Price Limitation: Government Decision Not in Accordance with at Least Two Laws and the Constitution

In the hierarchy of legal regulations, the Government’s decision on price and margin limitations for nine products, as a subordinate act, holds less importance than the law. Since its provisions are primarily contrary to the provisions of the Law on the Prohibition of Unfair Trading Practices in the Food Supply Chain and the provisions of the Trade Act, a tsunami of lawsuits can be expected.

The Croatian government, in September, limited the prices of nine food products by more than 30 percent, as well as the maximum allowable margin for traders, through the Decision on Direct Measures for Price Control of Certain Food Products, effective from September 10. The government made this decision based on Article 6. of the Law on Exceptional Measures for Price Control, which grants it the authority to implement measures to prevent negative effects from changes in certain prices or to prevent monopolistic positions when these goals cannot be achieved through other economic policy measures. Thus, it is a broad and imprecise legal authorization. This law prescribes measures for determining maximum price levels and lowering prices to a certain level, but does not prescribe regulating traders’ margins.

The government has stated that the Decision was not a hasty act, but rather the result of discussions, including a joint decision with representatives of retail chains and producers. However, it is suggested that this may not be entirely accurate.

Decision Discriminates

After the Decision came into effect, some of the main defenders of the interests of those traders and producers rose up with numerous doomsday scenarios, leading to the conclusion that the Decision indeed surprised, unpleasantly, most of the actors it applies to. Even citizens are not satisfied as its first negative effects are already present, namely the lack of these products on store shelves and the limitation of their sale per customer.

It is also crucial that in the hierarchy of legal regulations, the subject Government Decision, as a subordinate act, holds less importance than the law, which should be clear even to those who have attended at least two semesters in their first year of law school.

Thus, the findings from that decision hold no importance if they are contrary to the provisions prescribed by law. It is clear that the provisions of the Decision are primarily contrary to the provisions of the Law on the Prohibition of Unfair Trading Practices in the Food Supply Chain and the provisions of the Trade Act, particularly in the part that prohibits selling products below the purchase price. Therefore, to the question of whether traders’ actions contrary to the Decision, while in accordance with the Law, are punishable, the answer should be – no. The Decision is also contrary to constitutional categories of property rights and entrepreneurial and market freedoms, which can only be limited for the ‘protection of the interests and security of the Republic of Croatia, nature, the human environment, and human health,’ and only by law, not by decision.

What is further interesting is that the Decision is discriminatory as it only applies to those entities engaged in registered trading activities in Croatia. Why did the Government, for example, not limit the price of real estate, which has recently experienced a boom, or the price of water or children’s necessities?

Duration of the Measure Not Specified

Although some media reported that this decision would be in effect for three months, there was no specification regarding the duration of the measure, perhaps not coincidentally. However, it was not forgotten to specify that the Decision comes into effect on the first day of publication in the Official Gazette, putting traders in an impossible position where they must ‘overnight’ adjust the prices displayed and necessarily achieve changes to existing arrangements with suppliers, all to comply with the price limitation and prescribed margin.

If suppliers agree to the changes, it is clear that either those products will not be on the shelves or traders will turn to importing those same products to stay within the limited margin and price.

State Inspectorate on the Move

The Decision will likely lead to numerous monetary claims from producers and traders who are obliged to act according to it if they are not satisfied with the announced compensation measures and if those measures are not quickly paid out. Then producers and traders will be forced to assert their rights judicially, which will trigger an avalanche of lawsuits in courts that are already overloaded and under-resourced. It would certainly be desirable, for legal certainty, for the State Inspectorate, specifically its Sector for Trade Oversight, Services, and Consumer Protection, to prepare and publish a legal opinion on the compliance of the Decision with the provisions of the Law on the Prohibition of Unfair Trading Practices in the Food Supply Chain and the Trade Act as soon as possible, to avoid misdemeanor proceedings against traders and their additional punishment with significant fines.

The question is also whether the Constitutional Court will finally use its authority to initiate a procedure for assessing the constitutionality and legality of the Decision.