Government Annuls Pricing Reform Scheme

EghtesadOnline: Based on President Hassan Rouhani’s decree on Wednesday to the Industries, Mining and Trade Minister Mohammad Shariatmadari, the scheme to reform the sales of a select number of non-staple goods by allowing producers to avoid printing prices on their products was annulled.

News ID: ۷۸۰۰۹۲

28 October 2017

In the decree, the president called for informing all production units of the annulment.

Rouhani said an alternative method be devised in cooperation with the Consumer and Producer Protection Organization, based on which factory owners will be prohibited from printing unreasonably high prices on their products, making discounts of up to 50% possible for retailers and chain stores, the Persian daily Donya-e-Eqtesad reported.

Where It All Began

Former minister of industries, mining and trade, Mohammad Reza Nematzadeh, had proposed the initiative in the last days of his term by including biscuits, confectionary, cakes, snacks, cellulose products and toiletries in the new pricing scheme, according to Financial Tribune.

Later, when he handed the baton to Mohammad Shariatmadari, the new minister added conserves, compotes, sauces, pickles, pickled vegetables, jams and honey to the list.

It was announced that if the scheme was successfully carried out, other items would be gradually added to this list.

The scheme was initially meant to be implemented as of Sept. 23. Yet due to the poor dissemination of information regarding the issue and the high probability of sellers and intermediaries taking advantage of the new regulation and causing turmoil in the market, public concerns increased and the government decided to postpone the scheme for a month to conduct further studies and consult more experts.

Speaking with Financial Tribune, Mohammad Reza Kalami Bajestan, director general of the Economic Affairs and Commercial Policies Office with the Ministry of Industries, said the truth is that a conspiracy had been going on beneath these printed price tags between sellers and producers in all these years.

He said producers add a fixed amount of profit to their end prices and this is the price at which they sell their products to supermarkets and chain stores.

“But they also print the consumer price on their products, which is the price at which stores can sell them to customers. The difference between the former and latter prices is the sellers’ profit margin,” he said.

“What happened here is that over the years, sellers, by pursuing self-interest, constantly asked producers to print higher prices on products if they want their products to go on their shelves and, not having any other choice, factory owners complied.”

Experts, Critics Beg to Differ

As an advocate of the scheme, Kalami said the scheme can relieve producers of this pressure and customers will know that the prices on the goods are the sellers’ doing.

“As such, prices in different shops will differ, creating options for customers. People will compare prices and quality, and decide where to shop from,” he said.

“This will make sellers set more reasonable prices on their products to encourage customers to buy from them and keep their businesses running.”

However, critics of the move argue that many sellers are also likely to set higher prices than before on their products and in the absence of a monitoring system, consumers will be the losers as most of them don’t have the time or the energy to check all the shops in their area for bargain purchases.

Now the new directive to be issued by the industries minister will oblige factories to set real prices on products. Experts believe that the discounts offered by producers to retailers can find their way to end customers as well, as the new scheme draws on trust between the government and factory owners for its success.

By issuing the new directive and asking producers to set prices from the very beginning based on supply and demand dynamics, the government is making new efforts to reinforce this trust.