Our View: Unenforceable law to curb profiteering plainly absurd

Many were baffled, to put it mildly, by the government’s decision on Wednesday to approve a bill giving the commerce minister the power to set a maximum gross profit margin for businesses selling essential goods. Others may have thought, reading about the decision in newspapers that this was their April Fool’s Day joke, delivered 24 hours early. 

Announcing this bizarre bill, which would be forwarded to the legislature as a matter of utmost urgency, commerce minister Natasa Pilidou, said it would allow the ministry, “where there is a need, to be able to intervene immediately, either with the placing of a ceiling on the gross profit or setting a maximum price, depending on the case.”

The bill approved by the cabinet, would amend the laws of 2012 and 2018 On the Setting of Maximum Prices on Wholesale and Retail Sales in Special Circumstances. The existing law allowed the setting of a maximum price, something, Pilidou said, could cause problems for the market given that continuously fluctuating prices, particularly in the crisis we were going through.

The big question is how the ceiling would be set on the gross profit margin of each business producing or importing the items – bread, milk, water, Cyprus coffee, barley and corn – that are covered? Once the gross profit ceiling is set, if this ever happens, would there be government inspectors going through the accounts of each company to make sure they are complying with the ministerial decree?

According to an announcement by the commerce ministry, the gross profit margin is defined as the profit index, which is “expressed as a percentage of the gross profit of the sales of a trader during an accounting period.” Which accounting period will be used if a trader has not prepared accounts for a couple of years? Perhaps traders will have to submit forms to the commerce ministry every month, with their gross profit, based on the changing prices of raw materials and imports.

The ceiling will be imposed by ministerial decree lasting 45 days (rule by decree, after two years of the pandemic, appears to have become very popular) it was announced, although it is very doubtful the commerce minister would exercise this power. We suspect this unenforceable law was thought up, primarily, as a publicity exercise – a display of political theatre – for the government to pretend it had a plan for dealing with the rising prices.

With the new law, the government hopes to be seen to be doing something about rampant inflation, even if it would amount to nothing in practical terms. The newspapers took the news seriously, one impressed paper using the headline ‘Brakes applied to profiteering via price caps,’ while another talked about ‘Legal barrier to profiteering.’ The idea that inflation caused mainly by rising global prices could be controlled by ministerial decree, supposedly targeting profiteering, is plainly absurd.