goods from the assortment without prior written notice. The supplier must be informed of such changes at least 30 days in advance, except in cases where the goods do not meet the terms of the contract.
In addition, the amendments propose introducing a clear definition of the forecast for the supply of agricultural and food products. This will help prevent situations where suppliers are forced to produce goods without covering real orders. The amendments also prohibit the application of unilateral sanctions and establish cases of their non-application, for example, if deviations from the forecast supply volume are insignificant.
Significant changes are also provided for in the payment procedures. For regular supplies of fresh vegetables and berries, payments must be made within 20 days, excluding the possibility of forcing suppliers to agree to longer payment terms.
The committee emphasizes that the amendments will limit manifestations of unfair trading practices while maintaining flexibility in the cooperation between suppliers and retailers. The amendments are part of broader measures to stimulate fair competition and transparent pricing in the retail trade of food products.
