The consumer watchdog has warned the Government that introducing price caps could increase prices, reduce choice for consumers and result in scarcity.
It comes as Enterprise Minister Simon Coveney has asked the Competition and Consumer Protection Commission (CCPC) for advice on how “more transparency” can be delivered in the food supply chain to “ensure consumers are paying reasonable prices”.
Taoiseach Leo Varadkar revealed in the Dáil on Wednesday that the Government had received advice from the CCPC warning against the introduction of price caps.
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The document, seen by the Irish Mirror, warns that the CCPC has not seen “any evidence or analysis to support the suggestion that an emergency or market failure exists in the retail grocery market”.
It advised that customers had benefited from high levels of competition in the grocery market and that this had contributed to Ireland experiencing low levels of food inflation.
The watchdog said: “A policy which introduces the concept of Government price intervention using unclear ‘emergency’ criteria creates significant risk to this successful economic model. “It creates uncertainty for anyone looking to set up business in Ireland that they may not have the freedom to set their own prices.
“Over time, such uncertainty reduces the level and increases the cost of investment in Ireland resulting in fewer players competing on quality and price to the benefit of Irish consumers.”
The CCPC also warned that introducing price caps could be “counterproductive” and could lead to increased prices. This, it argued, was due to the fact that the price of goods could be increased to meet the capped price. Companies could also increase the price of other goods in a bid to offset losses.
It could also lead to decreased choice if shops chose not to sell goods subject to a price cap. Scarcity could occur if companies decided to stop producing goods if the cap was lower than the price of production.
The CCPC also said that price caps would be “difficult to terminate” as “there will always be a view that the price of some goods is too expensive”.
Elsewhere, Minister Coveney was quizzed on food prices in the Dáil on Thursday morning by Sinn Féin TD Louise O’Reilly, who questioned what the Government was going to “ensure corporate profiteering is not contributing to food and grocery prices increases in respect of large supermarkets and the big food conglomerates and processors”.
The Minister pointed to Minister of State Neale Richmond’s meeting with retailers on Wednesday.
“The Government has given a clear signal to business leaders in the retail sector that we are not happy and that we expect to see the reduction in the cost of production passed on to consumers in terms of pricing,” he said.
However, Ms O’Reilly said that the Government needed to send a strong message.
“Could [the message] not be that if the Government does not see delivery in reductions for consumers, it will act? The Minister just said the Government's message was it was not happy. Can I give the Minister a message from consumers? They are getting creased.’
Mr Coveney later confirmed that he had asked the CCPC for further advice.
He stated that this would be “concerning the options available to us in the context of delivering more transparency in the food supply chain to ensure consumers are paying reasonable prices”.
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